Today Housing secretary Michael Gove has warned developers, contractors and manufacturers they must fork out £4 billion to fix dangerous cladding on low-rise buildings. Whilst this may seem to be good news to some – Government has at last made a stand – our concern is the impact and ripple effect that this will have has been not been fully understood.
FIS predicted this news before Christmas and our firm view remains that the current approach is more about winning the blame game than solving the problem.
In his opening remarks Gove said it wasn’t fair that leaseholder take the financial impact, this is true but it is also true that the construction sector shouldn’t shoulder more than its fair share of the burden. The current approach will see years of legal wranglings with costs simply being pushed down the supply chain. The only winners will be the lawyers and the administrators and the real losers will be the small and medium sized contractors and subcontractors, who bound by heavily amended contracts (designed to deflect risk), operating in exceptionally difficult circumstances and could well be left holding the bill when the music stops. New procurement guidance targeted at stopping prioritising cost over value clearly recognises the challenges that the supply chain was under and seeks to change the culture, but this approach was endemic in the past.
Commenting on the letter FIS CEO, Iain McIlwee stated:
“This latest announcement is focussed on cladding, but we know this is not the only issue and when read in context with other correspondence and the retrospective application of changes to the Defective Premises Act it is troubling. In his opening remarks Gove said it wasn’t fair that leaseholder take the financial impact but it is also true that the construction sector shouldn’t shoulder more than its fair share of the burden. The issue is about being proportionate. By passing the entire responsibility on to the construction sector we run the risk of derailing future work whilst we manage this legacy. It is very difficult for the industry to look forward when there is a shadow that is getting darker with every announcement looming over our shoulder.
We have to accept this is a systemic breakdown, regulation and guidance was not clear and new procurement guidance targeted at stopping prioritising cost, over value, is recognition of the challenges that much of the supply chain have been struggling with. Unrealistic cost and time pressure have been masked by terms like value engineering and liquidated damages and dumped in “standard contracts” that were amended beyond all recognition to dump risk through the supply chain. I remain unconvinced that the solution is in the interventions we are seeing and suspect the only winners will be the lawyers and the administrators with cost and blame being pushed through the supply chain. A better approach is a levy based Building Safety Fund and we have written to Mr Gove and his department to recommend this.”
A better solution has to be found. FIS has long advocated – a similar approach to the Pension Protection Fund. Putting a £4 billion pound threat on to contractors, developers and manufacturer may win headlines now but it will just create an even bigger problem further down the road.