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How we buy stuff. - Or the Dark Art of Procurement. How we buy stuff. 160 or so housing associations in Scotland Very diverse businesses Size of operation - 20 units up to 48,000 units 97 have less than 1,000 units 8 have more than 5,000 units.

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how we buy stuff

How we buy stuff

- Or the Dark Art of Procurement

how we buy stuff1
How we buy stuff
  • 160 or so housing associations in Scotland
  • Very diverse businesses
  • Size of operation - 20 units up to 48,000 units
  • 97 have less than 1,000 units
  • 8 have more than 5,000 units.
  • Procurement and collaborative procurement – two different things !!!!
  • Imposed from above or good business ?
how we buy stuff2
How we buy stuff
  • Housing associations and co-operatives in Scotland contribute £ 1 BN into the Scottish Economy annually – wages and spend
  • Roughly £ 668 M of spend on goods and services and £ 357 M of staff costs.
  • Tenants rents, not public grants
  • Excludes construction spend but includes maintenance
how we buy stuff3
How we buy stuff
  • What do we do now ?
  • All associations and co-operatives have buying procedures – standing orders, order processes, authorisation levels, invoicing systems payment approvals. Record keeping is by sophisticated accounting systems – but not readily able to share or collate information
  • Putting value into local economy, getting a fair price for goods and services
how we buy stuff4
How we buy stuff
  • Why do we need to change anything ?
  • Drivers
  • European Legislation
  • Scottish Procurement Reform
  • Good business practices and the need to demonstrate value for money to tenants and others
  • Need to maximise effectiveness of resources
how we buy stuff5
How we buy stuff
  • European Legislation – the evil empire imposing unworkable systems for unrealistic ends ?
  • Aim was to remove barriers to trade and open up opportunities throughout member states
  • Treaties and Directives are the basis for Scottish Procurement Law, but how we implement, up to the Scottish Parliament.
  • Public Contract ( Scotland ) Regulations 2012
how we buy stuff6
How we buy stuff
  • European Legislation - new 2014 Directive
  • Object to simplify processes, reduce red tape
  • Pre contract dialogue, encouragement to use e procurement
  • Breaking contracts into lots and disallowing high turnover requirements for PQQ – all to encourage SME’s
  • Clarification of a lot of previous case law
how we buy stuff7
How we buy stuff
  • Why are we deemed Public Contracting Authorities and subject to public procurement law ?
  • NOT mentioned as such in the 2012 Regulations
  • BUT since 2004, been recognised in Europe and conceded by UK and Scottish Governments that we are
  • French case – definition of “controle”
how we buy stuff8
How we buy stuff
  • Thresholds for OJEU advertising:-
  • £ 4.3 M ( 5 M Euros ) for construction
  • £ 173 K ( 200,000 Euros ) for Part A and Part B, goods and services
  • Perfectly clear – or is it ?
  • Further duty on public contracting authorities – is advertising of a contract required anyway, because of three Treaty pillars of transparency, non discrimination and equality
how we buy stuff9
How we buy stuff
  • What happens if you don’t ? The threat of challenge by a disgruntled “economic supplier”
  • Realistic ? Risk ?
  • A few associations have faced threats of legal challenge – slowed down tender process, but
  • In climate of regulation and financial uncertainty, voluntary boards are uneasy.
how we buy stuff10
How we buy stuff
  • Scottish Procurement advice is that goods and services contracts above £50,000 should be tendered and advertised. Some HA’s apply this limit to construction contracts as well – huge amount of effort. Not clear if benefits identified – compliance not adoption
  • Yet procurement specialists not the norm in housing associations – but do we need ?
how we buy stuff11
How we buy stuff
  • Government focus on HA reform
  • Review of Procurement in the Affordable Housing Sector, Turner Townsend Report March 2011
  • £ 530 M spend -“more mature procurement” - £ 26M to £ 42M savings – collaborative activity identified as key
  • A bit short on practical recommendations, however – SFHA vehicle was the main one
how we buy stuff12
How we buy stuff
  • Procurement Reform ( Scotland ) Bill
  • Sits on top of the 2012 Regulations, does not replace, so HA’s are deemed Public Contracting Authorities
  • New thresholds introduced - £ 50,000 for goods and services and £ 2 M for construction
  • To use Public Contracts Scotland, up to EU thresholds, when OJEU notices as well.
how we buy stuff13
How we buy stuff
  • Other clauses on procurement strategies, community benefits and sustainable issues – well meaning, but more bureaucracy
  • We will remain deemed as Public Contracting Authorities because of EU position - not sensible to classify up to 80% of our membership as having businesses on the same scale as local authorities and NHS Trusts.
how we buy stuff14
How we buy stuff
  • Construction Review – published 22nd October
  • Procurement Capability Assessments – de rigeur for Local Authorities, suggestion will be required for all projects with government grant.
  • Some HA’s have used as an improvement tool, but may not be appropriate for housing activity – needs reform
how we buy stuff15
How we buy stuff
  • Local Authorities, in planning investment programmes to look at procurement routes and whether RSL or inter LA opportunities.
  • Seems like a great opportunity for collaboration, but in reality how this can work on diverse sites with diverse timescales is not clear
  • “bundling up tenders” – a small part of the story
how we buy stuff16
How we buy stuff
  • A project on a difficult site can take 4 or 5 years to get to tender and can be subject to many delays – planning, legal, environmental (bats, diamond headed ants), cost. How can this be planned for MMC etc ? Devanha approach
  • General provisions all sensible – project bank accounts, whole life costing, design, Construction Advisor for Scotland
how we buy stuff17
How we buy stuff
  • Many associations are considering how procurement tools can achieve savings
  • Use of Frameworks – very attractive idea, a pre established framework contract that you simply join to gain benefits
  • Disadvantages – have to use commercial framework contractors
  • Or set up your own framework – bit of a hassle but once done…………………….
how we buy stuff18
How we buy stuff
  • Procurement groups – I Flair, Trust/Bield/Cairn/Hanover
  • Started with Lead Developer arrangements
  • Now used for repairs, maintenance and procurement of furnishings for older people
  • Need commitment to actually use – Cyntra issue
  • Savings not always apparent
how we buy stuff19
How we buy stuff
  • So, working in a world which imposes behaviour on us through legislation and policy
  • Not always appropriate to our sector – scale and undefined benefits
  • Are opportunities for collaboration, better ways of working and potential savings for our tenants
  • Not always big ticket contracts – construction
  • Shared services, bulk purchasing, maintenance
  • Needs commitment for the long term, not short term view of participation