The use of the NHF Schedule of Rates within UK social housing tendering has become embedded as a default commercial mechanism. Their stated purpose is to introduce consistency, comparability, and administrative efficiency across maintenance and investment programmes. However, widespread adoption has revealed that standardisation alone does not equate to value. When applied as a dominant pricing framework, NHF SORs influence procurement behaviour, risk allocation, and delivery outcomes in ways that extend far beyond simple cost control.
The principal weakness of NHF SORs lies not in their existence, but in their elevation from reference data to dominant commercial instruments. In practice, the reliance on predetermined national rates prioritises procedural compliance over commercial realism. Tenderers are constrained to operate within parameters that frequently fail to reflect asset condition, operational complexity, or regional market pressures. This constraint tends to encourage defensive pricing strategies, embedded contingencies, and selective risk transfer rather than transparent value propositions.
As a result, tenders may appear competitive on
paper while concealing structural inefficiencies that emerge during contract
execution. Rate-driven delivery models can create conditions in which
operational KPIs diverge from tendered assumptions during live delivery. For
example, Birmingham City Council’s independent PwC review of its repairs and
maintenance service identified productivity and unit-cost variances against
comparator benchmarks, illustrating how apparent tender competitiveness can
mask underlying inefficiencies during delivery.
Large-scale housing stock transfers are often subject
to uncertainty in asset data, particularly when inherited stock condition
information is incomplete or overly optimistic. When NHF SORs are applied
without local calibration and early intrusive validation, early delivery can
become more variation-led. Latent defects, non-traditional construction types,
and compliance issues are therefore more likely to surface after award than to
be priced explicitly at tender.
In that scenario, risk that might otherwise be
priced explicitly at tender is more likely to be managed post-award through the
contract’s change and valuation mechanisms. This dynamic can increase friction
and push behaviours toward defensive commercial administration. Management
effort is then drawn into valuation and dispute avoidance rather than service
improvement and resident outcomes.
From a governance perspective, NHF SORs tend to
reinforce a transactional model of contract management. Emphasis can shift
towards item validation, coding accuracy, and rate compliance rather than
outcomes, performance, or whole-life value. This orientation is at odds with
contemporary expectations in public procurement. The Procurement Act 2023
emphasises proportionality, value for money, and innovation. It places far less
weight on administrative compliance as an end in itself. Rate-driven compliance
can therefore dilute strategic intent.
The experience of post-Grenfell building safety
remediation further highlights this limitation. Enhanced compliance
obligations, later reinforced by the Building Safety Act 2022, demanded bespoke
technical solutions and proactive risk management. NHF SOR structures struggled
to accommodate this complexity, leading to increased reliance on negotiated
variations and specialist schedules. This experience underscores the inherent
limitations of standardised rates when applied to evolving regulatory and asset
risk environments.
What Are the NHF Schedule of Rates
The NHF Schedule of Rates constitute a nationally standardised pricing
mechanism designed to support consistency across housing maintenance, repair,
and improvement activities. Developed through aggregated market intelligence
and periodic sector consultation, the rates provide a common baseline for
frequently recurring tasks. In theory, this structure promotes efficiency,
reduces tendering time, and supports comparability between bids, particularly
for high-volume responsive maintenance. However, the abstraction required to
achieve national consistency inevitably dilutes sensitivity to local and
asset-specific realities.
The operational design of NHF SORs distinguishes them from traditional
bespoke rate schedules. Rather than functioning solely as a neutral pricing
reference, they operate as a sector-wide commercial framework shaped by policy
objectives and sector norms. Their adoption often carries an implicit
expectation of conformity, even where housing stock, delivery models, or risk
profiles diverge significantly. This dynamic constrains the articulation of
differentiated commercial strategies and limits the expression of innovation or
risk-adjusted pricing within tenders.
In practice, this standardisation can suppress meaningful market
signals. Tenderers are incentivised to align closely with prescribed rates
rather than reflect genuine operational assumptions, productivity differences,
or asset complexity. Over time, this produces a homogenised tendering
environment in which price differentiation narrows, and value becomes difficult
to discern. Such outcomes sit uneasily with the principles of effective
competition embedded within the Procurement Act 2023, which emphasise proportionality,
transparency, and the pursuit of value for money. The experience of large-scale
housing stock transfers provides a practical illustration of these limitations.
This dynamic is most visible where the asset
baseline is least reliable, because a rate schedule cannot correct for missing
or optimistic stock intelligence. In those contexts, NHF SORs tend to shift
commercial focus from pricing known risk to managing discovered risk,
increasing reliance on valuation and change-control disciplines. The effect is
not unique to transfers, but transfers provide a clear stress test of how
quickly standard rates can become misaligned with delivery reality.
Limited Reflection of Local Market Conditions
The NHF Schedule of Rates are constructed to reflect aggregated national
cost data, yet this methodology inherently struggles to capture the variability
of local market conditions. Regional disparities in labour availability,
subcontractor capacity, and supplier resilience create cost environments that
diverge significantly from national averages. In metropolitan areas with
sustained development activity, particularly London and the South East,
construction demand has historically placed upward pressure on wages and
preliminaries, rendering uniform rates an imperfect and often blunt pricing
instrument.
Periods of intensified infrastructure investment further accentuate this
distortion. Large-scale transport and regeneration programmes have repeatedly
drawn skilled labour away from housing maintenance, thereby increasing scarcity
and costs. When NHF SORs are applied without local adjustment, contractors are
exposed to commercial risk that cannot be priced transparently at the tender
stage. This risk is often managed through conservative delivery approaches,
reduced service responsiveness, or post-award commercial recovery mechanisms,
each of which undermines procurement objectives.
Experience in high-cost regions indicates potential impacts on
competition where rate constraints limit pricing flexibility. The mandated use
of unadjusted NHF SORs may be associated with reduced tender participation when
rate constraints prevent tenderers from pricing local cost and capacity risks
transparently. This aligns with broader procurement dynamics in which limited
market engagement can yield very low bid volumes (including single-bid
outcomes), thereby reducing competitive tension and increasing reliance on
validation rather than comparative pricing. In such conditions, contractors
with heavy regional workloads may decline to bid, while others may
submit compliant tenders structured to rebalance margins across specific items.
Although formally competitive, such tenders distort pricing intent and
weaken the reliability of market testing. This risk is not theoretical.
Brighton & Hove City Council’s Housing & New Homes Committee report on
creating an in-house responsive repairs and empty properties service explicitly
modelled the alternative of outsourcing “under a single tender,” estimating an
outsourced budget range of c. £7.1m–£7.35m at prevailing costs. The committee frames
evidence that, in practice, market response can be sufficiently constrained
that client options are assessed on the assumption of a single-bid outcome
rather than robust multi-bid competition.
