Housing Association – Permadoor Partnering Feature
Published: 8th June 2007
The social housing sector is putting renewed emphasis on price in its negotiation with the private sector. Adrian Wyatt of social housing specialist door supplier Permadoor argues that if it is to extract best value from its private sector partners, a longer term approach is needed.
From Egan and Latham through to Best Value, partnering has, until very recently been the beating heart of the relationship between the private and social housing sectors. It has driven huge efficiencies, delivered better designed and fitted products and played a critical part in giving tenants new involvement and opportunity to contribute to the design and maintenance of their homes.
But this may now be threatened. Post-Gershon, the public and social housing sector has increasingly interpreted government calls for greater efficiency as synonymous with lower prices. Local authorities, ALMOs and registered social landlords (RSLs) are joining buying consortia or adopting a new and more aggressive approach to contract negotiation. This has had a major impact on the sector’s private sector partners. The new emphasis on price has arrived at a time when the rising cost of raw materials and spiralling energy prices are already placing private sector suppliers under significant pressure and this has generally prompted one of two responses. The first is the charge that the social housing sector wants to ‘have its cake and eat it’. Many private sector suppliers see the sector as calling for ever higher standards of service and at the same time being unprepared to pay for it.
The second response is to ignore the above and simply pitch for business on price. The equation for many in the private sector has been simple, deliver less for less. Many companies are already making the switch, cutting back on services and support to come in with quotes at lower prices. Unless checked this will inevitably lead to a near return to Compulsory Competitive Tendering (CCT) – something the Government has already decided doesn’t work. It also means that there is an inherent danger and in selecting suppliers solely on price much of what has been achieved through partnering and Best Value to date, will be undermined.
Partnering was introduced as an antidote to CCT. The 1994 Latham Report and Egan’s ‘Re-thinking Construction’, published in 1998 represented a backlash against the award of contracts solely on price. Amid a raft of targets to cut costs and construction time, what both were saying was that there was too much time and money was being wasted and if only everyone would sit down and discuss what they needed and when they needed it, projects could be delivered more efficiently. These efficiencies could then be shared between partners. This made sense for local authorities because projects were delivered on time and at lower cost. For the constructor and their suppliers things were better because they took a share of the savings in performance bonuses, while contracts were awarded over a longer period, making it easier to plan more effectively and in so doing make additional savings and efficiencies.
This move towards partnering has since become a firmly established part of Best Value. Sitting side by side with targets to increase tenant involvement are those to deliver projects more efficiently, taking less time and at lower cost. When Gershon came to the table in 2004, he was simply arguing that these and continuing efficiencies should be exploited to lower costs further. He was not arguing that contracts should be awarded simply on the basis of price – to do so runs completely against principles of Best Value. This is recognised by many responsible RSLs, ALMOs, local authorities and buying consortia. For its part responsible members of the private sector have become more competitive, making the balance between service and price just about sustainable.
Permadoor has, for example, spent the last decade not only investing in its service but in its operation, in its plant, equipment, machinery and in its relationship with its suppliers to drive down our own costs. We are delivering a better product but we are doing it more efficiently, reducing energy consumption and waste and by implication our overheads. The public sector must, however, also be realistic and understand that costs can not be absorbed by their suppliers indefinitely. This may mean a small additional cost but in return a partnering approach will deliver much greater value, from technical support to quality of installation and resident empowerment.￩ Back to News Page