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ACT AUDITOR–GENERAL’S REPORT

MAINTENANCE OF PUBLIC HOUSINGREPORT NO. 2 / 2016

© Australian Capital Territory, Canberra 2016

ISSN 2204-700X (Print) ISSN 2204-7018 (Online)

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Territory Records Office, Shared Services, Chief Minister, Treasury and Economic Development Directorate, ACT Government, GPO Box 158 Canberra City ACT 2601.

ACT Audit Office

The roles and responsibilities of the Auditor-General are set out in the Auditor-General Act 1996.

The Auditor-General is an Officer of the ACT Legislative Assembly.

ACT Audit Office undertakes audits on financial statements of Government agencies, and the whole-of-Government consolidated financial statements.

The Office also conducts performance audits, to examine whether a Government agency is carrying out its activities effectively and efficiently, and in compliance with relevant legislation.

ACT Audit Office acts independently of the Government, and reports the results of the audits directly to the ACT Legislative Assembly.

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Audit TeamBrett Goyne Robert Holbert Muralidhar Kannan Katinka Mutandadzi Graham Smith (Numerical Advantage) Brett Stanton

The support of Sophie Butler-Stratton, David Kelly, and Fran Holbert of Stret Pty Ltd is appreciated.

Produced for the ACT Audit Office by Publishing Services, Shared Services, Chief Minister, Treasury and Economic Development Directorate, ACT Government

Publication No. 16/0395

ACT Government Homepage address is: http://www.act.gov.au

PA 15/14

The Speaker ACT Legislative Assembly Civic Square, London Circuit CANBERRA ACT 2601

Dear Madam Speaker

I am pleased to forward to you a Performance Audit Report titled ‘Maintenance of Public Housing’ for tabling in the Legislative Assembly pursuant to Subsection 17(5) of the Auditor‐General Act 1996.

Yours sincerely

Dr Maxine Cooper Auditor‐General 14 April 2016

Maintenance of Public Housing Page i

CONTENTS

Summary ................................................................................................................................... 1

Overall conclusion .................................................................................................................... 1

Chapter conclusions ................................................................................................................. 1

Key findings .............................................................................................................................. 3

Recommendations .................................................................................................................... 8

Agency response ..................................................................................................................... 12

1 Introduction ....................................................................................................................13

Background ............................................................................................................................. 13

Audit objective and scope ...................................................................................................... 15

Audit criteria, approach and method ..................................................................................... 16

2 Governance .....................................................................................................................17

Summary ................................................................................................................................. 17

Overview of governance arrangements ................................................................................. 20

Contract management ............................................................................................................ 24

Providing quality assurance .................................................................................................... 29

Management of maintenance services .................................................................................. 38

Risk management ................................................................................................................... 40

Managing contract variations ................................................................................................. 42

3 Time, quality and cost .....................................................................................................45

Summary ................................................................................................................................. 45

Background ............................................................................................................................. 47

Timeliness ............................................................................................................................... 47

Quality .................................................................................................................................... 51

Cost ......................................................................................................................................... 57

4 Planned maintenance ......................................................................................................61

Summary ................................................................................................................................. 61

Strategic asset management .................................................................................................. 63

Condition assessment ............................................................................................................. 66

Conduct of planned maintenance .......................................................................................... 68

Maintenance of Public Housing Page 1

SUMMARY

Maintenance of public housing is a key function of the ACT Government, as public housing assets are valued at over $4 billion and provide accommodation for nearly 6 percent of the ACT population. A Total Facilities Management contract is the means whereby maintenance of this asset is provided. This contract is valued at over $48 million a year, including both the direct cost of maintenance (around $41 million a year) and the value of the management fee payable to Spotless (around $7 million a year), making this one of the Territory’s largest ongoing contracts.

This audit examines Housing and Community Services’ management of the Total Facilities Management contract since 2012 when Spotless was awarded its second contract. The Audit Office tabled a performance audit ‘Maintenance of Public Housing’ in August 2008 which covered the period of the first contract with Spotless. The second contract terminates in May 2017.

Overall conclusion

Managing the Total Facilities Management contract poses many challenges. While Housing and Community Services has positioned itself positively to meet these, particularly through establishing a sound governance framework for the contract, its management of the contract is not fully effective. Importantly, there is scope for Housing and Community Services to improve its contract management through fully implementing the governance framework as provided for in the Total Facilities Management contract, improving its identification and management of risk, strengthening its oversight of Spotless’ quality control systems and better managing and documenting contract variations.

