Problem: Exceeded housing associations financial year orders
We run a small repair and maintenance company and have worked for a large housing association for nearly 30 years.
About 95% of our work has been with this one housing association although we have never had an official construction contract agreement with them. The modus operandi for payment is that we invoice them, and they pay our CIS payments direct to HMRC. We have always maintained a good relationship and have never had any complaints. We are fully insured and registered Gold / Acclaim with ConstructionLine.
Without warning, in January 2018 we were told that we had exceeded orders totalling £25,000 with them for the financial year and could not work again until April 2018. This was bemusing as our orders for any year had always exceeding £25,000. Since January, we haven’t done a single job for them and an in-house ‘department’ has picked up the remainder of the year’s work.
April has obviously come and gone, and we have been told they are going to use a framework and the construction contract will need to be won. That part we have no issue with, as we are aware that housing association contracts are generally procured this way.
We have since noted that the in-house ‘department’ is, in fact, an incorporated company and they are also a preferred contractor that now does more than half of the work. I assumed that in this age of transparency, preferred contractors are a no-no and that contracts were won on a cost basis. We are in a dire situation, 3 months before the termination we bought two new vans on loan and are desperately trying not to let the 3 people who work for us go.
Do we have any rights for regaining work through this housing association?
Response: Construction contract advice:
In all probability, there is nothing you can do.
Although you may feel very sorry for yourselves, I cannot help but see that you have been very fortunate to have had almost 30 years of continuous work.
Any business that relies on 95% of its work from a single source is putting itself at risk. It only needs a fall-out of some kind that will result in an adverse effect.
What you should have done is to have planned for this eventuality and sought new markets out. Alternatively, or in addition, you should have had an umbrella agreement in place, that set out fundamental terms. For example, the period that the construction contract agreement would last for and the work parameters (i.e., a minimum order value for the financial year). This, in turn, would have allowed you to plan your business more effectively, instead of committing to large capital expenditure only for the work not to materialise.
I would suggest that you arrange a meeting with the housing association to try and see what you can salvage. I would also have thought that if you were that good, the housing association would not want to lose you. In addition, you should also embark on a major sales drive to try and secure other work, although you may have to be ruthless in the short term and lay off some of your operatives.
Best of luck.
© Michael P. Gerard
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.