Research by Building magazine shows most councils will re-tender contracts that had been awarded to failed social housing contractor Connaught.
Morgan Sindall’s attempt to pick up more than half of Connaught’s contracts on behalf of Lovell, its social housing arm, is thought to be faltering, as a number of law firms told the magazine that most of their social housing clients would re-tender the deals.
Morgan Sindall told the City two weeks ago it had bought “the majority” of Connaught’s contracts, as well as its physical assets and its work-in-progress, for £28m.
However only six out of the 52 housing associations and local authorities represented by law firms contacted by Building have switched their Connaught contracts to Lovell.
The law firms contacted were Devonshires (which has eight clients), Trowers & Hamlins (26), Shoosmiths (two) and Anthony Collins (16). They said their clients were worried that if they switched the contracts to Lovell they could be open to legal challenges from rival contractors.
Thirty-nine housing assoviation have terminated their contracts, meaning they will have to re-enter the OJEU process if the deals are worth more than £156,000 a year for services, or £3.9m a year for works. Seven clients have either not decided what to do or have transferred some contracts to Lovell and terminated others.
Andrew Vickery, a partner in Trowers & Hamlins, said housing associations will seek more suppliers to avoid a repeat of the Connaught collapse. “Some will take the chance to restructure their contracts so they don’t put their eggs in one basket,” he said.
Despite the uncertainty, a spokesperson for Morgan Sindall told Building this week that it was still “confident that the majority of the contracts will come across."
Last week Building revealed that Morgan Sindall would still think the deal was worth it if half the contracts came across – as long as they were the better performing deals.
Guess we’ll have to watch this space.