Pool party anyone? Mahua Chatterjee looks at a new partnership, which aims to turn the purchasing power of one RSL into the procurement power of many.
The power of pooling is being put to the test in a pilot project, which could see RSLs saving millions of pounds each year to plough back into development and services.

There is also the prospect of relieving tenants who are in poverty.

The bulk purchasing project is the result of a partnership between HouseMark, which is majority-owned by the Chartered Institute of Housing, the National Housing Federation and sector training provider HATS.

Their decision to work together follows investigations in this area over the past two years by the partners.

The federation has already looked at e-procurement in partnership with an Internet provider, while HouseMark commissioned its own research into the scale of the market that RSLs represent.

HATS previously identified Best Value suppliers in the office supplies and energy markets and in turn piloted suppliers with some of its members.

By combining, the trio has secured an Innovation and Good Practice grant fund from the Housing Corporation to assess the capacity and benefits of setting up national purchasing consortiums for RSLs.

Management services company CEL has been enlisted to provide its own expertise and run the project.

If the pilot turns out to be a success, it could result in significant cost savings and improvements for associations when they enter the procurement process.

The project has three key strands: market testing, sector expertise and current RSL buying practice.

Market testing will include a real purchasing exercise, which will be analysed to establish the attitudes of RSLs and suppliers to consortium purchasing.

The current buying practices of around 20 participating associations will also be scrutinised. Follow-up research will involve detailed interviews with decision makers in up to 75 RSLs.

So why exactly is all this necessary?

According to the partners, housing associations are now faced with a “challenging financial environment”, and the Royal Institution of Chartered Surveyors’ latest building costs survey suggests that building and repair costs are likely to increase by at least 6 per cent next year. In addition, it is argued that high employment levels in the south east are creating salary cost pressures for housing associations, whereas in other regions changes in the housing market have reduced the level of demand for RSL stock.

Coupled with constraints on rents caused by restructuring, this means that improvement in the way associations purchase their goods is one way that they can reduce the costs of delivering services without damaging standards.

This is all the more important when it is considered that RSLs spend around £218m each year on goods and services, much of which could be readily bought on a consortium basis.

Researchers believe that out of this amount about £60m is spent on energy, £27m on telecommunications, £47m on office supplies and anything up to £100m on materials used for programmed repairs.

HATS has been able to identify energy savings of between 17 and 24 per cent, and have about 10 per cent against the best prices for office supplies.

The partners therefore believe that consortium purchasing could result in substantial savings and improvements in procurement processes.

The scheme could also harness the buying power of 1.45m households in social housing – it is argued that the poorest consumers pay most for services such as energy supplies because they are seen as a poor credit risk.

Improving the economic position of these consumers could bring about a reduction in poverty without any extra pressure for public funds.

Research by HouseMark and CEL in 2001 highlighted the top seven areas of expenditure for associations as: energy, telecommunications, office and general supplies, water, insurance/ financial services, television services and computer hardware.

Of the 58 various types of social landlord that took part in the survey, 16 per cent said they had a high level of interest in joining a purchasing consortium aimed exclusively at social landlords, while a further 32 per cent had “quite a high level of interest”.

Ross Fraser, chief executive of HouseMark, argues that although the pilot offers no guarantees of success or savings, the potential to achieve this is certainly there.

“There is clearly a business need for RSLs to improve and streamline their procurement processes. At the moment they have adequate information on what they spend, but a purchasing consortium would be able to provide detailed statistics to each participant on what they buy,” he said.

“In the long term, savings made on the purchase of energy could be passed on to residents, in the form of reduced service charges in sheltered housing schemes for example, to ameliorate fuel poverty.”

The pilot is not aimed at one specific type of RSL, although in the beginning Fraser believes it is more likely that larger RSLs will be more involved, as they will have more people involved in the procurement process.

Jane Greenoak, the federation’s director of corporate services, said: “The pilot is going to focus on things like maintenance and office supplies, and, in the long term, if associations begin to exert their own purchasing power then this has the potential to influence suppliers in terms of deals. That gives associations the opportunity to do more for their tenants.”

Fraser is keen to open the door to any RSL that wishes to take part.

There are no guarantees as to what the outcome will be, but it stands to reason that a wide cross section of participants will provide the most comprehensive results.

And if the study proves to be a success, it could pave the way for RSLs to gain more for their money to benefit their tenants.