Materials: Six steps to strengthen your contract

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Every social landlord wants a materials agreement that delivers top quality, at the best price, for the life of the contract. Yet few manage to tick all three boxes, all the time.

Here, Jeff Edginton – materials category manager at PfH – discusses the foundations of a strong materials deal – and offers six tips on how to get the basics right.

Stress-test your current agreement

When was the last time you procured your materials contract? If it was more than three or four years ago then your housing organisation, like many, may have evolved and your existing agreement might not be entirely fit for purpose.

Maybe your organisation is now part of a group structure with new corporate standards. Perhaps you are using a materials contract inherited from a recent merger.

Reviewing the terms of your deal might help to remove conditions that are no longer needed. For example, your housing association could be paying for a service such as Call & Collect, yet raw materials or parts are now delivered straight to site.

You may have recently set up an electrical repairs team. Are you procuring the products they require at the best price? If your operatives are driving around to pick up parts and struggling with availability, would it be better for them to get everything from one, large central merchant that stocks hundreds of different lines?

Review your KPIs

KPIs are essential to effective contract management. They ensure your supplier knows what must be achieved and what you’re going to measure their success or failure against. But setting KPIs isn’t enough – it’s the monitoring of them that tells the real story. Get this scrutiny wrong and you may miss problems or negative trends early on before they develop into more major service failures.

If you do uncover issues, then just presenting a supplier with the results and saying, ‘you need to do better’, won’t work. You also need a clear system for acting on findings and rectifying issues.

Remember to review your KPIs regularly so you have exactly the right ones in place. Perhaps you have a set of indicators that measure cost and performance, but since you last put gauges in place, social value has become more of a priority for your housing association. Do KPIs need to shift so they consider a commitment to local suppliers, the creation of apprenticeships or other wider community benefits?

Build trust and equality with suppliers

Your relationship with suppliers is paramount to a contract’s overall success. Acting in partnership with your supply chain, explaining issues and seeking joint solutions will get better results.

Occasionally, a new supplier may take time to ‘bed-in’ to delivering a new service as conditions may be ones they are not used to. It’s vital that you don’t immediately go into confrontation mode, thinking that a muscular response will solve everything. This can set a relationship off on the wrong foot, creating a combative culture that makes it more difficult to resolve issues in future. Instead, if you work with a supplier, rather than against them, then, from experience, they will settle in faster and work with you even harder to achieve your goals.

Manage your product lists

PfH achieves value for money for its members through a core list that covers the most popular materials goods, identified via spend volume. However, it isn’t unusual to see ‘product drift’, whereby less of an organisation’s spend goes on the core products for which PfH has negotiated preferential rates.

To avoid costs creeping up via product drift, check spend with your suppliers at regular intervals. Ensure that staff are buying from the core list and periodically refresh the items on this list so they reflect your housing association’s current needs. At PfH we achieve this via regular review meetings and ongoing dialogue with suppliers.

Rationalise product lines

Members often focus on the savings they can achieve when initially negotiating contracts, but further savings can often be made by looking at how materials contracts are managed on the ground.

Product rationalisation is one way to do this. For example, a housing provider might buy several types of one particular building material, product or part. By working with the supplier to refine the number of lines; they benefit from reduced stock requirements. The housing provider’s operatives benefit as it’s more likely that the product will be in stock and the social landlord benefits from cost savings.

Review new goods

New products come to market all the time, including a supplier’s own-brand goods and leading edge, innovative products that may work quite differently from existing lines. To help members navigate the latest releases, PfH looks at how products work in practice and, where advantageous, works with members and suppliers to embed them into core lists at discounted rates.

Your suppliers should keep you informed of new products that may improve service delivery, reduce cost, require lower maintenance, be easier or quicker to install and have longer guarantees – particularly relevant when considering life cycle costing.

It takes time to get the fundamentals of a materials contract right. But these six tips will help you to start building a cost effective, high quality agreement that delivers a wide range of benefits for your organisation and its tenants throughout its life time.