Chapter conclusions

GOVERNANCE

Housing and Community Services has established a generally sound governance structure to support the Total Facilities Management contract, including requiring parties to define key strategies for contract delivery and quality control, establishing committees to deal with both day‐to‐day administration and higher level oversight, and having a mechanism for financial control and dispute resolution. Contract management is also supported by a comprehensive Performance Management System for incentive payments and abatements to drive the achievement of key contract outcomes.

However, this sound governance structure has not been fully implemented and Housing and Community Services’ oversight of Spotless has been inadequate. There is no risk management plan specifically for the contract, and Housing and Community Services does not have visibility over the delivery of works managed by Spotless. Importantly, work order audits undertaken by

Summary

Page 2 Maintenance of Public Housing

Spotless have been problematic and Housing and Community Services has not enforced the necessary and required standard for these audits. It has not provided effective oversight of, and has not followed‐up in relation to, targeted quality audits that were undertaken by Housing and Community Services Quality Assurance team. Some contractual provisions designed to drive quality and innovation, and provide employment of target groups have not been enforced. Although initiatives to address some of these matters have been introduced, more remains to be done.

Contract variations have not been effectively managed as changes to the contract have not been documented or, if they have, the documentation is inadequate. Accordingly there is no audit trail or transparency of decision‐making related to contract variations. Poor documentation of variations presents a risk that the contract will not be effectively managed or enforced.

TIME, QUALITY AND COST

Spotless has met timeliness targets for the delivery of the more urgent maintenance services, but not for routine tasks. While this is the case, the reliability of the timeliness data is uncertain and Housing and Community Services needs to assure itself of its reliability.

Housing and Community Services does not have sufficient oversight of Spotless’ quality control activities; in particular over Spotless’ work order audits and the allocation and quality of maintenance work undertaken by Spotless’ in‐house maintenance provider.

Spotless’ payment incentives or abatements are dependent on the results of customer satisfaction surveys. These have a very low response rate and problems with them have been identified in quality audits. While Housing and Community Services has initiated action to improve the response rate, it remains low. If this persists then an alternative means for determining Spotless’ incentives and abatements will need to be pursued.

Spotless has not delivered the continuous improvement plans or Service Delivery reviews required by the contract.

Housing and Community Services and Spotless have established cost and price control arrangements and implemented processes for effectively managing payments to subcontractors.

PLANNED MAINTENANCE

Housing and Community Services is planning maintenance activities using multiple information system. A long‐term plan to consolidate information to create a centralised comprehensive asset register of ACT housing assets is needed.

Spotless has made significant progress in increasing the proportion of properties that have had a recent condition assessment audit. Given this it would be timely to assess whether the relevant key performance indicator should be changed to better drive performance by identifying a

Summary


desired outcome rather the conduct of a specific number of annual audits. Furthermore, condition assessments are an important tool in determining the program of planned maintenance but the priority given to these in influencing the planned maintenance program has declined. This needs to be corrected.

Some maintenance tasks that are classified as planned maintenance are not. This can lead to an overstatement of the amount spent on planned maintenance. The 70 percent requirement for planned maintenance, in the Total Facilities Management contract, is an important element of the Public Housing Asset Management Strategy and also contributes to Spotless’ incentives or abatements. It is important therefore that the claimed planned maintenance expenditure is accurate.

Key findings

GOVERNANCE Paragraph

The committee structure provided for in the Total Facilities Management contract has been implemented. While all committees have been generally operating as planned, governance would be strengthened if the most senior committee, the Joint Consultative Committee, improved its oversight of audits, risk, quality and contract management.

2.11

The Housing and Community Services’ Contract Management Plan is current and provides broad guidance to staff, but does not address risks.

2.20

Spotless’ Quality Management Plan does not adequately specify quality assurance activities in relation to key risk areas, such as sub‐contractor performance. Importantly, it does not specify what Spotless will do to ensure its sub‐contractors deliver work of the required quality.

2.23

The Spotless Quality Management Plan is not well aligned with the Housing and Community Services Quality Framework, as it has too broad a focus. The Housing and Community Services Quality Framework deals extensively with the accountabilities and strategies for delivering the quality assurance measures required by the contract.

