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Chapter 3
LEAD DEVELOPERS: A MORE SPECIALIST ROLE FOR DEVELOPMENT

Lead Developers

28. Firm Foundations proposed to address the current fragmented approach to investment in affordable new homes through introduction of regional Lead Developers. This envisaged all subsidy being channelled to a small number of RSLs which would take the lead in providing new affordable homes in a small number of regions across Scotland, building homes on behalf of other RSLs which would ultimately own and manage the properties. We have received a number of comments on these proposals - in the responses to Firm Foundations, in the responses to the subsequent consultation on changes to HAG and at regional seminars on investment reform held in August and September 2008. Our proposals have been refined in the light of this debate.

29. Our objective is a network of Lead Developers across Scotland in order to strengthen the sector's approach to procurement and investment, and through which we will channel the majority of our Investment Programme. This chapter sets out proposals for a Lead Developer model that builds on existing strengths and initiatives. It should be considered in tandem with chapter 4 which describes how RSLs would be able to establish development consortia, and how consortia would relate to stakeholders and to other RSLs which would no longer be directly involved in managing development.

30. In some areas it may take time before Lead Developers emerge which have the capacity to deliver a substantial regional programme. While our reforms remain radical and our objective of better value remains clear, we are proposing a transitional approach to investment reform which allows time for the sector to respond to the new opportunities and for new structures to emerge from within the sector.

Summary of the proposed process

31. We are proposing a two-stage process for the identification of RSLs to receive subsidy and to be appointed as Lead Developers. The process is described in detail in chapter 5 but is also outlined here to help in understanding the Lead Developer role.

• The first stage of the process is pre-qualification, which will take place on a national basis. At this stage a number of RSLs will be identified as pre-qualified; they will be eligible to apply for subsidy and will be invited to set up consortia.
• The second stage is the competition for subsidy and for appointment as a Lead Developer. This stage takes place separately in each region. At this stage all the pre-qualified RSLs will be invited to submit proposals (based on the Prospectuses outlined in chapter 2) and some of their number may be appointed as Lead Developers within the region.

32. This two stage process is illustrated in Figure 3. Only those which pass pre-qualification will be eligible to apply for subsidy to develop, either on their own behalf, or on behalf of others in their consortium. It is possible that some RSLs will see this as a satisfactory end-point and will choose not to seek appointment as a Lead Developer. However, appointment as a Lead Developer would guarantee the RSL/consortium a significant share of subsidy for up to five years, provided that their performance remained satisfactory. Therefore, we expect that many RSLs which pass pre-qualification will aspire to become a Lead Developer in one or more regions.

33. Three further key features of the proposed new system are:

• Multiple Lead Developers: The system should allow for there to be more than one Lead Developer appointed in a given region. This will ensure that we are not over-dependent on one organisation and that competitive challenge is maintained.
• Flexibility: The appointment of Lead Developers will be at the discretion of the Government in consultation with the local authorities which comprise the region. It is envisaged that there will be early appointments of one or more Lead Developers in some regions, while in others it may take longer to reach that point. And there will need to be a mixed economy within each region so that, whilst most of the available subsidy should be directed to Lead Developers, some will also be directed to other pre-qualified RSLs (as described in chapter 5), at least for the time being.
• Integration: All RSLs with intentions to acquire new housing stock would be encouraged ¹² to link together in development consortia with a recognised consortium head (see chapter 4). Provided that the consortium head satisfies the pre-qualification criteria described in chapter 5, it would be eligible to apply for subsidy on behalf of the whole group, and would be the consortium's potential candidate for appointment as a Lead Developer.

INVESTMENT REFORM: PROPOSED STRUCTURE

34. This flexible approach should benefit RSLs that have a sound track record and can deliver new investment in affordable homes in the short term. It enables RSLs that are ready for the Lead Developer role and are already working in a consortium to be recognised quickly. And it provides a route for other RSLs with the ambition and ability to become Lead Developers but which need more time to prepare for this.

The role of Lead Developers

35. We want Lead Developers to be industry leaders. Lead Developers will be established strong performers and exemplars of good practice in procurement and investment in affordable homes. They will have strong connections and relationships with local authorities and other major stakeholders. Appointment as a Lead Developer would offer RSLs opportunities for increased control over the planning and management of investment and for developing stronger relationships with central and local Government as well as with contractors, developers and other private sector partners. And Lead Developers will further develop good practice in investment and procurement, acting as beacons for further improvement for the benefit of the sector as a whole.

36. There are a number of benefits of having Lead Developers compared with the current approach to housing investment:

• There would be better identification of available resources - whether land, cash or skills - and better coordination and application of these resources in addressing housing need;
• There would be increased specialisation in the development and procurement functions; core skills and knowledge would be concentrated in the hands of a specialist team and processes would be streamlined;
• Lead Developers would be in a stronger position to take a more sophisticated approach to land acquisition; they would be better placed to engage with local authorities about securing land supply and should be in a stronger position to engage with the private sector about access to land banks or purchase of sites or options over sites.
• Lead Developers will be better able to engage with funders and to develop more sophisticated and robust approaches to funding projects and managing development cash flow;
• There would be increased opportunities to join up projects to create larger programmes over a longer period of time, and by doing so to benefit from increased economies in the investment and procurement functions; and
• This would support longer-term business planning, stronger asset management and more innovative procurement arrangements by the sector.

37. Lead Developers will have a strong role to play in working with stakeholders, in planning and in promoting quality of developments. The likely scope of these responsibilities is set out in Table 3 (Lead Developers will also have the general responsibilities expected from all those that head a development consortium, which are set out in Table 5 in chapter 4).

Table 3 - Responsibilities of Lead Developers

Implications for RSLs

38. The introduction of Lead Developers will have implications for all RSLs. A decision not to continue to develop does not mean the end to a supply of new affordable homes for an RSL. They will still be able to secure this by joining a consortium and working with the head of the consortium or Lead Developer to provide the new houses on their behalf. Obtaining new homes through a Lead Developer and consortium structure will not affect the legal status, nor core responsibilities of the board or committee of an RSL.

39. The roles and responsibilities that will remain in the hands of an RSL, even if they source new homes through a Lead Developer and consortium, are outlined in Table 4.

Table 4 - Roles and responsibilities that will remain in the hands of non-developing RSLs

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