VAT reform would promote CO2 emissions reductions, more sustainable building & cost nothing – so why the delay?

Image: 1t CO2. Olafur Eliasson. Tate Gallery 2019.

A Project Compass response to the Climate and Biodiversity Emergency objectives defined in ARCHITECTS DECLARE.

(revised & updated from a Walter Menteth article 1st published in AJ: Sustainability in Practice. 28th February 2014) [i]


Government for too long has been missing an enormous opportunity to incentivise investment in sustainable construction: VAT reform. This means redressing the long-standing skew in favour of new build over refurbishment. Current VAT rates5% for new construction and 20% for refurbishment – distort the market in favour of new build. VAT is a powerful tool which must now be used here and abroad to help accelerate low-carbon sustainable construction.

The majority of C02 emissions in the built environment emanate from existing buildings. Yet because they exist, they have the lowest embodied energy. Rather than demolishing and rebuilding whenever the most sustainable solution is upgrading an existing building evidentially this should be done. Because there is not a level playing field, the current disparity between VAT rates results in a significant financial penalty for refurbishment.

A policy paper on UK architectural VAT was produced by the RIBA’s Procurement Reform Group in 2013 (LINK AVAILABLE HERE).[ii] This recommended reforming VAT with a new ‘payment by results’ quality-based approach which was evaluated to have minimal impact on HRMC tax revenues. This relies on an incentive structure where specifically sustainable construction is met or exceeded delivering VAT benefits. This creates an incentive for greener construction and better performance.

THE PROPOSAL IS TWOFOLD

1. First, the current 20 per cent VAT rate on repair and improvement work to existing buildings should be reduced to 5%, when the works deliver sustainability benefits that are certifiable above the minimum level of the current Building Regulations. This would encourage investment on improving performance across the existing stock.

As an essential first step reduction of the VAT rates on refurbishment to create a level playing field with new build, as has long been called for, is now urgently required.

But VAT should also be a tool to further accelerate CO2 reductions, improvements and innovation.

2. Second, there should be a standard 5% VAT rate on new-build residential dwellings. This would be applied except where such works would deliver sustainability benefits that are certifiably above the minimum level of the Building Regulations, in which case the current zero per cent VAT rate would be applied.

In both cases, the certifiable sustainability level above the regulatory minimum would in quantum and detail be set by a reasonable margin. The margins could be introduced with suitable transitional arrangements progressively adjusted and modelled for neutral cost to the exchequer. This approach to VAT reform would encourage UK homeowners to undertake sustainable improvements, and incentivise developers and industry to drive CO2 emissions reductions and push qualitative improvements in new building performance. Circular economic principles, local sourcing, recycling, upcycling, and waste reduction along with social values are all standards which could also be applied upon certification. This would further stimulate quality and professionalism, across the sector and particularly on smaller developments, reduce the grey economy that is encouraged by current VAT differentials.

HOW MIGHT VAT REFORM WORK IN PRACTICE?

The following is recommended as a development model.

Prior to the start of construction anticipated performance targets relative to Building Regulations would be set. Certification of building performance at completion is currently available through a Building Regulations completion certificate. But in this case certification extends to cover measurable performance standards upon completion and/or POE (post occupancy evaluation, as opposed to simply the designed standards).

A ‘stick’ or a ‘carrot’ approach is proposed for implementating VAT reform.

In the ‘stick’ approach.

  • A developer client would always have an incentive to achieve the lowest possible VAT rate.
  • Developer clients with design teams and contractors electing to construct projects targeted at achieving the lowest possible VAT level, where the targeted outputs were not achieved on completion, would become liable to tax.
  • For new build if a designed VAT rate of 0% was therefore targeted, and not achieved, a 5% VAT liability would arise. In refurbishment where a 5% VAT rate was targeted and not achieved, a 20% VAT liability would arise.

In the ‘carrot’ approach.

  • For developer clients with design teams and contractors working on projects targeting the higher levels of VAT, where the targeted performance outputs were exceeded sufficiently on completion, a tax could become recoverable.

What has been learnt from the Green Deal is the need to develop robust and simple solutions with the widest possible market penetration. Pragmatically and to reduce complexity therefore, it is probable that the easiest option would be to determine VAT rates at the commencement of construction for all at 5%, and then use the stick approach on refurbishment and the carrot approach for new build.

VAT reform is nothing new. In 1999, the Urban Task Force chaired by Richard Rogers included harmonisation of VAT rates as one of its recommendations. This proposition offers potential to rapidly incentivise change to more sustainable zero carbon construction, and at no cost to the exchequer, as part of the jigsaw needing implementation. It is also an international model transferable to other contexts.