2.26

The Quality Assurance team in Housing and Community Services has been below its planned strength for most of the Total Facilities Management contract term. While the Community Services Directorate has recently addressed this, it is a concern that adequate resourcing was not provided earlier, given the importance of this team’s role.

2.33

Summary


While the key performance indicators set out in the Performance Management System provide a comprehensive framework for driving the achievement of key contract outcomes, opportunities exist to further refine the Performance Management System to improve its focus on measuring impact and outcomes, rather than activities and process throughout the life of the contract.

2.38

The Joint Consultative Committee provides active oversight of the application of the Performance Management System and has proven to be an effective forum for resolving disagreements about the application of individual performance measures and therefore the extent of incentives or abatements applied to Spotless’ base management fee. Over the life of the contract to date, the net impact of the incentives and abatements has been a slight reduction (less than 2 percent) in the base management fee payable to Spotless.

2.45

Given the importance of work order audits in the overall quality framework, it is a concern that significant issues identified by the Housing and Community Services Quality Assurance team in relation to the conduct of these audits, including the recommendation to cease related incentive payments, were not formally reported to the Joint Consultative Committee.

2.56

Housing and Community Services has not enforced the necessary and required standard for work order audits as set out in the Total Facilities Management contract, putting at risk assurance of the quality of maintenance overseen/performed by Spotless and its sub‐contractors.

2.60

Having regard to issues associated with work order audits identified by both Housing and Community Services and the Audit Office, it would be prudent for Housing and Community Services to arrange for a comprehensive independent audit of Spotless’ conduct of work order audits and the effectiveness of related controls.

2.61

A review of Joint Consultative Committee minutes shows that final reports and findings of targeted audits undertaken by Housing and Community Services Quality Assurance team have not been formally referred to Joint Consultative Committee at any time since the current contract commenced in May 2012.

2.66

Housing and Community Services’ monitoring of the implementation of recommendations from targeted audits undertaken by the Quality Assurance team, including through its participation in the Joint Consultative Committee, has been inadequate.

2.67

Recent policy changes which increase the involvement of the Community Services Directorate’s internal audit group in the conduct of designated ‘high risk’ targeted audits, and require the reports of these audits to be tabled with both the Joint Consultative Committee and the Community Services Directorate Audit and Risk Management Committee, have strengthened assurance in relation to the administration of the Total Facilities Management contract.

2.73

Summary


Extending the Joint Consultative Committee’s oversight to include all targeted audits would provide a more comprehensive overview of risk and further strengthen assurance in relation to the management of the Total Facilities Management contract.

2.74

Full interconnectivity of Spotless and Housing and Community Services IT systems has not been achieved. Improved interconnectivity, in accordance with the requirements set out in the Total Facilities Management contract, would improve the planning of maintenance activities and thereby reduce the risk of inappropriate maintenance occurring, or needed maintenance not occurring.

2.78

Housing and Community Services has no visibility over the reviews undertaken by Spotless’ Works Supervisors for checking that work orders have been completed.

2.81

Spotless’ quarterly performance evaluations have not been routinely provided and, as Housing and Community Services have not insisted on their provision, it has not adequately enforced the Total Facilities Management contractual requirements.

2.83

Ethical suppliers’ declarations, which Spotless are required by the contract to provide to Housing and Community Services every six months, were not produced until August 2015, following a request from Housing and Community Services.

2.86

Formal complaints by Housing and Community Services to Spotless, such as Non‐Conformance Notices and Notices to Rectify, have generally been adequately addressed.

2.91

Spotless have not met the targets for employment of target groups set in the Total Facilities Management contract, although Spotless and Housing and Community Services are continuing to work together to address this matter.

2.96

Given the importance of the Total Facilities Management contract it needs to be supported by its own comprehensive risk plan. At the time of the audit, Housing and Community Services has not established a risk management plan specifically for the Total Facilities Management contract.

2.98

Housing and Community Service’s management of contract variations has not been adequate over the life of the contract.

2.115

TIME, QUALITY AND COST Paragraph

Timeliness of repair tasks managed by Spotless has been satisfactory for the more urgent maintenance categories but the target was not achieved for routine (within 20 day) tasks and consequently Spotless did not receive an incentive payment in relation to this category of maintenance.