In long-term partnering and framework-renewal contexts, particularly
where demand is high, and delivery data are well developed, incumbents
typically hold a structural advantage through superior utilisation intelligence
and coding familiarity. Under tightly constrained NHF SOR pricing, that
information asymmetry can narrow effective competition and raise barriers to
entry for new suppliers. New entrants, lacking comparable utilisation data, may
be exposed to heightened risk under standard rates and disadvantaged
relative to incumbents. The outcome is frequently a narrowing of the
competitive field and a reinforcement of incumbency, contrary to the
competition principles embedded within the Procurement Act 2023.
In contrast, the application of NHF SORs in lower-cost regions can
produce a different but equally problematic effect. Where local labour and
material costs sit below national benchmarks, standardised rates may inflate
baseline pricing. This inflation embeds inefficiency within contracts and
limits the potential for genuine savings. Such outcomes sit uneasily alongside
the duty to secure continuous improvement and value for money under the Local
Government Act 1999.
The combined effect of these regional misalignments raises broader
concerns regarding public accountability and stewardship. Whether through
suppressed competition in high-cost areas or inflated pricing in lower-cost
markets, the uniform application of NHF SORs risks misallocating public
resources. Effective procurement practice requires mechanisms capable of
reflecting local economic reality while maintaining transparency, a balance
that nationally fixed rates struggle to achieve in diverse market conditions.
Inflexibility in Addressing Asset-Specific
Variations
Housing stock across the social sector reflects decades of differing
construction practices, regulatory standards, and investment cycles. Variations
in age, design typology, and retrofit history introduce complexity that resists
standard categorisation. Non-traditional construction methods, legacy
materials, and partial upgrades are standard, yet the NHF Schedule of Rates
rely on generalised descriptions that assume uniform conditions. When such
rates are applied rigidly, material asset-specific risks remain inadequately
priced or deferred into post-contract adjustment mechanisms.
This misalignment often manifests during early delivery, where
previously unrecognised constraints emerge on site. Issues such as hidden
structural defects, obsolete components, or non-compliant installations require
intervention beyond the scope of standard rate descriptions. Rather than
enabling proactive resolution, rigid rate structures tend to channel these
risks into variations and claims processes.
The Grenfell Tower Inquiry, whose final Phase 2 report was published on
4 September 2024 across seven volumes, offers a sobering example of the dangers
of failing to recognise asset-specific characteristics. It demonstrates how
dependence on standardised approaches can hide critical risk factors when local
context and building history are not thoroughly examined. Although not directly
attributable to NHF SORs, the inquiry underscores the importance of a detailed
understanding of assets, particularly with respect to life safety and
regulatory compliance.
Rigid application of standard rates also discourages early engagement in
asset risk diagnosis. Where commercial frameworks limit the ability to reflect
complexity at the tender stage, meaningful collaboration is deferred until
after contract award. At that point, dialogue is often displaced by adversarial
variation management, eroding trust and increasing cost. This dynamic conflicts
with modern procurement principles that emphasise early risk identification,
collaboration, and shared accountability for asset performance.
Risk of Cost Misalignment Due to Regional
Price Fluctuations
NHF Schedule of Rates is updated periodically, relying on historic cost
data and sector consultation. This retrospective methodology creates an inherent
lag between real-time market conditions and published rates. During periods of
economic stability, this lag may appear manageable. However, during rapid
inflationary cycles, the disconnect becomes pronounced. Following Brexit and
the post-pandemic disruption period, contractors faced escalating labour and
material costs. In that context, standardised rates may not adjust quickly
enough to reflect rapid changes in input costs. This risk was materially
exposed during 2022, when BCIS reported peak annual inflation of 14.6% in its
General Building Cost Index and 23.5% in its Materials Cost Index, far
exceeding the responsiveness of most scheduled rate updates.
The construction labour market provides a clear illustration of this
challenge. Restrictions on workforce mobility and sustained demand for skilled
trades intensified regional competition for labour, particularly in
metropolitan areas. NHF SORs, applied uniformly, were unable to reflect these
pressures promptly. Contractors, therefore, absorbed inflationary risk that had
not been transparently priced at the tender stage, thereby undermining the
principle of balanced risk allocation that is fundamental to effective contract
management.
When misalignment persists, it can alter commercial behaviour. Those
behaviours are not necessarily aligned with long-term value. Where cost
recovery through rate adjustment is constrained, delivery strategies may
prioritise throughput and cash protection. Diagnostic time, efficiency, and
quality can then be deprioritised. Over time, this creates a risk of adverse
impacts on asset condition and service reliability. Housing associations then
encounter increased reactive maintenance, resident dissatisfaction, and budget
volatility, eroding the stability that standardised pricing frameworks are
intended to provide.
Long-term maintenance contracts can exhibit
these effects during inflationary periods, notably when indexation lags behind
the real cost of inputs. In inflationary conditions in which indexation lags
input costs, commercial pressure often shifts to a contractual process. This
pressure can manifest as increased volumes of variation submissions,
compensation event notifications, and requests for relief or repricing. Dispute
likelihood can increase, and contract behaviours can become more defensive. The broader service environment shows parallel
strain. The Housing Ombudsman reports a 474% increase in investigated
complaints about poor living conditions compared with 2019–20, with poor
practice identified in 72% of cases, despite £9bn spent on repairs and
maintenance in 2023–24.
Commercial pressure of this nature can drive a more transactional
posture. Management attention may shift away from improvement initiatives and
towards commercial reconciliation. These outcomes sit uneasily alongside
collaborative procurement models promoted within public-sector frameworks and
guidance. Independent cost data reinforces the limitations of static national
rates.
The Building Cost Information Service has consistently identified
significant regional divergence in labour and material indices, particularly
during periods of market volatility. Such divergence highlights the inadequacy
of uniform schedules as tools for risk allocation. Without mechanisms to
respond dynamically to regional price fluctuation, NHF SORs risk embedding
instability rather than delivering the predictability and value they are
intended to support.
Over-Standardisation of Complex Repair
Activities
Complex repair activities within social housing frequently require
diagnostic capability, professional judgement, and cross-trade coordination
that extend beyond routine task execution. Defects often have multiple
underlying causes, shaped by building age, historical alterations, and
occupancy patterns. NHF Schedule of Rates, by design, disaggregates work into
predefined tasks, thereby encouraging sequential intervention rather than
integrated problem-solving. This structural fragmentation can inhibit holistic
repair strategies and undermine technical effectiveness.
