10 Models for the Future
The future models (shown below in diagrams two and three) were developed during the study and shown to HAs and LAHDs during sample interviews to gauge reaction. Any future model for procurement in the affordable housing sector must pull HAs in, offering sufficient benefits and make procurement easier: a model that does this will quickly be adopted throughout the sector, spread by word of mouth. We believe that HAs cannot easily be pushed into using a procurement model and mandating them to do so, may actually be counterproductive.
10.1.1 Model 1 - Scotland Excel ( SE) provision of a housing specific procurement centre of expertise
10.1.2 Structures
This model was created on the basis that, due to its responsibility for all LAs across Scotland, SE is the most logical location as the procurement centre of expertise for HAs. This would offer greater collaboration opportunities between LAHDs and HAs who, in the main, are buying similar goods and services. It would also enable wider collaboration with other centres of expertise such as APUC28 who are likely to be procuring some similar goods and services. Due to SE staff being based in offices within Highland, Aberdeen City and City of Edinburgh Councils, and in their own offices in Paisley, this model would give a regional dimension, allowing SE staff to build up a good knowledge base of their area and more easily identify collaboration opportunities that could be met by regional contractors/suppliers.
Diagram 2: Draft model one
In the model, HAs are shown operating in isolation, in collaboration with other HAs and/or LAHDs. The regional SE offices would offer the sector a regionally based point of contact for procurement, and could offer specific services such as:
- Accessibility to existing and, in time, new housing specific procurement frameworks
- Knowledge sharing with identification of potential collaboration opportunities with other HAs and LAHDs
- Knowledge of market trends and what current deals exist within the market
- Quantified case studies of procurement best practice
- Standard templates of documentation used in procurement
- Flow diagrams and guides for undertaking procurement exercises
- Procurement training
10.1.3 Costs
Currently, SE does not have a remit for HAs and this model would require the commitment of dedicated housing resources to support SE's procurement resources to help establish HA specific frameworks.
The main costs in this model would be securing the services of housing experienced staff to establish the housing specific procurement frameworks and establish accurate spend profiles. The regional structure would require at least four staff at an estimated cost of approximately £200,000 per annum. If this option is to be progressed, it is imperative that a full business case is produced setting out the programme, costs, risks, resources and benefits.
10.1.4 Benefits
The principal benefits of this model are that it:
- Brings LAHDs and HAs together in a centre for procurement expertise and aggregates their spend leading to greater opportunity for cost efficiencies
- Brings the housing sector into a sector of expertise that is already included in the Procurement Investment Reform Programme
- Gives a regional dimension to collaboration but still facilitates national collaboration if different regional opportunities can be aggregated through regular communication between the offices
- Allows regional contractors/suppliers to compete
- SE has a training capability and could give HAs easy access to procurement training
- SE is well placed to drive the identification and collation of HAs spending profile
- The sector bodies (i.e. SFHA and GWSF) can concentrate on representing their members and acting as an intelligent client, facilitating SE's engagement with the sector; there should be sector representation on the SE board
10.1.5 Stakeholders' views
Sample organisations, including LAHDs, who were aware of Scotland Excel suggested that there were few frameworks that were housing specific. There was, however, an acceptance that locating HAs in the same centre of expertise as LAHDs was sensible.
10.1.6 Risks
The most significant risk to this model is that Scotland Excel has no remit, or resources, for improving HA procurement as it is run by local authorities for local authorities. In the current climate, it may be difficult to persuade LAs of the merits of this model.
A conflict of interest exists as this model potentially puts SE in the position where it has to advise HAs to use other existing frameworks.
SE does not yet have a wide range of housing specific frameworks and so, at this moment in time, is not in itself attractive to HAs.
SE does not have an extensive knowledge of the affordable housing sector.
Due to the length of time to undertake a spend analysis, agree specifications and establish housing specific frameworks, this model will take a considerable period of time to mature fully and reach its full potential for driving efficiency savings for the affordable housing sector.