3.11

Summary


Housing and Community Services needs to assess whether Spotless has addressed the problems in the reporting of timeliness that were identified by Spotless in its 2015 audit. This audit was limited in scope to the examination of a random sample of 111 work orders allocated to a single sub‐contractor over a five month period in 2014, which was around 10 percent of the work orders allocated to this contractor over the period. However, in light of the nature of the findings and their impact on the reliability of related timeliness data, it would be prudent for Housing and Community Services to initiate action to assure itself that the problems identified in that audit are not experienced more generally, and that Spotless staff and sub‐contractors are undertaking the correct processes for the completion of work orders and for data entry into relevant systems.

3.16

Current reporting does not provide Housing and Community Services with adequate visibility over Spotless’ Work Supervisors inspections of works undertaken by Spotless or its sub‐contractors.

3.24

Given the key role of work order audits in providing assurance around service delivery and in contributing to incentive payments, the significant and persistent gap between the failure rates found by Housing and Community Services (for example 19 percent and 57 percent) and the failure rates reported by Spotless (for example 3 percent and most recently 0.3 percent) is a matter of concern which Housing and Community Services needs to address.

3.28

Housing and Community Services does not have visibility over the work orders selected by Spotless for its audits; therefore it does not have any assurance that the audit results are representative and reliable.

3.30

Spotless and Housing and Community Services have instituted a process that allows for joint audits of work orders. Over the period of the contract, 85 work orders have been subject to a joint work order audit, although the last one was conducted in January 2015. Audits of work orders by Spotless, for which the number conducted is a key performance indicator that leads to incentive payments, are not conforming to requirements under the contract and not providing adequate assurance on the quality of work performed by Spotless or its sub‐contractors.

3.33

To date, the work done by Spotless’ in‐house maintenance provider, Asset Services, has been inspected by in‐house supervisors but has not been subject to independent quality assurance. Independent quality assurance of the work undertaken by Asset Services would provide assurance that this arrangement is delivering value for money for the Territory, and would assist in managing any real or potential conflicts of interest that may arise from Spotless overseeing the maintenance services provided by Asset Services.

3.36

Measurements of tenant satisfaction with maintenance services managed by Spotless (used as a basis for incentive payments to Spotless) are based on very low tenant response rates. While Housing and Community Services provide some incentives for tenants to complete survey forms, response rates have not significantly improved and there has been no formal follow‐up to address the

3.42

Summary


critical findings of Housing and Community Services’ 2012 audit into the conduct of the maintenance survey.

The Total Facilities Management contract encourages continuous improvement initiatives. For example, the contract requires that Spotless produce a continuous improvement plan and conduct Service Delivery Reviews each six months with the intent of identifying improvements. Neither the improvement plan nor the reviews have been delivered by Spotless and Housing and Community Services has not required them to be delivered.

3.46

Through the development and maintenance of a comprehensive schedule of rates, and the implementation, in cooperation with Spotless, of arrangements for allocating and reviewing costs for individual tasks, Housing and Community Services have established a generally sound framework for the control of costs allocated to individual tasks.

3.58

PLANNED MAINTENANCE Paragraph

The report to the Minister on specified performance indicators that is required by the Public Housing Asset Management Strategy 2012‐2017 has not been produced.

4.8

Housing and Community Services lack a centralised asset register that contains comprehensive information on public housing properties. Such a register would reduce the risk that scheduled maintenance decisions may be based on incorrect or incomplete information.

4.11

Housing and Community Services acknowledge that information on public housing assets is not centralised, but have advised that the core requirements of a comprehensive asset register are met within its business systems. While this is noted, it would be prudent to develop a long‐term plan for progressively centralising information on public housing assets as IT systems are upgrade and/or replaced.

4.12

Spotless’ condition assessment audits have not met the target in any quarter from contract commencement in 2012 through to October 2015, and Spotless did not provide required Energy Efficiency Rating reports in the first two years of the current Total Facilities Management contract.

4.20

Changes made by Spotless, in consultation with Housing and Community Services (including outsourcing the conduct of condition assessment audits) have resulted in the target being met each month since the revised arrangements were implemented in October 2015. Housing and Community Services needs to monitor the revised arrangements to ensure targets continue to be met.

4.21

Summary


Given Spotless’ progress in completing condition assessments of properties Housing and Community Services needs to adjust the key performance indicator to reflect progress toward the objective, namely having all properties with a condition assessment no more than five years old, rather than maintaining its focus on the number of assessments conducted.

