Resi developer Essential Living has called the top of the construction market, and said it will take a more direct approach in delivering its £1bn pipeline in a bid to reduce costs.
The company is said to be ‘reluctantly’ standing down its framework of main contractors as it moves increasingly towards a direct procurement strategy, using modern methods of construction and engaging directly with suppliers.
Essential Living will also expand its in-house construction management capabilities at forthcoming schemes including those at Greenwich, Acton and Swiss Cottage.
The company has also developed a trade contractor framework, in addition to its core framework of brand suppliers which deliver key elements of its branded standard specification such as kitchens and bathrooms, and says this will remove reliance on labour-intensive on site trades and operations.
Ray Theakston, construction director at Essential Living, said: “This is about giving us greater control and will allow us to have a more hands-on management of cost and crucially, risk, which we are simply no longer willing to pay for using a main contractor. Design and build contracts have been on the rack for a while now and we are of the opinion the market has now reached a tipping point.”
Mark Farmer of Cast, a development and construction consultancy which is supporting Essential Living with the implementation of their development programme, said: “This decision is all about recognising the changing dynamics in the construction supply chain. Certain clients, such as Essential Living, are able and willing to take a much more hands-on role in risk management and are structuring their supply chain to deliver at a portfolio level not just project by project.
“In a market where the appetite for taking risk in a conventional contracting environment has fallen away and clients are questioning the price of lump sum conversion, it no longer makes sense to force the issue and pay a premium that brings into question scheme viability when there might be a different method of delivering that generates better value.”
Last week the secretary of state backed Essential Living’s appeal over Theatre Square, the company’s £100m, 200-unit Swiss Cottage regeneration project. This followed the granting of planning permission for the £200m Perfume Factory project in Acton.