Materials: Six steps to strengthen your contract

, , , ,

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