4.24

Current business rules governing the classification of maintenance expenditure as either planned or responsive need to be improved so that the ratio of planned to responsive maintenance is correctly reported. Accurate reporting of this figure is important because it informs Housing and Community Services strategic decision making, and is linked to incentives and abatements under the Total Facilities Management contract.

4.30

Condition assessment audits are an important source of information to drive strategic decisions about the maintenance of the Territory’s public housing asset. While condition assessment audits have been an important driver of new planned maintenance work over the last three years, the priority attached to work identified through the condition assessment audit process has been declining. The condition assessment audit drove less than 25 percent of new work planned for 2015‐16, a substantial reduction from 68 percent in 2014‐15 and well below the three year average of 40 percent. Given the extent of works carried over, the low priority accorded to works identified through condition assessment audits increases the risk that they will not be completed in the year initially planned.

4.35

Recommendations

RECOMMENDATION 1 QUALITY MANAGEMENT PLAN

Housing and Community Services should initiate action so Spotless revises its Quality Management Plan to cover key quality assurance risks and directly align this plan with the Housing and Community Services Quality Framework.

RECOMMENDATION 2 PERFORMANCE MANAGEMENT SYSTEM

Housing and Community Services should initiate action to review the Performance Management System to increase its focus on impact and outcomes.

Summary


RECOMMENDATION 3 WORK ORDER AUDITS

Housing and Community Services should initiate action to improve work order audits undertaken by Spotless by:

a) identifying, in consultation with Spotless, the best way to provide for assurance of work order quality (and define the role of audits by visit or telephone, when to target complex works and the place of joint audits). This should be documented and presented to the Joint Consultative Committee for endorsement;

b) fully documenting any agreement with Spotless to vary the requirements for work order audits as set out in the May 2012 Total Facilities Management contact;

c) monitoring the quality of work order audits by Spotless, including conducting targeted Quality Assurance audits;

d) bringing the work order audits function in house if the quality of the audits remains inconsistent; and

e) arranging for a comprehensive independent audit of Spotless’ conduct of work order audits and the effectiveness of related controls.

RECOMMENDATION 4 QUALITY ASSURANCE

Housing and Community Services should improve its quality assurance by:

a) improving internal monitoring of the outcomes of targeted audits, including by documenting actions agreed with Spotless to comprehensively address all audit recommendations;

b) directing the Quality Assurance team to progress the development of a joint program of targeted audits that are based on a risk analysis; and

c) requiring the Joint Consultative Committee to consider all findings of targeted audits, and to monitor the implementation of agreed recommendations.

RECOMMENDATION 5 CONNECTIVITY OF IT SYSTEMS

Housing and Community Services should initiate action to resolve outstanding issues on connectivity of IT systems and establish realistic target dates for implementing needed actions.

RECOMMENDATION 6 CONTRACTUAL OBLIGATIONS

Housing and Community Services should enforce all the requirements of the Total Facilities Management contract including requiring Spotless to provide quarterly performance evaluations and ethical suppliers declarations.

Summary


RECOMMENDATION 7 RISK MANAGEMENT

Housing and Community Services should improve its risk management by:

a) developing a comprehensive risk management plan for the administration of the Total Facilities Manager contract; and

b) including in the overall Housing and Community Services risk register key risks that relate to this contract.

RECOMMENDATION 8 MANAGING CONTRACT VARIATIONS

Housing and Community Services should improve its management of variations to the Total Facilities Management contract by:

a) developing and sharing with Spotless an accurate up‐to‐date register of contract amendments which identifies the provisions of the 2012 Total Facilities Management contract that have been varied, the nature of the revised provision, and the date from which the revision should be applied;

b) centrally maintaining documentary evidence that clearly demonstrates agreement between the contract parties as to each of the amendments, and where agreement to prior amendments is not available, liaise with Spotless to develop appropriate documentation; and

c) implementing a system whereby all future amendments are clearly specified and adequately documented. Matters considered in agreeing to an amendment should form part of the documentation (including but not limited to measures to protect risk and value for money).

RECOMMENDATION 9 TIMELINESS OF MAINTENANCE TASKS

Housing and Community Services should strengthen assurance in regard to the reported timeliness of maintenance activities by:

a) assessing the extent to which the issues indentified in the Spotless 2015 audit in relation to sub‐contractor practice have been rectified and whether it is satisfied with the reliability of timeless data; and

b) conducting Quality Assurance audits or joint audits on this matter.

