You are viewing 1 of your 1 free articles
Confusion over housing association supply chain payment duties during coronavirus pandemic
Confusion is spreading across the housing association sector about whether organisations are legally obliged to support contractors and suppliers during the coronavirus crisis, even if they are unable to carry out the work because of government restrictions.
Contractors demanding help from housing associations to keep their businesses running amid the pandemic have been met with differing responses from landlords, while leading lawyers disagree on what associations should do.
The issue stems from uncertainty about whether government guidance telling contracting authorities to continue paying “at-risk” product and service suppliers for work they are unable to carry out during the COVID-19 outbreak applies to housing associations.
Housing contractors are likely to be severely impacted by the coronavirus crisis, with most construction sites closing and the majority of landlords switching to an emergency-only repairs service in line with social distancing advice.
Rebecca Rees, procurement law specialist and a partner at law firm Trowers & Hamlins, said the guidance – published last month as Procurement Policy Note (PPN) 02/20 – is not compulsory for housing associations.
She told Inside Housing: “I asked the Crown Commercial Service about this point and they have confirmed that registered providers have discretion on whether they follow the PPN or not.
“In theory, housing associations can opt out. As the status of the note is not mandatory there are no sanctions attached to not applying it.”
But Kris Kelliher, a partner at Devonshires also specialising in procurement, said: “In our view there is a good argument for why the PPN shouldn’t apply to housing associations, but unfortunately the PPN as it’s worded makes clear that it applies to all contracting authorities.
“Registered providers are contracting authorities for the purposes of procurement law so it applies to them.
“It is guidance, but there’s a clear expectation it should be followed. The important thing to note is that it’s down to each individual contracting authority to decide what it should do to support its supply chain.”
READ MORE
A spokesperson for the Cabinet Office told Inside Housing that the guidance applies to the “vast majority” of housing associations depending on whether they consider themselves subject to the Public Contracts Regulations 2015.
Mears and Kier – two of the largest contractors working in the social housing sector – confirmed they have been requesting relief from housing association clients on the basis that they follow PPN 02/20 requirements.
A spokesperson for Mears said: “All bodies that are in receipt of public funding are covered by PPN 02/20, which would include housing associations.
“As such we are in touch with our housing association partners, to ensure that we are paid in line with these guidelines and that equally we do our part around for example protecting jobs and services.
“Most of our clients have been brilliant on this, but some are still perhaps coming to terms with the guidelines given in PPN 02/20.”
Mears – which reported a £17.1m pre-tax profit from a turnover of £480.8m for the first half of 2019 – told Inside Housing that it is asking housing associations to pay as normal for work put on hold because of coronavirus, with the jobs completed when possible after the emergency has subsided.
A spokesperson for the G15 group of large London-based housing associations said: “The G15 are legally advised that housing associations are not obliged to comply with this PPN because we are independent organisations with a charitable purpose and not part of the public sector.
“However we share the objective of supporting our regular suppliers through this difficult period to ensure as far as possible that normal service can resume when the emergency is over.
“We will do this by ensuring prompt payment for services and supplies.”
Alistair McIntosh, chief executive of the Housing Quality Network, said: “It’s true that you’re seeing arguments between associations and contractors at the moment.
“Associations are waiting to see how their income holds up. As they gauge the situation on income, I think the arguments will settle down a bit.
“The one thing that would be good to come out of this is a more mature relationship between landlords and contractors.
“We need contractors to stay in business and be profitable and we need associations to be solvent for any reason under the sun. There is an opportunity here to work better together.”
Views from the sector on contractor support during the coronavirus crisis
Jon Lord, chief executive of Bolton at Home and chair of Greater Manchester Housing Providers:
“We have interpreted the government’s approach for Bolton at Home’s purposes as we’ve identified our key contractors and are in talks with those about whether they need our help.
“These are contractors we’ve worked with for quite a long time. We’ve been thinking about who we want to work with after the crisis is over and we’re focusing on our local economy. We would probably be more resistant to other contractors.”
Sinéad Butters, chief executive of Aspire and chair of PlaceShapers:
“We haven’t yet had any challenge from our contractors on our approach. There are shades of grey as to whether the guidance is applicable to housing associations. The suggestion is to get legal advice and apply that to your own policy and work on a case-by-case basis of where the risk lies with contractors.
“Maintaining a good relationship with our partners is obviously important. It’s a difficult one that could be quite a contentious issue for the sector, but we just have to treat people with respect and be pragmatic.”
Mark Everard, executive director of property at Metropolitan Thames Valley Housing (MTVH) and chair of the G15’s asset directors group:
“The G15 as a group took legal advice on this and the advice was clear that this wasn’t guidance that applied to us. Nevertheless, there’s a spirit that sits behind this and that’s where our conversations have been going, and we along with a number of our G15 peers are having mature conversations with some of the big national contractors with which we are working, particularly where we’re using a PPP [protecting the public purse] mechanism as the basis for our contractual relationship. We’re conscious that they are still delivering elements of the contracted service and are still incurring some overhead costs – we want to keep a fair and reasonable payments flowing to them.
“What we at MTVH are saying, and this is the case with many of our peers, is that we don’t want to be paying the element of labour costs that are offset where they have furloughed staff – it wouldn’t be right to pay for that because you’d effectively be paying them twice.
“We will simply be asking them to do a credit note for the amount of staff cost they are saving by furloughing. Likewise we’re looking at more variable costs, such as petrol – contractors are clearly not driving to as many jobs at the moment. In our experience, conversations are being carried out in a very sensible, professional fashion with partners that are keen to work with us into the future.
“We have had a couple of examples of our smaller specialist contractors which deliver emergency services, asking to increase their rates to allow for the additional cost they are picking up on PPE [personal protection equipment]. We’ve agreed to this in some instances as a temporary measure and are working to ensure that work is being carried out as agreed, and that the PPE is being used appropriately. The contracts probably say these costs lie with them but we’re just trying to be reasonable as this is such an extraordinary situation.”
More on coronavirus
To see all our coronavirus coverage to date – including the latest news, advice to providers, comment and analysis – use the link below.