Materials and Associated Managed Services: The materials framework helps asset managers deliver their strategic objectives with access to a wide range of products across 10 lots including electrical, building materials, plumbing & heating and renewables.

Details are available on the PfH website or contact our category expert Jeff Edginton on 01925 286377 or JEdginton@inprovagroup.com

Shifting social value to the procurement start line

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In the past, family fun days were the social value staple of some housing associations. But six years on from the Social Value Act, things are changing. Lawyer Andrew Millross explores how landlords can use procurement to make a meaningful difference to the communities in which they work.

 

Short-term ‘social value’ initiatives that offer little wide-ranging impact for tenants and come with hidden costs for landlords are, thankfully, becoming less common.

 

The sector is also wiser to the fact that social value must be linked to a contractor’s area of work. Unless your maintenance company also hires out bouncy castles, then a family fun day shouldn’t form part of their tender.

 

Housing providers are also more alive to the fact that they always pay for social value somewhere in the contract. Transparency is important; providers need to know how much they are paying for their social value outputs so they can check they are good value for money.

 

A classic “own goal” is asking a supplier to allocate a proportion of the contract price to “social value activities”. This just increases the contract price (on which the provider pays VAT), and also means that the contractor chooses where to spend the money rather than the provider being able to.

 

So, six years after the Public Services (Social Value) Act was first introduced, what other lessons have been learnt about how to secure lasting social value through procurement?

 

Identify what you want to achieve

Surprisingly, many housing associations don’t begin the procurement process with this important social value question. They should ask it right at the start of the process, when scoping what they want to buy. Instead, they ask their contractor what community benefits they can deliver, rather than thinking about what they, as the client, want to get in terms of a social value. This type of approach doesn’t even comply with the Social Value Act.

 

Some providers may want to create apprenticeships, work placement opportunities or develop school links. Others might want to get their contractors to host DIY training seminars, build a new playground or paint a community centre. These are all familiar outputs, but it’s worth considering a wide range of options. You might want to get more tenants from black and minority ethnic groups into maintenance careers, promote the use of electric vehicles or encourage your contractors to donate surplus materials to community groups.

 

Use good practice guides

Don’t reinvent the wheel when it comes to how you embed social value into contracting processes.  At Anthony Collins Solicitors LLP, we have supported the ‘Tradeswomen into Maintenance’ project by writing a free legal guide for social landlords, ALMOs and local authorities that want to address gender imbalances in the construction trades workforce through their procurement activity.

 

The Tradeswomen into Maintenance Legal Guide explains relevant equality and procurement legislation (including the Social Value Act) and sets out the steps clients can take to promote the creation of opportunities for women in maintenance careers. It includes template clauses for each stage of the procurement and contracting process which could also be used if your housing association wants to help other underrepresented groups into maintenance jobs.

 

The guide can be freely used and it is one of a number of good practice guides which aim to support landlords and other businesses working in the social housing and public sector to increase the number of women working in construction trades. Other guides can be accessed on the Mears website.

 

Invest in enforcement

A supplier promising to deliver social value at tender stage is one thing, but ensuring they deliver on this promise is another.

 

This means that good contract management is crucial to making sure suppliers deliver on their social value promises. The ‘let and forget’ culture that still prevails amongst many landlords makes this difficult as some still see contract management as a back-end process. Procurement teams must change this, setting out how a supplier will be managed from the start – right from when a tender is first being pulled together. They also need to make sure the right resources and processes are in place to manage the contract effectively.

 

The Social Value Act requires housing providers to consider, at the outset of each procurement process for services, what social value (if any) they want to secure. But putting community value at the heart of procurement in a meaningful, enduring way is not easy. Hopefully these pointers can help social landlords design their procurement and contracting process to generate real change in the communities they work in.

 

Andrew Millross is a Partner at Anthony Collins Solicitors LLP, a leading procurement and construction lawyer, and an active member of the Procurement Lawyers’ Association.

Whitefriars frees up 85% of staff time with PfH framework

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When Rehman Akhtar began working for Whitefriars Housing as a building surveyor, one
of his first roles was to review asset management procurement.