The incredible Bulk

Harvest Housing Group has saved a quarter on its electricity bills in the past two-and-a-half years – but that's not the only reason project manager Robert Porter is pleased he joined a collective purchasing scheme. "What's much more tangible is the lower administrative costs, internet ordering and the fact that we can minimise stock levels because of just-in-time delivery," he says.

The group used to process 700 energy invoices every quarter; now it makes a single monthly payment by direct debit. "And you can't underestimate the ability to network and share best practice with housing associations you wouldn't usually meet," adds Porter.

Manchester-based Harvest is one of 36 registered social landlords that took part in the Network Purchasing pilot, which ends this week; results will be presented at the Chartered Institute of Housing conference in Harrogate next week, before a nationwide roll-out in September. It's the first dedicated scheme for RSLs and is funded by the Housing Corporation, the National Housing Federation, best-practice body Housemark and Housing and Training Services.

Use your powers wisely
Many councils are already part of bulk-buying schemes such as the Northern Housing Consortium and LHC – formerly the London Housing Consortium, now a nationwide body – but the Housing Corporation is keen that housing associations also make the most of their collective buying power. Although quantifying the savings is difficult, those involved in collective purchasing schemes agree that they have been significant. "It's your tenants' money, so you've got to be aware of cost all the time." says Chris Rainer, who was in charge of telecoms at Harvest.

It's not just about lower price agreements, though. Modernising processes, changing technology and partnering arrangements all lead to significant savings, and when the deals extend to repairs and maintenance procurement, they can fundamentally change the way associations do business.

All collective purchasing schemes work on the same broad principles. An organisation representing a number of councils or associations negotiates prices with suppliers on the basis of a guaranteed volume of trade, then its members take advantage of these deals. They may approach the supplier direct or go through the purchasing organisation.

"Traditionally, larger organisations assumed that their size allowed them to secure the best prices. But no matter what size you are, you can benefit from these deals," says Porter.

Even greater savings can be made where associations agree specifications for components such as doors and windows. The tendering process also happens only once, so there is no need for every public body to go through the same lengthy cycle of research, due diligence and notices in the European Union's Official Journal.

Network Purchasing has, so far, concentrated on securing deals for stationery, energy bills, phone calls and printing services. For an initial fee of £50-950, depending on the size of the association, its members can save about 40% on costs. The most striking cuts are on landline phonecalls: by switching from BT to a special tariff with Colt Telecom, prices dropped 80%. And phonecalls are just the tip of the iceberg, says Ross Fraser, chief executive of Housemark, one of the organisations that sponsored the project: "We need to do further work on building materials, and separate repair materials from labour, but we're not at that stage yet."

Traditionally, larger organisations assumed their size allowed them to secure the best prices. But no matter what size you are, you can benefit from these deals

Robert Porter, Harvest Housing Group

The Northern Housing Consortium has been engaged in collective purchasing partnerships for 12 years, and represents 76 councils and 45 housing associations. Its best deal is with Tunstall, for the supply and maintenance of sommunity alarms for sheltered housing schemes: 58 organisations bought £3.5m worth of business last year, for a discounted rate of £2.1m – a saving of 27%.

Andrew Carlin, partnership development manager at the consortium, says arrangements have changed significantly in the past three years: "In the past, it was less formal but then public-private partnership came in and it was easier to test the validity of the agreements. Now with the open-book approach, we can get even better deals."

The Northern Housing Consortium is also working with LHC to short-cut the European tendering process for public-sector purchasers. It concentrates on repairs and maintenance, selecting preferred suppliers and agreeing specifications. Landlords wanting to replace the windows on an estate can simply call one of LHC's five PVC window suppliers and give them the address.

"The specs are done by us with the limited budgets of social landlords in mind," says Cliff Woodward, business development manager at LHC. He estimates that the hidden costs of the tendering process can amount to thousands; in contrast LHC, he says, finds councils and associations the best price in Europe with none of the complications.

A Housing Corporation-funded project on Merseyside has taken this idea a step further. Fusion 21 approaches suppliers to discuss driving out costs across the entire maintenance process and passes the savings on to seven of the largest housing associations in the area. It has split materials costs from labour costs, and agreed on a seven-year programme of maintenance with its partners, so RSLs are not competing for labour at certain times of the year.

Mike Brogan, Fusion 21's chief executive, says removing the casual nature of building jobs has solved the local skills shortage. "We've also picked up unemployed people and trained them with the savings. We've got 83 people into jobs, fitting windows and heating systems, since last July."

Although collective purchasing schemes may be driven by bulk-buy bargains, the e-government agenda is also modernising purchasing. Electronic marketplaces, where buyers club together to get the best deals from suppliers, have not prospered in the private sector because companies don't like collaborating with rivals. Local government, on the other hand, must meet a 2005 deadline to conduct all services online.

The electronic marketplace rub by the Improvement and Development Agency, the local government best-practice agency, is already live and used by 11 councils to buy online and track purchases. More than 800 suppliers are on board, and there are 128,000 product lines.