If the government is to achieve significant UK carbon emissions reduction before 2050 construction VAT should be reformed now.

We cannot afford to wait any longer!


[i] Menteth. W., Sustainability in practice: VAT reform would promote sustainable building and cost nothing- so why the delay? 28 Feb 2014, In: Architects’ Journal . 239, 8, p. 62

[ii] Menteth W., Incentivising design quality and sustainability, VAT Policy paper. RIBA February 2013. [NB. A paper which also also covers the differential VAT rates applied to professional fees when charged directly by a client (20%) and when charged through a works contract (recoverable) – which incentivises D&B contracting]


Competition Culture in Europe: Voices

Competition Culture in Europe: Voices is now available from the RIBA bookshop

Competition Culture in Europe: Voices, 2018

This publication comprises a series of essays by distinguished architects, competition organisers, scholars and commentators in 22 chapters on architectural competitions.

The case studies, project data, discussions and interpretive glossary, that together include reflections on historic, contemporary and future competitions and their practices, opportunities and potential, in Europe and beyond, offer a valuable resource and unique insight into competition culture.

‘Competition Culture in Europe: Voices’ arises from an open European invitation issued by Project Compass in December 2017 for articles on competitions. From among ten objectives agreed at the International CCIE 2017 Conference held in Amsterdam, the subject areas identified in the call for this publication focused, although not exclusively upon two:

• Experiences collected from architects who have won Design Contests abroad, to better understand the conditions that apply in other countries, including the benefits and obstacles.

• Critical reflection by architects on substantive competition issues, including their practices and outputs.

In ‘Voices’ the case study essays from various locations, are provided along with project data to enhance knowledge and analysis, enable comparative understanding and provide a research resource.


The four-year Competition Culture in Europe (CCIE) programme is an informal collaboration between three not-for-profit organisations, Project Compass, Architectuur Lokaal and A10 new Architecture cooperative, under the fulcrum umbrella, which commenced in 2017. The aim is to join together with others across Europe who value the culture of architecture, to inform a brighter future for design competition culture across Europe. Specifically this will happen by further expanding cooperation on competitions through the exchange of knowledge and information; increasing access to pan-European competitions by making the national platforms on which competitions are announced more transparent; and by investigating and cooperating together structurally to agree and support advancement.

The temporary House of Commons & restoration of the Palace of Westminster

What was the question this proposed temporary Parliamentary chamber and the restoration of the Palace of Westminster endeavours to answer?

  • Is it reinstating and refurbishing Barry’s 165+ year old Palace of Westminster which is now clearly no longer fit for purpose, too small and inadequate, in need of reform, and in a country desperately needing regional regeneration? And all at a time when Gov. has divested its civil service premises across Whitehall?  
  • Is this restoration being embarked on when a new constitutional settlement appears to be needed as the nations of the UK are perilously close to splitting, and what message will this contribute to that debate? Or for example at a time when there is a known need for reform of the House of Lords, which few have had the courage to face, while Parliamentarians still have constrained and inappropriate accommodation?
  • Is this just another vanity project that has had insufficient public debate, lacks imagination, vision and leadership, due interrogation, scrutiny, evaluation and appraising of the underlying need? Because this appears to have been procured with Grayling panache and many similar deficiencies to Brexit, Crossrail, or the Garden Bridge etc. – that certainly won’t elicit public confidence in either process or results.
  • Might the lack of any interrogation and resolution be further manifestation, if any was needed, of the institution of Parliament failing its wider remit?
  • Although the project management may be evolving towards an ‘Olympics style’ delivery, is the raison d’etra simply expeditious, poorly considered and lacking foresight?

To some/all of these questions, and for many, the answer is increasingly YES![i]  (whatever the merits of the architecture of this temporary Parliamentary chamber, the demolition of the grade 11 Whitefield building and the recent Bill to oversee restoration and renewal of the Palace of Westminster, introduced only recently)[ii]  

Why the Palace of Westminster and temporary Parliament building might be the most appropriately progressive upcycling of well-loved buildings has not been sufficiently debated, cogently argued nor tenably expressed.

Unless persuasive arguments can be advanced, achieve consensus and national commitment within the current and emerging political context, the Parliamentary restoration project will likely become increasingly fraught while, ironically, further undermining the institution it seeks to restore.

The MP’s expenses scandal may pale to insignificance if in this context this is seen as another case of Gov. and parliamentarians ‘open’ accounting – ie spending recklessly, wilfully and on their own vain frivolity.

