Want to slim down the social housing bill? Just form a consortium of social landlords to procure work collectively, then sit back and watch the pounds fall off …
Despite all The recommendations to improve efficiency is the government putting its money where its mouth is and supporting a specific construction procurement programme? In the case of social housing capital works and the ODPM the answer is yes, it is.
Inspired by the call from Sir Peter Gershon for £340m to be saved on social housing capital projects by 2008 the ODPM has pump-primed an initiative by which groups of social landlords can procure capital works collectively, and thereby enable the supply side to offer added value and reduced prices.
The ODPM has established, and started to expend, an "efficiency challenge fund". It has set up NCA Housing, a body to administer the fund and provide guidance to client consortiums.
The aim is to set up about 30 of these across England made up of local authorities, arm's length management organisations (Almos) and registered social landlords. These consortiums are expected to organise and balance their workflow in a specific region and to offer long-term deals to the construction marketplace based on the agreement of consistent specifications.
The first three consortiums were launched by Yvette Cooper, minister for housing, in June 2005. They comprise LAPN (representing a group of London Almos), the South Yorkshire Consortium (representing four councils and ALMOs in South Yorkshire) and Buy4London (comprising a range of London RSLs). Between them, they are responsible for more than 300,000 dwellings.
Since then, three more consortiums have been formed: GM Procure (nine Almos and RSLs in Greater Manchester), the South East Consortium (14 RSLs in the South-east) and Procurement For All (six RSLs across the south, the Midlands, East Anglia and the north of England). They account for a further 220,000 dwellings.
Each consortium receives an ODPM grant to produce a detailed business plan with further financial support to cover some of the costs of implementation. In return, each consortium will undertake to deliver measurable efficiencies and contribute to a growing body of procurement best practice.
The recent Department for Work and Pensions Jobcentre Plus initiative claimed savings of 22% compared with traditionally procured projects
In what ways are these client groups doing something different? Each consortium is using new procurement models and is focusing on local training and employment initiatives, and each is working with consultants selected from a panel accredited by NCA Housing. They are inviting bids from main contractors, specialist contractors and suppliers for a wide range of capital works, using template framework agreements and guidance notes also produced by NCA Housing.
One key objective is for each consortium to work alongside its appointed main contractors in establishing a pool of framework subcontractors and suppliers appointed on a consistent long-term basis so as to stabilise their workflow and attain approved prices, stronger warranties and other examples of added value.
This system of collective procurement by a client working with a number of main contractors has already been tried outside the NCA initiative by Hackney council, which set up a total of 10 supply-chain framework agreements with Mansell, Kier, Lovell, Connaught and Mulalley on the second phase of its decent homes initiative.
So can procurement efficiencies really offer big savings in the public sector? Outside the field of social housing, the recent Department for Work and Pensions Jobcentre Plus initiative claimed savings of 22% compared with traditionally procured projects. This £700m initiative covered 500 Jobcentres across the UK. It involved the appointment of 14 main contractors and a series of key suppliers in integrated frameworks, with projects costed on an open-book basis and additional work awarded to performance against KPIs.
All the early NCA Housing consortiums and their appointed consultants are confident that savings can be achieved through the use of improved supply-chain agreements, collaborative working on site, rationalisation of the clients' programmes and specifications to reduce supply side risk.
With expectations high and timescales short, consortium business plans and marketplace reaction is being monitored closely by the ODPM and NCA Housing. The targeted savings of £340m in 2007/08 will require efficiency improvements to be generated across billions of pounds of works, which need to be completed or be under way in the next two years.
This article was co-written by John Connaughton of Davis Langdon. David Mosey is a partner with Trowers & Hamlins. NCA Housing is managed by Davis Langdon in association with Trowers & Hamlins. For further information please contact NCA Housing on 020-7061 7832 or visit www.ncahousing.org.uk