When complex issues are reduced to isolated rate items, root causes may
remain unaddressed. Repairs can become symptom-focused rather than
outcome-driven, increasing the likelihood of repeat attendance and latent
defects. Over time, this pattern drives inefficiency, increases lifecycle
costs, and diminishes residents’ confidence in maintenance services. The
apparent certainty of standardised rates masks the operational reality, in
which complexity rarely aligns with linear task definitions embedded in SOR frameworks.
In responsive maintenance environments, this transactional approach is
in direct tension with service-excellence objectives. Performance is implicitly
measured through adherence to coded activities rather than durable resolution.
Contractors are commercially incentivised to complete tasks that align neatly
with rate descriptions, even where broader intervention would be more
effective. Accountability for persistent failure modes becomes diffuse, as
responsibility is distributed across multiple chargeable activities rather than
outcomes.
In ALMO and large-portfolio contexts, task-fragmented delivery can
increase recurrence risk by making early identification of underlying system
failures more difficult. Where SOR-driven pricing separates diagnostic work
into discrete chargeable activities, root causes are more easily deferred,
increasing the likelihood of repeat attendance.
Sector performance regimes already treat first-time fix as a practical
proxy for recurrence risk, enabling the effects of task-fragmented delivery
models to be assessed directly against an established and governed KPI rather
than through qualitative assertion alone. For example, Spitalfields Housing
Association’s Annual Report 2022–23 reports a first-time fix performance of
95%, illustrating both the prominence of this metric in social housing
governance and the extent to which repeat repairs are actively monitored and
managed.
In local authority repairs governance, recurrence indicators such as
repeat attendance and first-time fix are routinely treated as leading measures
of cost-to-serve and service stability. Where these metrics are weak,
additional supervision, inspection, and commercial pressure are typically
introduced, increasing overhead and reinforcing the link between fragmented
delivery models and measurable cost and service impacts.
One mitigation is a shift to hybrid commercial models that combine
limited-rate schedules with outcome-based repair scopes. This experience aligns
with wider sector learning following the Grenfell Tower Inquiry, which
emphasised the dangers of compartmentalised responsibility in building
maintenance and safety management. Although not directly attributable to NHF
SORs, the inquiry reinforced the importance of joined-up thinking, professional
judgement, and clear accountability. Over-standardisation risks obscuring such
responsibilities, particularly where compliance with process is mistaken for
assurance of safety and quality.
Legislative expectations further challenge fragmented delivery models.
Duties under the Health and Safety at Work Act 1974 and emerging obligations
under the Building Safety Act 2022 emphasise proactive risk management and
sound decision-making. Repair frameworks that prioritise task completion over
diagnostic resolution struggle to align with these principles. Where complex
repairs are over-standardised, NHF SORs risk constraining professional
discretion precisely where it is most needed.
Reduced Transparency in Contractor Pricing
Assumptions
The NHF Schedule of Rates present an appearance of transparency through
published item values and standard descriptions. However, this visibility is
largely superficial. The underlying assumptions that shape pricing, including
productivity rates, preliminary allocation, overhead recovery, and risk
contingency, remain obscured. Tenderers frequently apply uplifts or discounts
at an aggregate level, masking how individual risks are priced. As a result,
headline compliance conceals significant variation in commercial strategy and
cost exposure.
This lack of granularity weakens post-award commercial governance. Contract
managers are required to administer rates without a clear understanding of the
assumptions that underpin them. This limits their ability to assess the
reasonableness of decisions or to challenge emerging cost pressures. When
performance issues arise, it can be difficult to distinguish genuine external
impacts from inefficiencies embedded in the original pricing model. That
ambiguity can limit the quality of the commercial challenge. This opacity
increases reliance on contractual mechanisms rather than informed commercial
dialogue.
The absence of visible cost drivers constrains meaningful value
engineering. Without insight into labour productivity, sequencing assumptions,
or supply chain dependencies, commercial discussions tend to narrow toward
individual rates. Structural inefficiencies are more challenging to diagnose in
this context. Opportunities to redesign workflows, integrate trades, or adopt
alternative materials may therefore be missed. Over time, this environment can
encourage transactional behaviours and undermine continuous improvement,
despite the sector’s ambitions to deliver more innovative and sustainable
maintenance services.
Audit and assurance considerations further expose the limitations of
opaque pricing structures. The National Audit Office’s guidance on managing the
commercial lifecycle, informed by findings from over 200 published reports,
consistently identifies transparency of cost drivers and commercial assumptions
as essential to effective public accountability. Public-sector clients are
required to demonstrate value for money and proportionality, particularly when
expenditure is funded through rents or public subsidies. NHF SOR-based pricing,
when divorced from explanatory commercial data, makes such assurance more
difficult to evidence.
These challenges can arise in major maintenance framework procurements. In
SOR-dominated frameworks, delivery-phase cost variance can occur even where
tender submissions appear competitive. One driver is that margin recovery and
risk assumptions can be embedded within compliant rates rather than being
transparent at tender. Where this occurs, post-award commercial analysis
typically focuses on how margin recovery and risk assumptions were distributed
across the schedule at award. These cases highlight that apparent price
certainty does not equate to genuine transparency. This is particularly the
case where standardised schedules obscure the underlying economics of delivery.
Potential for Tactical Pricing and Rate
Manipulation
The NHF Schedule of Rates create conditions in which experienced
tenderers can identify items with high usage frequency or elevated operational
risk and adjust pricing strategically. While overall compliance with prescribed
rates is maintained, commercial balance within the schedule may be deliberately
skewed. Margin is concentrated in predictable demand areas, allowing apparent
competitiveness at the tender stage while enabling future cost recovery. This
behaviour is most likely to manifest during framework renewals, where delivery
patterns are well understood.
Incumbent contractors are uniquely positioned to exploit this dynamic.
Access to historic volume data enables selective pricing that aligns with
anticipated call-off demand, while less visible or infrequently used items are
discounted. New entrants, lacking comparable insight, are exposed to asymmetric
risk and face difficulty competing on an equivalent basis. Over time, this
imbalance reinforces incumbency and narrows the competitive field, contrary to
the objectives of open and effective market competition.
For clients, tactical pricing introduces significant forecasting risk.
Minor shifts in service demand, policy priorities, or asset condition can
trigger disproportionate cost impacts when heavily weighted rate items are
activated. Budget predictability is undermined, and contract management effort
is diverted towards monitoring item utilisation rather than service
performance. These effects undermine the reliability of NHF SORs as
cost-control mechanisms within long-term maintenance arrangements.
