Management handouts

A few years ago the idea of inviting private business to run council estates was enough to send local politicians running for cover behind the municipal barricades.

Today that scenario is changing. A competitive marketplace for lucrative social housing estate management contracts has been born.

Westminster, Lambeth, Islington, Lewisham, Sutton and Ealing have all contracted out at least part of their estate management function to registered social landlords or to private business.

Compulsory Competitive Tendering, housing transfer and now Best Value have contributed to the demise of what was traditionally the domain of the local authority housing department. But what are the prospects for continuing numbers of councils - and housing associations - surrendering day-to-day responsibility for their estates? JSSPinnacle was one of the first and is probably the most successful private company to break into the estate management sector. Business wasn't always so sweet.

Managing director John Swinney is quick to recall the early years when the company's name was mud in council circles.

He says: "I used to be invited to speak at council sessions and then be completely ignored by assembled councillors after giving the low-down on the type of work we do. In the last 12 months, however, the scene has completely transformed." Today Pinnacle is responsible for around 21,000 homes on estates throughout five London boroughs, and is currently bidding in a partnership arrangement for a contract to to manage 14 "villages" and two individual street contracts in Westminster - a borough which has been at the forefront of moves to contract work out of council control. Other bidders include the council's estate management arm WMS Haywards and there has also been interest from engineering group Parkman and Orbis plc.

Councils apart, there is plenty of encouragement from government to look at competition.

Yet the housing Green Paper proposes a vast increase in the number of stock transfers taking place over the next few years. Could this present an obstacle to the growth of estate management companies? Not according to Amicus housing group's housing initiatives director Brendan Ryan. The possibility of public private partnerships is firmly part of the Green Paper agenda, he believes.

Registered social landlords are obvious candidates to take on these contracts. "It depends on what an RSL's core business is," he says. "At Amicus we are concerned with housing management. Other organisations see building and development as their core operation. In a transfer scenario it is likely that such RSLs could take responsibility for stock improvement while a private company could take on the estate management work." This is a prediction currently being played out in the negotiations at Westminster. The process has brought an alliance between the country's largest RSL, North British HA, and JSSPinnacle. They are jointly bidding - Pinnacle playing to its frontline management experience, and North British pitching in on the building and maintenance side.

North British new initiatives manager Paul McEvoy believes such partnerships could be the shape of things to come.

"What we are bringing to the table is our experience in terms of building and maintenance," he says "I can definitely see a situation where more transfers will generate more opportunities for this kind of partnership work. It's certainly an observation we have made." The driving force behind this pheonomenon is Best Value.

So what happens once RSLs themselves become part of the Best Value process? "District auditors are looking at council responses to Best Value and one area I get the impression they are not impressed with is competition," says Ryan. "I think this will definitely be a problem for RSLs when they are subject to Best Value." Is it conceivable that RSLs will be forced to contract out operations such as estate management to private companies? Could competing associations be invited to take chunks from underperforming rivals? Only time will tell but it is clear there is a role for associations like Amicus to step in and carry out estate management on behalf of RSLs not appropriately geared up.

Amicus is currently in internal discussions over this issue. Ryan outlines the dilemma: "Our core business is managing homes, if we started contracting it out then we would be giving away our core business. But others see their core business as developing new homes." The implication being that an RSL specialising in management might be welcomed in to take on that part of the business.

While the housing Green Paper and the Best Value regime open up the possibilities for the private sector, growth in competition is not as fast as JSSPinnacle might like. Other purely private sector, non publicly funded companies are emerging, but still very slowly. Serco Property and Design, better known for its role in the management of private sector properties, is one. It has a contract involving social stock with Sutton borough council, and is currently studying the marketplace.

Marketing director Jo Blundell says: "We are currently doing some research to see what is next in terms of social housing. From our perspective we would only get involved on our own terms." And she sounds a note of caution:" In terms of the changing market we are not yet convinced about PFI. There are problems for us that would make it unattractive." Another aspect of this phenomenon is that it is very largely limited to London.

Of the councils outside the capital that no longer have sole control over estate management, the majority were forced to make the move through CCT. And of those, most contracts have been awarded to in-house management bids rather than external companies.

Are authorities north of the Watford gap really less keen to grasp the nettle than their London counterparts? Scale of activity may be part of the answer. It's easier for an authority with tens of estates to contract out one of them to test the idea - like Lewisham has done, for example. For a smaller local authority, outside London contracting out might have to take the form of all or nothing - putting all the housing stock out in one.

That hardly lets the bigger metropolitan authorities in the north and midlands off the hook. But times are changing, and as the Best Value regime takes hold nationwide and some of these authorities are beginning to look at the options. JSSPinnacle, for example, has been taling to half a dozen housing associations and local authorities, including Kirklees, Manchester and Sheffield.

The vision of widespread competition between a host of private sector companies for housing management is still not a reality. But it won't be long. Whether the future of estate management lies with RSLs or private companies is yet to be seen. But it is clear competition is here to stay.