RECOMMENDATION 10 INSPECTION OF WORKS

Housing and Community Services should improve quality control of works undertaken by Spotless and sub‐contractors through measures such as targeted audits of Spotless’ Work Supervisor processes for undertaking inspections.

RECOMMENDATION 11 IN‐HOUSE MAINTENANCE PROVISION

Housing and Community Services should initiate action to provide for independent quality assurance in regard to the maintenance work undertaken by Spotless’ in‐house maintenance provider.

Summary


RECOMMENDATION 12 TENANT SATISFACTION SURVEYS

Housing and Community Services should assess the appropriateness of using the tenant satisfaction surveys as a basis for Spotless incentive payments given the very low response rate. If this survey is considered appropriate, a mechanism should be developed to secure reliable data and a satisfactory response rate (formally addressing the critical findings of Housing and Community Services’ 2012 audit into this issue may assist).

RECOMMENDATION 13 CONTINUOUS IMPROVEMENT PLAN AND SERVICE DELIVERY REVIEWS

Housing and Community Services should initiate action so Spotless produces a continuous improvement plan and conducts Service Delivery reviews each six months with the intent of identifying improvements, or remove these requirements from the Total Facilities Management contract.

RECOMMENDATION 14 PERFORMANCE AGAINST THE PUBLIC HOUSING ASSET MANAGEMENT STRATEGY

Housing and Community Services should report annually to the Minister on its performance against the Public Housing Asset Management Strategy 2012‐2017 using the indicators specified in that Strategy or seek the support of the Minister to remove this requirement.

RECOMMENDATION 15 ASSET REGISTER

Housing and Community Services should develop and progressively implement a long‐term plan for consolidating existing data sources to create a centralised comprehensive asset register of ACT public housing assets.

RECOMMENDATION 16 CONDITION ASSESSMENTS

Housing and Community Services should initiate action to improve condition assessments by:

a) continuing to monitor the revised condition assessment arrangements implemented by Spotless to ensure the targets for condition assessments are consistently met and that Energy Efficiency Reports provide adequate support to maintenance planning; and

b) assessing whether Key Performance Indicator 3.1 should be changed to reflect the objective of ‘all properties having a condition assessment no more than five years old’.

RECOMMENDATION 17 DEFINITION OF PLANNED MAINTENANCE

Housing and Community Services should initiate action to improve current business rules governing the classification of maintenance expenditure as either planned or responsive, so that the ratio of planned to responsive maintenance is correctly reported.

Summary


RECOMMENDATION 18 CONDITION ASSESSMENTS IN PLANNED MAINTENANCE

Housing and Community Services should review how it develops the annual program of planned maintenance to ensure that condition assessment audits remain an important priority for identifying planned maintenance work.

Agency response

In accordance with subsection 18(2) of the Auditor‐General Act 1996, the Community Services Directorate was provided with:

draft proposed reports for comment. All comments were considered and required changes were reflected in the final proposed report; and

a final proposed report for further comment. As part of this process, the Community Services Directorate was also asked to provide comments for inclusion in the final report in the Summary chapter.

The Community Services Directorate did not provide comments for inclusion in the Summary chapter of this report. However, no matters regarding the factual accuracy of material in this report were brought to the attention of the Auditor‐General.

In accordance with subsection 18(3) of the Auditor‐General Act 1996, extracts of the draft proposed report were provided to Spotless Pty Ltd. Comments provided by Spotless were considered in developing the final proposed report.


1 INTRODUCTION

1.1 This chapter provides background information on this audit, including contextual information on maintenance of the ACT public housing asset and the Total Facilities Management contract, under which housing maintenance is delivered. It also presents the audit criteria, approach and method.

Background

1.2 Housing and Community Services is a division of the Community Services Directorate, responsible for the provision of social housing and community services in the Territory. In 2015 the value of Housing ACT’s land and buildings was $4.5 billion, which represents approximately 16 percent of the Territory’s total assets.

1.3 In 2014–15, Housing and Community Services managed 10 611 tenancies which provided accommodation for 22 096 people which is 5.65 percent of the ACT population as at 30 June 2015. The Community Services Directorate Annual Reports shows that the number of ACT public housing tenancies has decreased by 10 percent from 11 823 in 2011–12 to 10 611 in 2014–15. Although Housing and Community Services currently head‐leases 635 properties to community housing providers, overall the numbers have declined.