The IMF report that the Tories have now borrowed £816 bn in 8 years, while in 8 years they’ve increased debt by £1 trillion from £759 bn to £1.7 trillion, which is more than Labour ever did in 33 years in office. At issue is whether such sums might be better expended on addressing many pressing social, environmental and economic needs, as well as the robust institutions necessary to provide them. Yet instead hugely wasteful spending is detrimentally growing. 

This project is equally in danger of becoming a national millstone. It forms part of the £1.6bn masterplan, the Palace of Westminster refurbishment is projected to cost £4bn while the temporary building will cost roughly £400m.[iii]  The Parliamentary Public Accounts Committee recently reported that The Palace of Westminster refurbishment, relocation costs and programme remained vague and unverifiable. 

“the process by which and by whom some decisions have been taken on restoration and renewal to date are opaque” and it concluded “it is our view that it would be imprudent for the House to commit to a specific option or timetable”. [iv]  

The costs inevitably will rise yet the projects value and political suitability, beyond symbolism, nostalgia and geographic inertia, appear undefined.

When Barry won the design contest in 1835 for The Palace of Westminster he estimated a construction time of six years, and a cost of £724,986.  The public competition stipulated that the style was to be either Classical (associated with revolution and republicanism) or Gothic (associated with conservative values). Land was reclaimed from the Thames flood plain for the construction. The project in fact took more than 30 years to build, at a cost of over £2 million, with The House of Lords first sitting in their new purpose-built chamber in 1847 and the Commons in 1852.[v]  Perhaps there are some lessons here, and in 100-165 years with sea levels due to rise this will be a strategically vulnerable site, if government is planning for resilience and sustainability.

Because the current proposals don’t seem to have any vision, foresight, logic or clear sense of the zeitgeist, the country might like to know where all this money is going and why this is an appropriate spend.

This project doesn’t seem fit for a fluid, progressive and modern democracy.

Palace of Westminster

An indicative image of the temporary House of Commons Chamber, which will feature new public and press galleries, public spaces for visitors, and education and participation spaces. Source:Forbes Massie Studio

Images:

1. Indicative image of the temporary House of Commons Chamber, which will feature new public and press galleries, public spaces for visitors, and education and participation spaces. Source:Allford Hall Monaghan Morris.

[i] Temporary Parliament ‘extravagant, time wasting and destructive’, say heritage campaigners and architects. Harry Yorke, The Telegraph 10 May 2019 https://www.telegraph.co.uk/politics/2019/05/10/temporary-parliament-extravagant-time-wasting-destructive-say/

[ii] Parliamentary Buildings (Restoration and Renewal) Bill 388 2017-19 https://publications.parliament.uk/pa/bills/cbill/2017-2019/0388/190388.pdf

[iii] Parliament refurb: AHMM reveals first images of MPs’ temporary home. Richard Waite, Merlin Fulcher. Architects’ Journal 8 May 2019. https://www.architectsjournal.co.uk/news/parliament-refurb-ahmm-reveals-first-images-of-mps-temporary-home/10042396.article?blocktitle=News&contentID=19637

[iv] PAC. Report 16 March 2017 on Restoration and Renewal of the Palace of Westminster: Preliminary Report Contents. https://publications.parliament.uk/pa/cm201617/cmselect/cmtreasy/1097/109703.htm#_idTextAnchor006

[v] Architecture of the Palace. Rebuilding the Palace www.parliament.uk/about/living-heritage/building/palace/architecture/palacestructure/rebuilding-palace/

Survey Results on UK Government Framework Agreements 2018

Results from the survey to discover if SMEs found the widely adopted Framework Agreement a simple and rewarding process for winning new business from government are now reported below and available HERE.

The survey has been run on behalf of the Frameworks Working Group, a part of the independent SME Advisory Panel advising on central government procurement and targeted key small businesses (& not just construction professionals) providing a wide range of niche products and services to departments across Whitehall.

The results from more than 200 responses are clear.

Framework agreements are often disliked by SMEs who feel that they are written in complex language, have expensive and time consuming tender processes, are inflexible and favour large companies over smaller ones.

