As recommended by the above research, we are developing a new business model based on collaboration. We believe that there are two levels of collaboration that are needed:
- Horizontal collaboration – at present the Affordable Housing Supply Programme is delivered by over 100 councils and housing associations. Our analysis in the Edinburgh City Region suggests that most of the homes commissioned by these organisations are similar in many respects but each organisation tends to have preferences that result in relatively minor design differences in layout, size etc. These variations mean that many projects are designed as bespoke projects with the associated design costs. These variations also mean that some of the economies of scale that could be achieved through factory manufacture are lost.
We are therefore working with partners to consider the relative balance between bespoke and a more standardised approach to design and whether greater standardisation of house types and certain components could help deliver a more streamlined system improving quality and reducing costs. It seems likely that partners will favour a ‘mass customisation approach’ through which certain components become standard to form a core which can then be customised in a variety of ways to ensure that design is sensitive to local context. This work will potentially lead to greater scope for aggregation of demand which potentially gives ‘buyers’ more influence on what has traditionally been a ‘sellers’ market. This is considered further below.
- Vertical collaboration – the traditional construction process is sequential and is based on design, procure and build. This is not well suited to offsite construction because clients and their designers often create bespoke designs that require adjustment of factory settings and which defeat potential economies of scale. It is also quite clear that this sequential process on projects can lead to disputes and re-work as projects progress because the design was not properly ‘fixed’ at the outset. The new business model is based on clients, designers, developers and builders all working together from much earlier in the process at both project and at programme level. This increases the likelihood that all will sign up to a shared approach that is amenable to improved delivery and manufacture and the benefits that this brings. So we will move from a traditional sequential approach to one that is based on ‘design for manufacturing and assembly’ (DfMA) and we will continue to discuss with design partners how this can positively impact on their work and the related outcomes.
If significant numbers of councils and Registered Social Landlords adopt the new business model then this will bring a significant opportunity to change our approach to procurement and delivery. The Affordable Housing Supply Programme is currently characterised by a large number of projects – typically over 300 projects each year – many of which are small sites delivering small numbers of homes (although there are also some larger sites – typically in regeneration areas which are developed over a longer period) . We believe it is possible, and necessary, to further improve the delivery model for these homes. The new business model would allow aggregation of small projects to form larger and longer term requirements which could be assembled as programmes (within which performance improvement targets can be agreed and benefits shared) bringing economies of scale and more effective and efficient delivery. This is still work in progress but we believe that aggregation of demand and management of the demand pipeline in this way presents an opportunity to gain efficiencies in project development, design, procurement, construction and after care whilst increasing the scope for the sector to influence what is being built.