SOCIAL DEVELOPMENT COMMITTEE MOTION

Annex A – Paper from Egan Contractors

BRIEFING PAPER FROM EGAN CONTRACTORS FOR MEETING WITH D.S.D. COMMITTEE

Housing Executive Funding of Revenue Replacement (Kitchens) and External Maintenance.

BACKGROUND

During 2006 the Housing Executive commenced a process based on “Egan” type contracts to source contractors to carry out the above work.

After an exhaustive process four contractors were awarded five contracts based on Housing Executive Areas for a five year period.

As part of the Egan process contractors had to agree an all in package encompassing suppliers and subcontractors to enter into what was emphasised was a partnership contract between Housing Executive/Contractors/Suppliers at predetermined rates/costs.

Originally the contract was to start in April 2008 but it was noted that there might be some delay while the existing contracts (many of which were awarded in early 2008) were running out.

The contracts initially started rolling out in July 2008. According to the contract guidelines it was anticipated that the contracts were worth a total of approximately £37m annually with 4500 kitchen replacements and 9500 houses each year receiving external maintenance.

FUNDING

Again it is worth remembering that it was recognised that the first years programme would not be worth the full Annual Value having to allow for the “Running Out” of the existing contracts.

The first intimation that there was a serious funding problem arose on 18/12/08 when the Housing Executive notified the four contractors that there would be no starts in January/February. This appeared to follow M. Ritchie’s “smash and grab speech” of 15/12/08.

After intense lobbying of MLA’s over the Christmas Holiday period, on 12/1/09 it was announced that following a meeting between N. Dodds and M. Ritchie additional funding would be introduced to enable the contracts to recommence. Housing Executive informed contractors that the explanation for the shortfall was that “in order to balance the books we have had to service the shortfall in our capital receipts through our revenue income”. (H.E. e-mail 5/1/09)

Obviously after this experience the Contractors/Suppliers were becoming concerned about the funding of the contracts going forward for 2009/10 and beyond.

A meeting took place with M. Ritchie on 23/2/08 where we were told:-

There were no longer separate Revenue/Capital Budgets.

That the Minister’s first priority was new builds.

That there was a major funding deficit and that we should lobby N. Dodds to grant DSD more funding.

It was emphasised to the Minister that these Repair and Maintenance contracts offered the best method of maintaining employment in terms of value for every £1 spent and also of the concern that any additional funds obtained would not be ring fenced for repair and maintenance contracts.

MEETING WITH N. DODDS

A meeting took place with N. Dodds on 19/3/09 when all of the above points were again raised. It was also raised with the Minister that the concept of ring fencing repairs and maintenance monies should be safeguarded as the Housing Executive was still in receipt of £270m rent from 90,000 homes.

In addition the following points were highlighted.

At present NIHE cannot confirm the level of funding they were likely to receive yet we were 2 weeks from year end. All works would cease on 3/4/09 with no further works to be started. Redundancies would be immediate.

Full NIHE programme should be 4500 new kitchens and ECM works to 9500 dwellings. Current NIHE housing stock 90,000 dwellings.

To complete 4500 kitchens per annum it would take 20 years to replace kitchens in all dwellings. NIHE estimate life expectancy of a kitchen to be 15-20 years. Full programme therefore only enables the NIHE to stand still.

ECM works at the above rate would be completed in a 10 year cycle.

An investment by the Department in the full programme would secure 800 jobs as well as complete kitchen replacement and planned maintenance to 9500 homes. A similar investment in new build social housing would only secure approx. 150-180 jobs and provide 250 new social houses – Was there really a housing shortage?

At this moment in time there are 1150 vacant NIHE properties which cannot be rented due to either minor repair or major improvement works to be carried out. These properties could be repaired at a fraction of the cost of new build and would still remain in public ownership.

The Minister was extremely sympathetic but emphasised that the DSD had the funding already in place through the three year budget/plan for Government but that it was up to the Minister how those monies were spent!

LATEST SITUATION

On 6/4/09 the Egan contractors were advised that they had been allocated £10m (£2m per area) for 2009/10 with no anticipated further funding available until the last quarter.

The projected spend on these contracts was £37m and obviously this drastic curtailment is having serious consequences on all of the companies concerned.

Following this announcement a meeting was had with the Deputy First Minister in order to attempt to gain more clarity into what was likely to happen going forward and that meeting is referred to in Item 4 below. As yet we have not received any clarification on funding issues raised at that meeting.

GOING FORWARD

Everyone is well aware of the difficult economic times we find ourselves in but burying our head in the sand and waiting for a better day is not really an option.

The following points need addressing:-

1. Do you agree with the Chancellor’s Statement in his December pre budget speech that the upgrading of public authority housing to meet the Decent Homes Standard should be prioritised in order to maintain employment in this sector of the Construction Industry?

2. M. Ritchie’s statement that “building new homes to put a roof over peoples heads rather than give them new kitchens” issued on 26/3/09 has been extremely unhelpful. All employees are now asking when they are to be laid off. Many of the tenants are anticipating starts on these contracts. They continue to pay their rent and accordingly have expectations. Should this type of spend not deserve priority as against say urban renewal?

3. Having regard to the fact that there are allegedly 57000 empty homes in N. Ireland is it a good use of resources to build more housing? In the short term does it not make better sense to adopt schemes/incentives to bring these houses into occupation?

4. Has the Housing Executive received adequate funding? We hear conflicting opinions but from the Housing Executive latest accounts (31/3/08) it would appear that the spend on maintenance was £118m in both 2006/08 and 2007/08.

At the meeting with DFM on 7/4/09 we were informed by DSD that the H.E. had received £127m to cover Revenue Repairs and £16m to cover Capital Spend (a reduction from £48m in 2008/09).

He confirmed that £10m had been allocated to the Egan contractors present, £6m for Heating upgrades, £45m was withheld for Response Maintenance, change of Tenancy repairs etc. but was unable to account for the other £60m which he stated has been “pre-allocated”.

Based on the above it would appear that more than the same level of funding is available this year compared to that which was available when the Housing Executive entered into these Egan contracts.

Is the Committee satisfied with the degree of transparency afforded to it with regard to the Housing Executive Budget and Spending?