Regulatory concern regarding such pricing behaviour has been expressed
more broadly by the Competition and Markets Authority. The Competition and
Markets Authority has repeatedly highlighted practices such as bid rigging and
cover pricing as mechanisms that create an appearance of competition while
distorting outcomes. This risk is exacerbated when pricing structures enable
selective margin concentration within compliant schedules.
Pricing structures that facilitate strategic gaming are recognised as
distorting competition, particularly where procurement rules constrain
flexibility or negotiation. Within the context of NHF SORs, the potential for
rate manipulation highlights the limitations of standardised schedules when
applied without sufficient safeguards, transparency, and ongoing commercial
challenge.
Inadequate Incentives for Innovation and Value
Engineering
The NHF Schedule of Rates is designed to reward compliance with
predefined tasks and descriptions rather than to encourage innovation in the
means of achieving outcomes. Delivery models that rely on alternative
materials, integrated work packages, or redesigned processes struggle to align
with fixed-rate structures. When innovation entails deviation from standard
practices, it is often treated as an exception rather than as an improvement.
This framing positions innovation as a commercial risk rather than a source of
added value.
Modern methods of construction and digital diagnostics clearly
illustrate this constraint. Technologies such as remote condition monitoring,
building information modelling for maintenance planning, and off-site
fabrication can reduce lifecycle cost and disruption. However, these approaches
do not readily map onto task-based schedules. Without explicit commercial
recognition, contractors absorb the cost of innovation while the client
captures most of the benefits, thereby weakening the incentive to invest in new
capabilities.
This structural limitation conflicts with the sector’s broader
ambitions, particularly those related to decarbonisation and energy efficiency.
Programmes supported by the Social Housing Decarbonisation Fund require
integrated retrofit solutions, coordinated sequencing, and specialist
expertise. NHF SORs, focused on individual activities, struggle to accommodate
whole-house approaches or performance-led interventions.
Published learning from Social Housing Decarbonisation Fund demonstrator
programmes reinforces this assessment. Learning outputs from BEIS-supported
Social Housing Decarbonisation Fund Wave 1 demonstrator projects highlighted
delivery challenges arising from applying traditional activity-based and
SOR-aligned pricing frameworks to whole-house retrofit. These challenges are related
primarily to sequencing, specialist coordination, and performance-led delivery,
with implications for transaction cost and programme pace.
Whole-house retrofit programmes most clearly expose the limits of
activity-based pricing. Integrated measures require coordinated sequencing,
specialist interfaces, and performance assurance that do not map neatly onto
itemised tasks. Where the commercial framework remains rate-led, pricing
discussions tend to revert to workarounds and exceptions, thereby increasing
transaction costs and delaying delivery even when the technical pathway is
clear.
Early retrofit activity illustrates this challenge. Housing providers
adopting fabric-first approaches reported difficulty aligning innovative
insulation systems and low-carbon technologies with existing SOR frameworks.
Commercial discussions became centred on rate adjustment rather than
performance outcomes, delaying delivery and increasing transaction costs. These
experiences highlight the misalignment between standardised pricing mechanisms
and the complex delivery models required for meaningful carbon reduction.
The absence of structured value engineering incentives further
entrenches this problem. NHF SOR-dominated contracts offer limited opportunity
to share efficiency gains arising from design optimisation, process
improvement, or supply chain integration. Savings generated through innovation
are often captured implicitly through lower utilisation rather than explicitly
rewarded. This discourages initiative-taking investment in skills, technology,
and collaborative problem-solving that could enhance long-term asset
performance.
Legislative and policy drivers increasingly emphasise continuous
improvement and sustainability. Duties arising from the Climate Change Act 2008
and evolving building safety and energy performance regulations place pressure
on the sector to modernise. Contractual frameworks that inhibit innovation risk
falling out of alignment with these obligations. Where NHF SORs dominate, the
danger is not merely stagnation, but the gradual embedding of obsolescence
within long-term maintenance and investment arrangements.
Challenges in Benchmarking Non-SOR or
Specialist Works
NHF Schedule of Rates are structured around everyday, repeatable
maintenance activities, which limits their relevance for specialist or
technically complex works. Fire safety remediation, intrusive structural
repairs, and complex mechanical or electrical installations rarely correspond
neatly with standard SOR descriptions. When such activities fall outside
predefined items, benchmarking becomes inherently subjective. Competitive
tension is weakened as procurement shifts from comparative pricing to negotiated
agreements, increasing uncertainty regarding cost and value.
This challenge became particularly pronounced following the introduction
of enhanced building safety obligations. The Building Safety Act 2022
introduced new expectations around competence, assurance, and remediation of
higher-risk buildings. Many housing providers found that legacy NHF SOR
frameworks could not readily accommodate fire stopping, compartmentation works,
or complex system upgrades. Pricing such works required bespoke schedules or
negotiated rates, disrupting procurement programmes and delaying critical
compliance activity.
Post-Grenfell remediation programmes highlight the consequences of
inadequate benchmarking. Providers undertaking large-scale fire safety works
reported significant variation in pricing for similar scopes across schemes.
Without consistent benchmarks, commercial assurance relied heavily on
professional judgement rather than market evidence. This approach increased
exposure to regulatory scrutiny, resident concerns, and external auditor
scrutiny, particularly when public funding was involved.
The absence of robust benchmarking mechanisms also carries broader
financial and reputational risk. Public-sector clients are expected to
demonstrate transparency and value for money, particularly in safety-critical
contexts. Where specialist works cannot be reliably benchmarked within existing
SOR frameworks, confidence in procurement decisions is weakened. This
limitation underscores the need for more flexible commercial models that can
accommodate specialist risk while maintaining competitive discipline and
accountability.
Dependence on Accurate Volume Forecasting
The NHF Schedule of Rates relies heavily on the accuracy of volume
forecasting to function effectively as a cost-control mechanism. Rates are
fixed, yet overall expenditure is driven by assumed demand levels across
numerous repair categories. In responsive maintenance environments, where
failure patterns are unpredictable and influenced by weather, occupancy, and
asset condition, forecasting accuracy is inherently limited. Minor errors in
demand modelling can therefore translate rapidly into significant cost variance
over the life of a contract.
This structural dependency exposes weaknesses in risk allocation. Contractors’
price schedules are based on assumed utilisation profiles, embedding a margin
where volume is expected to concentrate. When actual demand diverges from these
assumptions, financial balance shifts. In many cases, volume risk is implicitly
transferred to housing providers, who bear the costs of changes in asset
condition or service priorities. This misalignment undermines the stability
that standardised rates are intended to provide.
