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HAMMAR West Midlands Does size matter in procurement?. Central Housing Investment Consortium Ltd. John Fisher – Managing Director CHIC - Partner Ark Housing Consultancy. CHIC Presentation. Asset Management Market Summary – How we see it Where does size matter? CHIC’s response

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HAMMAR

West Midlands

Does size matter in procurement?


Central housing investment consortium ltd

Central Housing Investment Consortium Ltd

John Fisher – Managing Director CHIC

- Partner Ark Housing Consultancy


Chic presentation
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



Affordable housing landlords business model

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%


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%







Housing Asset Management High Rise)

Volume of orders

High

Low

Value of orders

Low

High

Development

Planned

Responsive

LABOUR

MATERIALS


Client Function – Silos or Integration? High Rise)

Development

Planned

Responsive

CONTRACT MANAGEMENT

CLIENT MANAGEMENT

LOCAL OVERHEADS

PRELIMINARIES

LABOUR

MATERIALS






3 Big Spend Items High Rise)

  • People (50-60%)

  • Materials (20-50%)

  • Vehicles (10%)


Contractor Order Book High Rise)

  • Any business needs to know what it needs to deliver

  • Order book is king

  • How good is your AMS?



Procurement Solutions High Rise)

  • 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?



Where does size matter? High Rise)

Assumption: ‘Size’ means more than one RP working alone


Housing Asset Management High Rise)

Volume of orders

High

Low

Value of orders

Low

High

Responsive

Planned

Development

Development

Responsive

Planned

LABOUR

LABOUR

MATERIALS

MATERIALS


Opportunities from Aggregated Size High Rise)

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’


CHIC’S RESPONSE High Rise)


What is chic
What is CHIC? High Rise)

  • 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.


Current membership
Current Membership High Rise)

  • 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


CHIC’s USP’s High Rise)

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)


Works services contracts example specialist mechanical electrical services
Works & Services Contracts High Rise)ExampleSpecialist, Mechanical & Electrical Services


Actual efficiency gains works services
Actual Efficiency Gains – Works & Services High Rise)

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%


Materials supply overview
Materials Supply Overview High Rise)

  • 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


Materials supply 1 big ticket items
Materials Supply (1) - High Rise)‘Big Ticket Items’

*Some delivery restrictions may apply



Actual efficiency gains example
Actual Efficiency Gains - Example High Rise)

Example individual item savings achieved by members are summarised below:


So Does Size Matter? High Rise)

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


Does it work? High Rise)




Materials procured direct

Materials Procured Direct High Rise)

Shared Costs of Shopping


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