Table 1‐1 Housing and Community Services public housing tenancies 2011‐2015

Financial Year Number of ACT public housing tenancies

Annual percentage increase/(decrease)

2011‐12 11 823 ‐

2012‐13 11 577 (2%)

2013‐14 10 724 (7%)

2014‐15 10 611 (1%)

Source: Community Services Directorate Annual Reports from 2011‐12 to 2014‐15

1.4 The per capita provision of public housing in the ACT is more than double the national average, with the most recent (2013) data showing 29 public housing dwellings in the ACT per 1 000 persons compared to the national average of 14 dwellings per 1 000.

1.5 Housing and Community Services has two major goals, management of the asset (dwellings) for the Territory, and appropriate housing for tenants. This audit is concerned with the former goal.

1.6 Since 2001‐02, the management and delivery of maintenance, repairs and upgrades of the Housing and Community Services housing assets have been provided through a Total Facilities Management contract with a private firm. Under the Total Facilities Management contract, this firm has responsibility for the planning and management of

1: Introduction


maintenance and service upgrades for Housing and Community Services’. This includes responsibility for managing sub‐contractors. Housing and Community Services advised that it is the only public housing provider in Australia using such a contract.

1.7 For over a decade Spotless Facility Services Pty Ltd (Spotless) has held the Total Facilities Management contract. It was initially awarded to Spotless in 2005, and following a procurement process, a second contract was entered into in 2012, for a further 5‐year period.

1.8 The current contract with Spotless commenced on 9 May 2012. It requires that Spotless, as the Total Facilities Manager, plan and deliver the contracted services within an agreed public housing maintenance budget. Spotless receives a management fee, which is adjusted annually to reflect changes in input costs and which may be further adjusted through incentives and abatements to reflect performance.

1.9 In 2014‐15, the public housing maintenance budget was $41.25 million and the management fee payable to Spotless was $6.92 million.1 Over five years, the total value of payments made under the contract is expected to reach $242 million,2 making this one of the Territory’s largest ongoing contracts.

1.10 Maintenance is categorised as responsive (based on tenants contacting Spotless with a maintenance request) or planned. In both cases, work orders that detail the work to be completed are raised by Spotless. Spotless then allocates the work order to a sub‐contractor.3 When work is completed, Spotless is invoiced by, and makes a payment to, the sub‐contractor. The process for payment involves Spotless verifying the invoice, forwarding it to Housing and Community Services who periodically (monthly) provide the funds to Spotless to cover the payments to sub‐contractors. On average, since 2011‐12 the Community Services Directorate has provided approximately $11 million a year to cover responsive repairs and $28 million a year for planned maintenance.

1.11 The responsive maintenance work is high volume, with an average 85 000 calls annually over the last four years. There have been around 70 000 work orders raised annually, for both responsive and planned maintenance, in the period from 2011‐12 to 2014‐15 (Table 1‐2).

1 Advice from Minister Berry to the ACT Legislative Assembly on 26 March 2016 (Legislative Assembly for the ACT, 2015 Week 4 Hansard (26 March) pp. 1220–22). These figures have been confirmed during audit fieldwork. 2http://www.procurement.act.gov.au/contracts/contracts_register/contracts/contracts/community_services_directorate/2010.xxxx.xxx/2010.14845.210 3 Housing and Community Services has advised that certain planned maintenance tasks are undertaken by Spotless’ in‐house maintenance provider. The tasks to be undertaken by Spotless’ in‐house maintenance provider are agreed in advance with Housing and Community Services and are set out in the annual Delivery of Works schedule. In 2014‐15, 1 888 work orders were raised in respect of works allocated to Spotless’ in‐house service provider; the total value of these work orders was $1 122 460.

1: Introduction


Table 1‐2 Public housing work orders raised between 2011‐12 and 2014‐15

Financial year Call centre calls* Work orders raised*

2011‐12 92 600 62 300

2012‐13 75 000 62 000

2013‐14 100 000 80 000

2014‐15 74 000 81 000

Note: Work orders raised includes those relating to both planned and responsive maintenance

Source: Community Services Directorate Annual Reports from 2011‐12 to 2014‐15 *All reported figures are approximate

1.12 Properties covered by the Total Facilities Management contract have varied. Management of neighbourhood hubs, halls and centres was included in the May 2012 contract and in October 2012 Spotless also became responsible for the repairs and maintenance at Arts and Community Facility sites and Bimberi Youth Detention Centre in Harrison. However, responsibility for the maintenance of these assets (excluding the Bimberi facility) has since been transferred to other ACT Government Directorates.