The consequences of inaccurate forecasting are frequently observed in
long-term maintenance contracts. Early-year underspend may be followed by
pronounced overspend as latent defects emerge or stock condition deteriorates
faster than anticipated. Budget volatility of this nature complicates financial
planning and reduces confidence in procurement outcomes. Contract management efforts
become focused on reconciling volume movements rather than on improving service
delivery or asset performance.
Dispute risk also increases under such conditions. When actual demand
deviates materially from forecast assumptions, disagreements arise over whether
a change in volume constitutes a normal fluctuation or an exceptional
circumstance. Compensation events, variation claims, and renegotiation become
more prevalent, eroding trust between parties. Collaborative behaviours
promoted at the tender stage are difficult to sustain when commercial
equilibrium is perceived to have been undermined by forecasting error.
Large-scale stock transfers provide a practical illustration of this
risk. Asset data inherited at transfer has often proven incomplete or
optimistic, leading to higher-than-expected responsive maintenance demand in the
early years of the contract. NHF SOR-based contracts struggled to accommodate
this surge without significant commercial tension. Subsequent asset surveys
confirmed that reliance on historic averages had underestimated the accurate
condition profile of transferred homes.
Contemporary asset management practice increasingly emphasises
probabilistic modelling, scenario planning, and data-driven forecasting. These
approaches recognise uncertainty and seek to manage it dynamically. Static SOR
frameworks offer limited support for such methodologies, as they assume
predictable volume and stable demand patterns. Without complementary mechanisms
to manage uncertainty, reliance on NHF SORs risks embedding structural
fragility within maintenance and investment programmes.
Exposure to Inflationary Pressures and
Indexation Lag
During periods of heightened inflation, particularly those experienced
in the construction sector following Brexit and the COVID-19 pandemic, the gap
between actual cost escalation and indexed adjustments became pronounced. Rates
failed to reflect real-time increases in labour, materials, and energy,
creating immediate commercial pressure. Official construction materials price
indices published by the central government further demonstrate sustained
volatility over this period, providing an auditable benchmark against which the
lag in standardised rate adjustment can be evidenced.
Contractors operating under fixed or slowly indexed rates were required
to absorb rising input costs that were not anticipated at the tender stage. In
response, delivery models were often adjusted to protect financial viability,
sometimes at the expense of service responsiveness or quality. Where cost
recovery proved unsustainable, contractual relief was sought through variation
claims or renegotiation, introducing instability into what were intended to be
predictable long-term arrangements.
Housing associations faced parallel pressures. Operating within rent
caps imposed under the Welfare Reform and Work Act 2016 and subsequent
regulatory guidance, income growth remained constrained while maintenance costs
escalated. This mismatch limited financial flexibility and placed pressure on
business plans. The use of NHF SORs did little to moderate these effects, as
rate structures lacked the agility required to respond to rapid cost inflation
without reopening commercial terms.
The resulting tension strained partnering relationships. Long-term
collaborative models rely on balanced risk allocation and shared confidence in
commercial mechanisms. When indexation fails to keep pace with market reality,
trust is eroded and transactional behaviours re-emerge. Management effort is
redirected towards dispute resolution and financial reconciliation, increasing
transaction costs and diluting the benefits of partnership working promoted
across the sector.
Sector experience during the post-pandemic recovery period provides a
clear illustration. During periods of accelerated inflation, fixed- or weakly
indexed-rate frameworks can become commercially fragile. They may increase the
likelihood of early re-pricing requests or supplier exit where sustained cost
absorption is not viable. If contractors seek early repricing or withdraw,
landlords may face a risk to service continuity. That may force accelerated or
interim sourcing approaches. The consequence is usually additional transaction costs
and reduced planning stability. These outcomes highlight the vulnerability of
rigid rate-based contracts during periods of economic disruption.
This dynamic exposes a broader structural weakness within NHF
SOR-dominated contracting models. Rate-based mechanisms assume relative price
stability and gradual adjustment, conditions increasingly absent in modern
construction markets. In macro-economically volatile environments, such
assumptions no longer hold. Without more responsive indexation or alternative
commercial structures, reliance on NHF SORs risks embedding fragility rather
than resilience within housing maintenance and investment programmes.
Difficulty in Accommodating Emerging
Technologies and Methods
Policy direction, most notably through the Cabinet Office’s Construction
Playbook (including its September 2022 update), promotes modern methods,
digital integration, and outcome-focused delivery across public sector
construction and maintenance. NHF Schedule of Rates, structured around
traditional activity-based items, can struggle to accommodate these approaches
without complex workarounds, thereby reinforcing legacy practices at the point
where transformation is actively encouraged. This disconnect creates tension
between strategic policy intent and the operational procurement mechanisms
commonly used within the social housing sector.
This misalignment has practical consequences for adoption. Where
commercial frameworks do not recognise the value of digital diagnostics or
predictive interventions, investment is delayed or avoided. Efficiency gains
that could reduce repeat visits, improve first-time fix rates, and extend asset
life are deferred. Housing providers piloting digital condition surveys have
frequently reported difficulty translating long-term savings into recoverable
value within NHF SOR-based contracts.
The experience of providers adopting off-site manufactured components
for kitchens and bathrooms illustrates this challenge. While such approaches
reduce disruption and improve quality consistency, they do not align neatly
with task-based SOR items. Pricing becomes fragmented and administratively
burdensome, discouraging wider adoption. In this context, NHF SORs function as
a structural brake on sector advancement, constraining innovation precisely
where it is most needed to improve performance and resilience.
Risk of Scope Creep Through Ambiguous Item
Definitions
The NHF Schedule of Rates relies on concise
item descriptions intended to standardise interpretation across diverse
delivery contexts. In practice, brevity can introduce ambiguity, particularly
around enabling works, access, preparation, making good, and reinstatement. Minor
interpretive differences can materially alter scope, particularly for
high-frequency items. Over time, incremental interpretation can expand payable
activity beyond what was intended at award, creating cost growth that appears
legitimate at the item level but problematic at the programme level.
This creates a governance challenge as much as
a commercial one. Contract administration can become absorbed in defining
boundaries for individual tasks rather than managing outcomes, quality, and
improvement. Assurance becomes more difficult to substantiate when scope
control depends on case-by-case interpretation rather than clear contractual
demarcation. In this environment, the schedule ceases to operate as a
stabilising baseline and becomes a continual source of boundary-setting
activity.
Public accountability increases the
sensitivity of scope drift. Under the Procurement Act 2023 and broader
value-for-money expectations, expenditure should remain demonstrably aligned
with the contract’s intended scope. Where ambiguity persists, external scrutiny
can reasonably question whether cost movements reflect genuine demand or the
gradual widening of the scope of payable definitions. Clear scope definition is,
therefore, not merely an administrative preference; it is integral to risk
allocation and stewardship.
