A golden age?
Are we about to witness the Golden Age of Partnerships?
In September I was invited to give a talk at the RESI conference on the subject of harnessing the power of partnerships in the delivery of property development projects. In it I made the case that I think we are about to enter into the Golden Age of Partnerships. Since then Sir Kier has gone and given a pretty good steer that under a Labour government we might indeed expect this to be a feature of the next few years
“...a genuine partnership, sleeves rolled up, working for the national interest. Worker and business. Public and private”
Whether we have a 1992 moment or a 1997 moment in the next election, I thought I’d expand on why I think this might, and how we will know if it does, prove to be the golden age of partnership working.
In my opinion, for the first time ever both the legal framework governing the way the public sector operates and the state of the market are aligned to deliver truly effective and robust partnerships. Partnerships where teams come together with a truly shared ambition, that share risk and returns fairly.
It was only in 2011 that the Localism Act that included a General Power of Competence which gave councils the ability to undertake any action that was not explicitly prescribed by existing law. It is within this context of the loosening of central government control over the operations of local government that we have witnessed an increasing number of routes to major project delivery taken by local authorities.
What is interesting is that the introduction of the General Power of Competence coincided with a period of very low interest rates, central government austerity and a generally buoyant property market. In this context we saw the growth of direct investment by local government (to high profile and unfortunate outcomes in some cases) and what I describe as the ‘Triple Lock’ approach to partnership working – or
‘Lets work like a team and do it my way’
There have been some certain habits developed in the way some institutions have procured partners, demanding fixed land values, fixed outcomes and a share of revenue. As I have said before, the problem with what I call the Triple Lock is that there are no levers left to cope with change. 10% drop in revenue and 10% increase in costs savages this model. Its bearable in a benign or rising market, but in our current market it’s a killer.
So, for the first time in history we have a public sector with a general power of competence combined with
challenging market conditions,
new restrictions on borrowing PWLB for yield,
some burnt fingers where there has been direct investment
recognition of the need for flexibility
the end of cheap money
growth of an aligned private market (B-Corp leading the way)
Combined with continued austerity (whoever comes to power next will have an uphill battle with the Treasury...) I do think what we are about to see is the golden age for partnership working.
The Golden Age
I think we are necessarily about to see a period of more humility in the way people put projects together and the need to focus more on the purpose and shared objectives of the partners, and a little less on nailing peoples’ feet to the floor through aggressively structured commercial agreements or cross-collateralisation through portfolio deals.
For me, the Golden Age of Partnerships will be defined by structures and processes that put ‘outcomes’ first and demonstrate flexibility for both sides
I think that future students of partnership delivery should be able to see that in around 2023 you see a great deal more projects that
Clearly pursue a purpose – harnessing the power of a partnership to a defined outcome, ahead of fixed returns
Expressly focus on people – the partnership is designed to enable long term collaboration and decision making, bringing clarity as to who is doing what, why and at what risk
Batten down the process – that we as an industry demonstrate a new maturity in how we procure and manage for real partnership working
There are already some canaries in the mine. Some recent partnership opportunity announcements do give some hope around the focus on purpose and people – seeking partners before solutions, for alignment before fixed land values, albeit the procurement processes themselves still seem a little fixated on masterplans and elevations (!) even before the local community has been consulted. So 2 out of the 3 so far. 66%, a solid 2:1. Room for improvement still. Golden Age, here we come.