HAMMAR West Midlands Does size matter in procurement?

1. HAMMAR West Midlands Does size matter in procurement?

2. Central Housing Investment Consortium Ltd John Fisher – Managing Director CHIC - Partner Ark Housing Consultancy

3. CHIC Presentation • Asset Management Market Summary – How we see it • Where does size matter? • CHIC’s response • CHIC in brief • A view of the future

4. Asset Management Market Summary HOW WE SEE IT

5. ANNUAL RENTAL INCOME c.£4,680 (£90 per week) Affordable Housing LandlordsBusiness Model Surplus 20% Management Loans Responsive Planned 25% Asset Spend = £1,600 - £2,000 C.35% - 40%

6. Understanding Cost (Not Price) Risk % of cost Contingency 4% Ownership Profit Overheads 6% Management Preliminaries 18% Sub Contractors 10% Labour Labour 40% Materials Materials 22% 100%

7. Housing Asset Management

8. Responsive / Cyclical

9. Assumed Unit Costs and Life Cycles – Planned (Low Rise)

10. Assumed Unit Costs and Life Cycles – Planned (Medium and High Rise)

11. Typical Unit Annual Costs

12. Housing Asset Management Volume of orders High Low Value of orders Low High Development Planned Responsive LABOUR MATERIALS

13. Client Function – Silos or Integration? Development Planned Responsive CONTRACT MANAGEMENT CLIENT MANAGEMENT LOCAL OVERHEADS PRELIMINARIES LABOUR MATERIALS

14. Planned e.g. Kitchen Replacement

15. Planned e.g. Bathroom Replacement

16. Planned e.g. Rewiring

17. Benchmarked Materials Costs Through Contractors

18. 3 Big Spend Items • People (50-60%) • Materials (20-50%) • Vehicles (10%)

19. Contractor Order Book • Any business needs to know what it needs to deliver • Order book is king • How good is your AMS?

20. Good strategic planning – avoids the wheels falling off…

21. Procurement Solutions • Is procurement a FUNCTION or a CAPABILITY? • Does the plan drive the delivery solution or procurement drive the plan? • Stage 4 of Planning Process = Order book • Test – sustainable order book for constant volumes?

22. Smooth the Programme?

23. Where does size matter? Assumption: ‘Size’ means more than one RP working alone

24. Housing Asset Management Volume of orders High Low Value of orders Low High Responsive Planned Development Development Responsive Planned LABOUR LABOUR MATERIALS MATERIALS

25. Opportunities from Aggregated Size Share the ‘costs of shopping’. Combined volume for M&E Servicing contracts (SMEs’) Purchase materials direct (control the price and transparent transactions). Combine planned programmes (shared overheads and prelims and improved social value : CSVs’). Opportunities for SME contractors from ‘market management’

26. CHIC’S RESPONSE

27. What is CHIC? • Formed in early 2010 CHIC is a company limited by guarantee, established by eight member landlords, which operate together as a consortium across and now beyond the Midlands. • CHIC is established to secure efficiencies in the procurement of asset management services for housing organisations. We pride ourselves on being the first procurement consortium to operate across the Midlands. • CHIC is supported and sponsored by the Homes and Communities Agency (HCA) and is being managed by Ark Housing Consultancy on behalf of its members.

28. Current Membership • 25 Member organisations throughout the UK comprising: • 21 Housing Associations • 2 Local Authorities • 1 ALMO • 1 Consortium (we also work closely with another) Collectively managing 287,500 homes

29. CHIC’s USP’s Joint Procurement– Share the cost of shopping. Contract with ‘ecommerce’ agent Procured Materials / Merchants contracts Joint (M&E) Service Contracts Member benchmarking All contracts have E & S requirements (including materials)

30. Works & Services Contracts ExampleSpecialist, Mechanical & Electrical Services

31. Actual Efficiency Gains – Works & Services Members saved >£1m on the cost of shopping in 2010/11 – 60 Lots in one go Plus annual contract efficiencies: Business Plan target 7% Actual Saving 18%

32. Materials Supply Overview • Long term 5 year (+ 5 year) contracts • All EU Compliant • Currently used by in-house and external contractors • Unique Nationwide Merchants Framework • Managed by ecommerce provider, Valueworks Ltd • Suited to Asset Management and New Build works • Can be used within external contracts & contractors Key benefits: • Savings, 19% average saving by members in 2011/12 • Price control & Invoicing compliance • Consolidated invoicing • Transaction accuracy • Supply chain management • Reduced administration

33. Materials Supply (1) - ‘Big Ticket Items’ *Some delivery restrictions may apply

34. Catalogue Management – Cashable Savings

35. Actual Efficiency Gains - Example Example individual item savings achieved by members are summarised below:

36. So Does Size Matter? Yes….But • Programme planning is key (sustained order book = continuity for workforce) • Understand the detail (cost, not price) • Be prepared to do it differently (materials vs, labour / joint contracts) • Commitment for Employment and Skills Strategy

37. Does it work?

38. A VIEW OF THE FUTURE

39. Real Choice of Service Delivery Models

40. Materials Procured Direct Shared Costs of Shopping