Our recent survey of Major Works rates showed housing providers are not getting value for money and the size of the provider does not guarantee savings or enable procurement of the component parts any cheaper. Whether we analyse the expenditure at a global or at component level in this case, it is clear that the sector is not using scale well enough to improve value for money in Repairs & Maintenance. This is all the more disappointing given the scale of mergers taking place.
So what can you do when you discover you are not getting best value? Moreover, how do RPs get themselves in this position? Whether it’s a partial review of procurement, a full review of external suppliers, or a combination of internal and external services, each housing provider needs to consider 5 golden rules of procurement.
5 Golden Rules of Procurement
The golden rule here is don’t rush. All too often, procurement is rushed through because existing contracts are coming to a renewal point. RPs should be considering a re-procurement exercise a minimum of twelve months before the deadline to allow for clear strategic thinking before putting pen to paper on the brief.
There is always room for genuine innovation in contracts, and RPs should seek to harness the strength of a contractor in their partnering agreements. It is commonplace to integrate the systems and supply chain strength of a contractor and embed the principles of innovation through collaboration. This is often spoken about or part of a contract but doesn’t physically happen.
Don’t just rush to the procurement stage. Take a step out of the cycle and go back to the start. The early procurement stage needs to include any service redesign including revising any specifications, service level agreements and contract management approach.
A successful procurement exercise should include the following stages:
- options appraisal
- an assessment of asset management and repairs data
- specification and reviewing new technology
- alignment with the organisation culture and strategy
- set target costs and service levels
- a pre-procurement exercise to scan procurement options e.g. frameworks or direct
Even if full re-procurement isn’t viable, it is always worth considering how you can improve what you have already. Successful re-negotiation of existing contracts is possible even when you think it might not be, often the contractor will be keen to improve with you. Our experience with the Gateshead Housing Company was that the contract was not delivering VFM. The client was two years into a five year contract and we identified the inefficiencies through a detailed open book review and re-negotiation of the rates including a significant value engineering project.
Upskill and Embed
It is vital to continue to focus on contract management once the work has begun. If you procure great rates but don’t involve the operational managers or upskill the team to effectively manage the contract, your hard work will be wasted. We see contract managers that don’t have a grip on the rates, the arrangement or the processes, which all result in inefficiencies. Key to all of this is upskilling your team in effective contract management and negotiating skills which, when embedded successfully, can bring about real and sustainable change across the organisation.
Vantage are leaders in transformational change and R&M performance improvement in social housing. Let’s discuss your options and see how much you could achieve.