The structural weakness is not the existence
of standard items, but the assumption that uniform wording can reliably capture
diverse site realities. Without supplementary clarification, boundary rules,
and disciplined change control, NHF SOR-based delivery can normalise scope
creep as routine practice, increasing cost and friction while weakening
strategic oversight across the contract lifecycle.
Administrative Burden of Schedule Maintenance
and Updates
NHF Schedule of Rates require continual maintenance to remain aligned
with contractual terms, operational systems, and published updates. Each
revision necessitates system reconfiguration, rate validation, and
communication among delivery teams. In large housing portfolios, minor
discrepancies can propagate quickly, creating inconsistencies between work
orders, invoicing, and financial reporting. The resulting reconciliation effort
increases audit workload and absorbs management capacity that could otherwise
be directed towards service improvement.
The complexity intensifies within multi-contractor environments.
Variations in the interpretation of updated items, transitional arrangements,
or legacy rates lead to divergent applications across suppliers. Contract
management teams are required to ensure operational consistency, which adds
further administrative strain. Rather than simplifying procurement, the
schedule becomes a focal point for clarification requests, corrections, and dispute-avoidance
activities, none of which directly contribute to asset performance or resident
satisfaction.
Framework-based maintenance arrangements illustrate how administrative
effort can escalate over time. Housing providers managing multiple call-off
contracts reported growing backlogs of rate queries following NHF updates,
particularly where amendments coincided with budget cycles or system upgrades.
Addressing these issues required additional governance forums and specialist
commercial support, increasing overhead without delivering proportional value
or efficiency.
This burden is frequently underestimated at the tender stage. Focus on
headline rates and projected volumes often obscures the ongoing cost of
schedule administration, system maintenance, and assurance. As contracts
mature, these hidden costs distort the assessment of total costs and erode
anticipated savings. From a value-for-money perspective, obligations under the
Local Government Act 1999 demand that such administrative impacts are
recognised, yet NHF SOR frameworks rarely make them visible at the point of
procurement.
Constraints on Whole-Life Cost Assessment
NHF Schedule of Rates are primarily designed to control transactional
expenditure at the point of delivery. Pricing emphasis is placed on the cost of
individual tasks rather than on how those tasks influence asset performance
over time. This short-term focus can distort decision-making, encouraging the
selection of the lowest compliance rates even where alternative approaches
would reduce future maintenance demand. As a result, apparent cost efficiency
at contract award may translate into higher lifecycle cost and increased
reactive intervention.
This limitation becomes evident where repair decisions affect durability
and longevity. Materials or methods that meet minimum specifications at a lower
cost may perform poorly over the asset’s life cycle, increasing failure rates
and requiring follow-on work. NHF SOR structures offer limited scope to reflect
such trade-offs, as rates are rarely differentiated by lifecycle performance.
Asset managers are therefore constrained in their ability to justify higher
upfront investment where long-term savings and resilience would otherwise be
achieved.
Whole-life costing principles, articulated within HM Treasury Green Book
guidance, emphasise the importance of assessing costs and benefits over an
asset’s whole life. These principles are difficult to operationalise within
rate-centric procurement models. Evaluation frameworks dominated by NHF SOR
compliance prioritise immediate affordability and budget certainty, often at
the expense of sustainability and long-term value. The absence of explicit
lifecycle metrics weakens alignment between procurement decisions and strategic
asset planning.
Practical experience within social housing reinforces this concern.
Reviews of long-term maintenance contracts have shown that repeated use of
lowest-cost repairs has contributed to accelerated deterioration of building
components, particularly in kitchens, bathrooms, and the exterior fabric.
Subsequent capital programmes were required earlier than anticipated, eroding
the savings achieved through initial rate-based procurement. These outcomes
highlight the risk of separating transactional efficiency from lifecycle
performance.
This misalignment undermines broader strategic asset management
objectives. Housing providers are increasingly expected to balance
affordability, safety, sustainability, and resident satisfaction within
constrained financial envelopes. Legislative drivers linked to building safety,
energy efficiency, and carbon reduction further intensify this challenge.
Procurement mechanisms that focus narrowly on task cost struggle to support
these objectives. Where NHF SORs dominate commercial decision-making, the ability
to optimise whole-life value is significantly constrained.
Potential Misalignment with Performance-Based
Contracting Models
Performance-based contracting is founded on the principle that
commercial reward should be aligned with outcomes such as reliability, safety,
customer satisfaction, and asset longevity. NHF Schedule of Rates, by contrast,
are structured around discrete tasks, quantities, and unit prices. This
fundamental difference creates an inherent tension. When success is measured by
completing coded activities rather than by achieving results, behaviour tends
to focus on transactional compliance rather than on long-term performance
growth.
This misalignment becomes apparent when service expectations extend
beyond routine delivery. Performance-based models seek to incentivise reduced
failure rates, improved first-time fixes, and enhanced resident experience. NHF
SOR frameworks, however, reward volume and activity. Increased call-outs or
repeat visits can generate additional revenue without necessarily signalling
poor performance within the pricing mechanism. The commercial logic embedded in
task-based rates, therefore, conflicts with the intent of outcome-driven
service management.
Attempts to bridge this gap through overlaying key performance
indicators often introduce complexity without coherence. KPIs are layered onto
SOR contracts to steer behaviour, yet the underlying payment mechanism remains
activity-focused. Where KPIs impose penalties for poor outcomes while rates
reward volume, incentives conflict. Behavioural signals become blurred,
weakening the effectiveness of both the pricing structure and the performance
regime intended to support it.
Practical experience within social housing maintenance frameworks
illustrates this challenge. Several housing associations introduced extensive
KPI suites alongside NHF SOR contracts to address repeat repairs and resident
dissatisfaction. In practice, behavioural change can remain limited where
payment mechanisms remain activity-driven. Contractors prioritised rate-driven
delivery while treating performance deductions as a manageable cost of doing
business. The disconnect between how work was paid for and how success was
measured diluted the impact of the performance framework.
Comparative experience from the utilities sector demonstrates an
alternative approach. Regulated water and energy providers have increasingly
adopted outcome-based commercial models, linking remuneration to service
continuity, asset reliability, and customer outcomes. These models align
financial incentives directly with performance objectives, encouraging
preventative investment and innovation. The contrast highlights the limitations
of applying task-based rate schedules in environments where strategic outcomes
and long-term value are paramount.
Legislative and regulatory trends further reinforce the importance of
alignment. Public procurement principles embedded in the Procurement Act 2023
emphasise value for money, quality, and proportionality, rather than merely
cost certainty. Where NHF SORs dominate, performance-based ambitions risk being
subordinated to administrative simplicity. Without rebalancing commercial
mechanisms towards outcomes, SOR-based contracts may continue to struggle to
support modern service delivery models centred on reliability, quality, and
user experience.