10.1.7 Pros and Cons
Table 11: Pros and cons of model 1
Pros | Cons |
|---|
Includes the housing sector in an existing procurement centre of expertise and the Procurement Investment Reform Programme | Lack of housing expertise in SE |
SE has good level of procurement expertise | Time required to set up housing specific frameworks |
Potential for joint collaboration between LAHD and HAs | HAs are outside SE's remit |
Opportunity to provide procurement training to the housing sector | No leverage over SE |
Willingness within SE to do more for the affordable housing sector | More complicated and costly to implement |
| Regional offices | |
| Experience in gathering sector spend information | |
| Allows local companies to participate | |
10.2 Model 2 - Sector provision of a housing specific procurement centre of expertise
10.2.1 Structures
In this draft model, the Scottish Federation of Housing Associations ( SFHA) establishes a procurement centre of expertise on behalf of the sector. A diagram of this model can be seen below in diagram three.
Diagram 3: Draft model two
The model proposes a similar level of functionality to model one with HAs being able to contact SFHA directly to access procurement frameworks, procurement advice, training, best practice and collaboration opportunities.
10.2.2 Costs
The costs to the Scottish Federation of Housing Associations ( SFHA) of operating such a service would be approximately £100,000 per annum based on the salary costs of securing experienced procurement resources.
The model could be funded 29 by a number of different methods:
- An annual payment for unlimited access to the service
- A pay as you go service whereby an amount of hours is bought and used as and when required
10.2.3 Benefits
The main benefits from this model are:
- The SFHA is keen to provide some form of procurement service for its members
- Nearly all HAs interviewed believed that a single point of contact would be highly welcome and very beneficial
- A significant number of HAs are keen for the SFHA to provide this sort of service
- The SFHA understands the affordable housing sector and is very well attuned to HAs' needs
10.2.4 Stakeholders' views
In many cases, HAs thought that the SFHA should have a definitive role to play in procurement: this was generally thought to be some form of advisory role more than a gateway role. There was little opposition to this operating model.
10.2.5 Risks
Whilst popular with a significant proportion of HAs, this model risks putting SFHA in an awkward position as the gatekeeper between suppliers (including public sector procurement frameworks) and its members.
A payment mechanism would need to be established to enable those HAs who are not members of the SFHA to access the service.
LAHDs would be unlikely to be persuaded of the merits of procuring via SFHA thus missing any opportunities that might exist in the future for collaboration between LAHDs and HAs, unless the SFHA could forge relationships with Scotland Excel and/or LAHDs to share information on forthcoming opportunities for collaborative procurement and, thus, drive collaborative procurement cost efficiencies.
Table 12: Pros and cons of model 2
Pros | Cons |
|---|
SFHA are experts in the housing sector | Lack of procurement expertise |
SFHA want to be part of the solution | Lack of resources |
Option exists to partner with a third party and enable quick access to existing housing specific procurement frameworks - see Model 2a | The housing sector would be undertaking procurement improvements outside the Procurement Investment Reform Programme |
SFHA is well placed to drive the implementation of this model | Time required to set up housing specific frameworks |
Local companies would be able to participate | Would need implementation funding to establish |
| Willingness of HAs to pay additional fee to SFHA? |
| Not all HAs are members of SFHA |
| This solution may exclude LAHDs |
10.3 Model 2a - Sector provision of a housing specific procurement centre of expertise with a third party
If model two is adopted, the option exists for SFHA to partner with a large scale housing specific organisation like the Northern Housing Consortium. This would enable SFHA to manage the procurement centre of expertise but, in effect, outsource procurement. This would:
- Allow more immediate access to a range of housing specific procurement frameworks
- Give the SFHA the opportunity to deliver the procurement service with less outlay and lower fees to HAs
- Enable access to proven experience of those that have introduced more modern procurement methods within the housing sector in other parts of the UK
For this option to be possible, the SFHA would need to enter into negotiations with a third party (e.g. Northern Housing Consortium) for all its members to join for a reduced fee.
Table 13: Pros and cons of model 2a
Pros | Cons |
|---|
NHC is a not for profit organisation run by LAs and HAs and so may be more acceptable to the housing sector | Possibility that NHC would be seen as a threat |
Ability to access existing frameworks quickly | Reassurance required that Scottish economy is not adversely affected and local companies excluded |
Easier and quicker to implement | Potential mixture of Scottish and English legislation |
NHC is a proven model and has the change management experience from implementing improved procurement in other parts of the UK | The housing sector would be undertaking procurement improvements outside the Procurement Investment Reform Programme |
| Ability to learn lessons from what has been done previously | |
Should an agreement with the Northern Housing Consortium not be possible, the SFHA could also consider options with GHA and PfH as potential partners.