Social housing clients turn back to 'lowest price wins'

Social housing frameworks are in danger of falling apart as clients turn their backs on established deals to find the lowest bidder through open tenders.

Contractors fear a return to the dark days of 1990s-style suicidal bidding as Registered Social Landlords (RSLs) shun their existing frameworks as the economic downturn bites.

One leading social housing contractor told CJ that 80% of all its work from RSLs over the past 12 months came through OJEUs rather than frameworks - a major swing on the previous year.

A floundering market has seen RSLs recognise a chance to procure work at lower prices as companies suffering from the housebuilding slump try to muscle their way into social housing.

The contractor said: "This could well see a return to the old 'foot in the door' approach - contractors bidding at a low price to get their foot in the door and then working up the contract price when they get on the project.

"Clients are short-sighted if they can't see that. They're throwing away all the reasons they used partnering and frameworks to generate good cost savings."

Lakehouse business development director Julian Harajda said: "A number of RSLs have said we are going to do nothing but tender, and why wouldn't they? We're in a marketplace that is inundated with frameworks. More importantly, it is inundated with contractors who are vying for survival.

"I don't blame them for doing this. If the clients want to achieve the cheapest price, the best way forward is to tender. You might not get the quality, but you'll get the price down. I wouldn't condone it but they will do it."

But Peter Wooliscroft, managing director of the London Area Procurement Network, questioned whether RSLs were deliberately sidestepping frameworks.

He said: "It's not logical. You're far better off negotiating with a framework contractor saying to them, you don't have any of the overheads attached to an OJEU submission therefore let's have some good prices from you."