Crown Commercial Service are studying the report’s findings and have pointed to several new and ongoing actions government is taking to level the playing field for small businesses including:

  • considering where different kinds of procurement vehicle, including Dynamic Purchasing Systems, are suitable delivery models. Crown Commercial Service itself has launched three DPSs in the last 12 months, with five more being developed. We also know of a number of these flexible systems across other government departments;
  • simplifying public procurement with the new, plain English ‘Public Sector Contract’ – removing duplication from the application process for suppliers;
  • consulting on proposals to exclude suppliers from major government procurements if they cannot demonstrate fair, reliable and effective payment practices with their subcontractors;
  • requiring suppliers to advertise subcontracting opportunities via the Contracts Finder website and to provide the government with data showing how businesses in their supply chain, including small businesses, are benefiting from supplying to central government.

2018_FRAMEWORK SURVEY_RESULTS 

 

Architects face insurance wake-up call post-Grenfell

As Professional Indemnity (PI) insurance costs rise following Grenfell fire, Project Compass Director Russell Curtis joins calls from the profession for the shift to Integrated Project Insurance (IPI).

“Now more than ever it’s surely time to consider alternatives,” .. “Integrated project insurance (IPI) is beginning to gain momentum among some enlightened clients as this leads to a less adversarial, buck-passing approach, instead encouraging teamwork and collective problem-solving – surely something the industry needs right now.”

With the rise of BIM, where the model is often led by the architect, the extent of an architect’s liability could be stretched again. To avoid that, this burden should be shared and other insurance approaches should undoubtedly be looked at.

Architects face insurance wake-up call post-Grenfell. Richard Waite. AJ 23 Nov. 2018. (paywalled)

Further information.

Integrated Project Insurance (IPI), under an Alliance Contract, has been used recently on Dudley College’s Innovative new building.  Insurance under this multi-party contract was provided by brokers Griffiths & Armour, with the project instigated under the Cabinet Office’s 2014 Trial Projects Delivery Programme, supported by an Innovate UK grant and known as known as “Dudley Advanced II”.

An excellent NBS podcast summarising the IPI Insurance model is available HERE, with further NBS resources HERE.

RIBA information on variants of the Single Project Insurance (SPI) model may be found HERE

Advice to clients

Clients might be better advised not to specify the insurance used in any particular project at the time of an architects procurement and appointment. This can ensure that the best, most effective and efficient insurance model suitable for each individual project can be determined as the project brief and design parameters develop.

(Ten Principles for Procuring Better Outcomes. RIBA 2016 pp28 and Building Ladders of Opportunity. RIBA 2012 pp22-24)

Northern Ireland is now open to fixed fee tenders

In N. Ireland methodologies on the procurement of design, where lowest price is no longer the determining factor have now been agreed between the Central Procurement Directorate (CPD), the RSUA & the construction sector (announced Sept. 2018). This halts the race to the bottom.

Under the pilot all construction services contracts to be awarded by CPD, both above and below the EU threshold, will be awarded in one of the following ways:

  • Projects with no quality assessment at tender stage will be awarded based on the Mean Narrow Average calculation;
  • Projects with a quality and price assessment at tender stage will base the price score on the Mean Narrow Average calculation; or
  • Projects with a fixed fee tender will be awarded on the assessment of quality only.

The first CPD procurement using the Mean Narrow Average is currently at prequalification stage.

Mean Narrow Average

In a move to ensure value, the fundamental shift is that the best price will no longer be the lowest price but the price that is closest to an average.  The average that will be used is a ‘narrow average’. The lowest price and highest price are not part of the calculation to establish the ‘narrow average’.

Full details of the Mean Narrow Average calculation are available here.  Those interested in bidding for CPD projects are strongly advised to review this and ensure they fully understand it.

For all in construction, and design professionals in particular this is surely an extremely welcome and long overdue step.

But this is not the only one of the advances being made in the UK nations -N. Ireland, Scotland and Wales have all now also adopted Project Bank Accounts although from different threshold values.

Isn’t it now time for England to advance, reform and follow suite?

No Brexit deal – Accessing Procurement Notices

If there is no Brexit deal significant questions need answering about how all UK public contracts covering services, works and supplies, will be published, accessed, completed and remain transparent for public clients and commerce. Government announced on 13 September 2018 that if there is no deal a new UK e-notification replacement system will be made available on 29 March 2019, and notices will be published there, rather than in ‘The Official Journal of the European Union’ (OJEU) published online via Tenders Electronic Daily (TED) .  Continue reading “No Brexit deal – Accessing Procurement Notices”

Competition Culture in Europe: Voices

Competition Culture in Europe: Voices
Competition Culture in Europe: Voices

Competition Culture in Europe: Voices is a publication from Project Compass on architectural competitions, with a series of essays by 17 distinguished architects, competition organisers, scholars and commentators in 22 chapters, covering 11 countries.