Disputes Arising from Interpretation of
Descriptions and Codes
Disputes under NHF SOR contracts commonly arise
when parties interpret item descriptions, coding boundaries, or inclusions
within a rate differently. These disagreements are often technical, centred on
whether particular preparatory works, access arrangements, or reinstatement
activities are included, yet they occur frequently enough to generate material
cumulative impact. Repeated contested valuations erode the predictability that
standardised schedules are intended to provide.
Dispute prevalence increases where descriptions
lag current practice or fail to reflect real site conditions, including legacy
alterations, diverse construction types, and evolving regulatory expectations.
When the schedule assumes idealised conditions, operational reality diverges,
and interpretive discretion increases, in responsive maintenance, time pressure
and incomplete information further increase the risk of disagreement during
valuation and certification.
Once disputes become routine, contractual and
legal escalation can shift from a last resort to a standard risk-management
practice. Correspondence, formal determinations, and legal advice absorb
disproportionate time and cost relative to individual work values. This pattern
has been structurally associated with long-term maintenance frameworks where
high volumes of low-value disputes created a persistent administrative burden
and delayed service responsiveness.
Regulatory change has heightened interpretive
sensitivity, particularly in safety-critical work. Obligations reinforced by
the Building Safety Act 2022 require intrusive inspection, documentation, and
remedial interventions that are difficult to express within legacy
descriptions. Where uncertainty persists, disputes entail not only financial
costs but also reputational and compliance risks, especially when decisions
must be justified to regulators, residents, and auditors.
This environment conflicts with the
collaborative ethos promoted by modern procurement policy. The Procurement Act
2023 emphasises proportionality and value for money; persistent interpretive disputes
foster defensive behaviours and reduce openness. The schedule then becomes a
contested terrain rather than a shared baseline, weakening trust and diverting
attention from performance improvement to continual argument over meaning and
entitlement.
Reduced Commercial Differentiation Between
Tenderers
The NHF Schedule of Rates imposes a uniform pricing structure that
significantly compresses commercial variance among tender submissions. With
rates primarily prescribed, bids tend to converge around similar cost profiles,
reducing visible distinction. This approach is explicitly described in local
authority procurement documentation. For example, the London Borough of
Camden’s responsive repairs procurement strategy specifies the use of
pre-priced NHF Schedules of Rates, with tenderers bidding percentage uplifts to
reflect overhead and profit. This model inherently compresses price
differentiation and places greater competitive weight on demand knowledge and
coding familiarity rather than on alternative delivery strategies.
Differentiation shifts away from substantive value propositions toward
compliance narratives, methodological descriptions, or marginal improvements.
This convergence can create an illusion of comparability while obscuring
genuine differences in capability, efficiency, and approach to service
delivery. Such compression disproportionately disadvantages innovative
suppliers.
Organisations seeking to differentiate through alternative delivery
models, digital integration, or preventative maintenance strategies struggle to
express these advantages within rate-constrained frameworks. In contrast,
incumbent contractors benefit from familiarity with demand patterns and
administrative processes, allowing compliance to be optimised. Over time, this
dynamic reinforces incumbency and raises barriers to entry, narrowing the
competitive landscape and reducing market diversity.
Multi-lot maintenance frameworks illustrate this effect. Under
uplift-based tender models, price differences among bidders can be minimal even
when there are marked differences in operational maturity and innovation
capacity. Selection decisions, therefore, relied heavily on qualitative
scoring, thereby increasing subjectivity and the risk of challenge. Where
incumbents retained contracts, post-award reviews often revealed limited
innovation, as the commercial framework provided little incentive to evolve
delivery beyond baseline compliance.
Reduced differentiation also weakens market resilience. Healthy
competition depends on suppliers’ ability to signal distinct strengths and to respond
creatively to client objectives. Standardised rates constrain this signalling,
encouraging homogeneity and risk aversion. In periods of market stress, such as
labour shortages or regulatory change, a narrow and uniform supplier base is
less adaptable, increasing systemic vulnerability within housing maintenance
markets.
This outcome conflicts with the principles of effective competition
embedded within the Procurement Act 2023, which emphasise openness and
proportionality. Statutory guidance accompanying the Procurement Act 2023
explicitly identifies fair and open competition and equal treatment of
suppliers as fundamental objectives, against which excessive compression of
commercial differentiation can be assessed.
While standardisation can support transparency, excessive compression of
commercial variance undermines competitive tension. Where NHF SORs dominate
procurement, the market risks becoming static, with innovation stifled and
long-term value compromised by an overemphasis on uniformity rather than
meaningful differentiation.
Limitations in Capturing Quality and Service
Delivery Standards
NHF Schedule of Rates are structured to quantify tasks rather than to
capture qualitative aspects of service delivery. Elements such as supervision
quality, workforce competence, resident engagement, and service culture sit
outside the scope of itemised pricing. While rates may reflect the cost of
completing an activity, they do not account for how that activity is delivered
or experienced. As a result, quality becomes an assumed outcome rather than a
measurable and incentivised component of the contract.
This disconnect allows contracts to appear cost-efficient while falling
short of service expectations. Repairs may be completed within prescribed rates
but may require repeat visits due to poor artistry or inadequate diagnosis.
Resident dissatisfaction increases, complaints rise, and management
intervention becomes reactive. Rather than preventing failure through robust
quality assurance, the commercial framework responds only after issues emerge,
thereby increasing costs and eroding confidence in service delivery.
Case experience from housing associations managing large responsive
maintenance portfolios illustrates this limitation. Post-contract reviews
frequently identified that low complaint thresholds and first-time fix targets
were undermined by rate-driven delivery. Although activity volumes were met,
service outcomes deteriorated. In response, additional inspection regimes and
customer care initiatives were introduced, increasing overhead and complexity
without addressing the underlying misalignment within the pricing structure.
This limitation is at odds with the growing emphasis on social value in
public procurement. Legislative frameworks such as the Public Services (Social
Value) Act 2012 encourage consideration of wider community and service outcomes
beyond cost. NHF SOR frameworks struggle to operationalise these objectives, as
quality and resident experience remain largely invisible within task-based
rates. Without complementary mechanisms, reliance on SORs risks marginalising
service standards in favour of transactional efficiency.
Challenges in Managing Variations and
Non-Standard Works
NHF SOR contracts are premised on the
expectation that most work aligns with predefined items. In practice,
variations are frequent, particularly in responsive maintenance and
refurbishment, where latent conditions and service priorities change over time.