The case studies, project data, discussions and interpretive glossary, that together include reflections on historic, contemporary and future competitions and their practices, opportunities and potential, in Europe and beyond, offer a valuable resource, practice compendium and unique insight into competition culture.

The publication, launched at the Venice Biennale, 25 May 2018, follows an open call in Dec. 2017 for articles and data on competitions which contributes to advancing the agreed 10 ten steps under the Competition Culture in Europe (CCIE) programme.

Hardcopies of the publication are available from Project Compass for £25.00 by emailing  ProjectCompassCIC@gmail.com.

The four-year Competition Culture in Europe (CCIE) programme is a collaboration between three not-for-profit organisations Project Compass, Architectuur Lokaal and A10 new Architecture cooperative, under thefulcrum umbrella, which commenced in 2017. The aim is to join together with others across Europe who value the culture of architecture, to inform a brighter future for design competition culture across Europe.

This is the second CCIE programme publication following the launch of ‘Competition Culture in Europe 2013 – 2016’, at the CCIE conference in Amsterdam, Sept. 2017 which provides the results of a pan-European survey executed by Architectuur Lokaal, A10 new European architecture Cooperative and Project Compass CIC. With EU data cards and examples of competitions in 17 European countries.

25 May 2018, 7.00-8.30pm, Palazzo Widmann, Venice

Competition Culture in Europe will be gathering and launching the publication ‘Competition Culture in Europe: Voices’ on 25 May 2018, 7.00-8.30pm, Palazzo Widmann, Cannaregio, Venice (Calle Larga Widmann 30121 Venice).   The publication arises from the European call in December 2017 for essays on architectural competitions.

The detailed programme is below.

In 2017 the collaboration of Project Compass CIC, Architectuur Lokaal and A10 new European Architecture Cooperative  started the Competition Culture in Europe program. At the end of the first year 10 concrete quick wins for 2018 were formulated.

During the Biennale in Venice we have been invited by AIAC (the Association of Italian Architecture and Criticism)  to present the progress made so far. We are happy to present a follow-up on the 50 case studies we collected last year in a new publication ‘Competition Culture in Europe: Voices’ which will be launched at the event. This publication draws on experiences from architects and organisers undertaking competitions, with discourse on competitions, and a draft-dictionary of terms for improving the pan-European understanding of competition discourse.  Research on the Reinventer. Paris project will also be presented.

In Venice we will focus on experiences with competition culture throughout Europe, compare practices all over Europe, and work towards mapping and establishing some common ground in terminology. You are welcome to join us at Palazzo Widman, Cannareggio, Venice.

The program

7.00     Welcome by Luigi Prestinenza Puglisi (AIAC-Italy)

7.05     Introduction by Indira van ‘t Klooster (A10-NL-moderator)

7.10     Tarja Nurmi (Finland) – Competition Culture in Finland – The MONIO Community School and Culture Education Building competition, organized by the Municipality of Tuusula in Southern Finland

7.20     Anna Yudina (France) – Reinventer.Paris

7.30     Q&A with presenters and audience, exchange of experiences, also in Italian context with Zaira Magliozzi (AIAC-Italy)​

7.45     Walter Menteth (Project Compass-UK) – ‘Competition Culture in Europe: Voices’ book presentation

7.55     Cilly Jansen ​(Architectuur Lokaal-NL) ​- introduction to discussion on European vocabulary on Competition Culture

8.05     Debate on vocabulary, glossaries, practices, confusions, solutions, etc

8.30     Conclusions, next steps

​            Drinks

Hardcopies of the publication will be available at the launch and digital copies will be made available on the Project Compass website shortly after.

Please feel free to disseminate this invitation to any others who may be interested in joining us. We look forward to welcoming you.

RSVP to ProjectCompassCIC@gmail.com

The Competition Grid: Experimenting With & Within Architecture

 

hCompetition Grid. Experimenting With & Within Architecture CompetitionsThe Competition Grid: Experimenting With & Within Architecture Competitions   (Theodoru. M., Katsakou A. (eds) RIBA Publishing, 2018. Project Compass Director Walter Menteth has contributed Chapter 10, ‘E-Procurement Delivering Better Design Competitions’ in Part 3-‘Experimenting with Architectural Competitions’.  “This is an engaging and extensive review of architectural competitions. Merging the immediacy of practitioners’ competition experience and the rigorousness of scientific writing, each section features comprehensive research and lively discussion from an international set of experts.”   Available from RIBA Publishing.