Each departure from a standard item triggers valuation activity and governance
steps that slow decision-making. While individual variations may be modest,
high volumes create measurable administrative costs and dilute operational
focus.
Non-standard works expose the limits of
predefined rates most sharply. Works arising from unforeseen conditions,
specialist requirements, or regulatory developments often resist mapping onto
existing items, shifting valuation into negotiated pricing. This introduces
subjectivity, reduces comparability, and can delay delivery, particularly
problematic where safety, resident welfare, or programme criticality is
involved. The commercial emphasis shifts from executing work to agreeing on
entitlements and pricing.
Safety-critical remediation contexts
demonstrate how quickly negotiated mechanisms can become the default where
predefined schedules do not map cleanly to scope. Intrusive surveys and
remedial works generated scopes that exceeded conventional maintenance
assumptions, including compartmentation upgrades, fire stopping, and complex
access solutions. Where NHF SOR coverage was insufficient, negotiation and
specialist schedules became routine. Without flexible valuation routes, delay
and commercial hardening followed at the point where decisive action was
required.
As variation volumes rise, trust can
deteriorate. Where the process is perceived as slow or adversarial, contractors
may become risk-averse and limit initiative, while clients increase oversight
and control. Transaction costs grow through repeated cycles of instruction,
quotation, challenge, and agreement. Governance forums can become dominated by
commercial reconciliation. Performance management and improvement activities
can weaken as a result.
Legal and policy expectations intensify the
stakes. Duties under the Building Safety Act 2022 and the Health and Safety at
Work Act 1974 require timely and competent intervention where risk is
identified. Commercial mechanisms that delay agreement on non-standard works
can therefore create compliance exposure. Efficient variation management
requires transparent cost drivers, rapid agreement routes, and proportionate
risk sharing, capabilities that sit outside the inherent design of a
standardised rate schedule unless deliberately supplemented.
Risk of Over-Reliance on Rates at the Expense
of Strategic Procurement Objectives
NHF Schedule of Rates can dominate procurement decision-making when used
as the primary determinant of value. In such circumstances, an emphasis on rate
compliance can narrow the focus to short-term cost control. Attention is
diverted from broader strategic outcomes, including service resilience, asset
sustainability, and innovation. Procurement activity may then become centred on
transactional efficiency, with long-term transformation deprioritised. This
shift risks reducing procurement to an administrative exercise, disconnected
from organisational priorities and future-facing objectives.
The consequences of this over-reliance are most pronounced in long-term
contractual arrangements. Early decisions on pricing structure, risk
allocation, and delivery models establish behavioural norms that persist
throughout the contract lifecycle. Where NHF SORs anchor these decisions,
flexibility to respond to emerging challenges is constrained. Opportunities to
embed preventive maintenance, digital integration, or collaborative improvement
are constrained by a commercial framework that prioritises task execution over
strategic value.
Experience within social housing maintenance contracts demonstrates how
rate dominance can crowd out strategic intent. Several housing providers have
observed that ambitious objectives around decarbonisation and service
transformation can be diluted during delivery, as operational focus shifts
toward managing rate utilisation and cost variance.
This pattern conflicts with evolving public procurement expectations.
Legislative frameworks such as the Procurement Act 2023 encourage consideration
of quality, sustainability, and proportionality alongside price. Overreliance
on standardised rates risks narrowing the interpretation of value and
undermining the spirit of these obligations. Where procurement mechanisms fail
to support organisational strategy, compliance may be achieved without
delivering meaningful benefit to residents or stakeholders.
Strategic procurement practice consistently emphasises alignment between
commercial mechanisms and organisational objectives. Pricing structures are
intended to reinforce desired behaviours, not merely to simplify
administration. NHF SORs, when treated as definitive rather than referential
tools, struggle to achieve this alignment. Without complementary mechanisms
that prioritise outcomes and adaptability, reliance on rates risks constraining
long-term performance and diminishing the strategic impact of procurement
activity.
Summary: Alternatives
and Mitigation Strategies
NHF Schedule of Rates remains widely used in UK
social housing tendering to promote consistency, comparability, and
administrative efficiency. Experience, however, demonstrates that
standardisation alone does not secure value. When NHF SORs are treated as
dominant pricing instruments rather than reference tools, they reshape bidding
behaviour, risk allocation, and delivery outcomes. Apparent certainty at award
can mask mispricing that later emerges through variations, disputes, and
declining resident experience, alongside increased management effort.
Uniform national rates frequently fail to
reflect local market conditions. Regional labour availability, subcontractor
capacity, and supplier resilience vary significantly, particularly during
periods of infrastructure investment. In higher-cost regions, unadjusted rates
can suppress competition or encourage tactical pricing, whereas in the
lower-cost areas, they may inflate baseline spending. Both outcomes challenge
the value-for-money obligations under the Local Government Act 1999 and the
competition principles reinforced by the Procurement Act 2023.
Asset diversity further exposes structural
rigidity. Social housing portfolios encompass multiple construction eras,
non-traditional methods, and layered histories of retrofit. Post-transfer asset
surveys and post-Grenfell remediation programmes have demonstrated that generic
rate assumptions struggle to accommodate latent defects and safety-critical
risks. Legislative duties under the Building Safety Act 2022 and the Health and
Safety at Work Act 1974 require risk-led intervention that is difficult to reconcile
with narrowly defined rate items.
Economic volatility compounds these
limitations. Inflationary pressures following Brexit and the COVID-19 pandemic
outpaced scheduled indexation, shifting risk and destabilising delivery.
Contractors sought relief through variations or by adjusting delivery
behaviour, while housing associations faced affordability constraints under
rent-control regimes. Regional cost divergence identified by the Building Cost
Information Service further undermined confidence in static national rates as
practical tools for risk allocation.
Over-standardisation also fragments complex
repairs and constrains innovation. Task-based pricing struggles to reward
diagnostic resolution, cross-trade coordination, or emerging technologies. This
conflicts with the Construction Playbook and with decarbonisation initiatives
supported by the Social Housing Decarbonisation Fund, which emphasise
integrated solutions and value engineering to improve long-term performance and
carbon outcomes.
Overall, governance challenges intensify where
transparency weakens, and incentives misalign. Tactical pricing, opaque cost
assumptions, and reliance on negotiated non-standard works increase
administrative burden and erode trust, reflecting concerns raised by the
Competition and Markets Authority regarding strategic gaming. A more effective
approach positions NHF SORs as contextual reference data, supported by more
explicit scope definition, local calibration, and whole-life evaluation,
thereby restoring alignment between commercial mechanisms and strategic
procurement objectives.
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