1.13 The ACT Audit Office tabled a performance audit report ‘Maintenance of Public Housing’ in August 2008. The audit stated that, ‘Audit recognised that the Total Facilities Maintenance contract that commenced in July 2005 aimed to address problems with the previous maintenance contracts’. The audit found there were initial difficulties and delays in implementing the contract, leading to deficiencies in management; that Housing ACT had taken action to improve maintenance of public housing; and that there were opportunities for further improvement, particularly in monitoring the quality and timeliness of work carried out by sub‐contractors.

Audit objective and scope

1.14 The objective of this audit is to provide an independent opinion to the Legislative Assembly on the effectiveness of Housing and Community Services’ management of the Total Facilities Management contract for the delivery of maintenance for public housing.

1.15 While the scope does not include the performance of Spotless as the Total Facilities Manager (nor does it extend to the management of the housing portfolio more generally), Spotless provided information to the Audit Office to inform our assessment of Housing and Community Services’ management of the contract. The audit considers matters associated with the management of the current contract since its commencement in 2012.

1: Introduction


Audit criteria, approach and method

Audit criteria

1.16 The effectiveness of the management of the Total Facilities Management contract for the delivery of maintenance for public housing was considered using the following criteria:

1. Governance. Does Housing and Community Services have sound governance arrangements in place, including policies, procedures and risk management, to adequately manage the contract and ensure the effective delivery of maintenance services and outcomes?

2. Time, Quality and Cost. Does Housing and Community Services have an effective system which provides adequate assurance that maintenance work is delivered in a timely way, is of an acceptable quality, and provided at an appropriate cost?

3. Planned Maintenance. Does Housing and Community Services have effective systems and processes for the strategic and annual planning of the planned maintenance and upgrade services; and for regularly assessing the condition of public housing stock?

Audit approach and method

1.17 The performance audit was conducted under the authority of the Auditor‐General Act 1996, and in accordance with the principles, procedures, and guidance contained in Australian Auditing Standards relevant to performance auditing. These standards prescribe the minimum standards of professional audit work expected of performance auditors. Of particular relevance is the professional standard on performance engagements ‐ ASAE 3500 Performance Engagements.

1.18 The audit approach and method consisted of:

reviewing relevant literature;

analysing the Total Facilities Management contract and related documents that set out the policies and procedures to be followed when administering maintenance of public housing;

analysing the risk management processes that had been applied to this task;

identifying the governance and accountability framework, including the use of joint committees established to administer the contract;

considering the controls established by Housing and Community Services on the conduct of public housing maintenance by Spotless as the Total Facilities Manager; and

briefings, interviews, and correspondence with relevant staff of the Directorate and of Spotless.


2 GOVERNANCE

2.1 This chapter examines the critical area of governance and therefore considers the establishment and operation of key committees, strategies and frameworks intended to support effective discharge of the responsibilities of both Housing and Community Services and the Total Facilities Manager (Spotless Facility Services Pty Ltd (Spotless)). It also analyses key documents such as the contract management plan, risk management plan and fraud management plan and considers Housing and Community Services’ management of assurance activities and contract variations.

Summary

Conclusions

Housing and Community Services has established a generally sound governance structure to support the Total Facilities Management contract, including requiring parties to define key strategies for contract delivery and quality control, establishing committees to deal with both day‐to‐day administration and higher level oversight, and having a mechanism for financial control and dispute resolution. Contract management is also supported by a comprehensive Performance Management System for incentive payments and abatements to drive the achievement of key contract outcomes.

However, this sound governance structure has not been fully implemented and Housing and Community Services’ oversight of Spotless has been inadequate. There is no risk management plan specifically for the contract, and Housing and Community Services does not have visibility over the delivery of works managed by Spotless. Importantly, work order audits undertaken by Spotless have been problematic and Housing and Community Services has not enforced the necessary and required standard for these audits. It has not provided effective oversight of, and has not followed‐up in relation to, targeted quality audits that were undertaken by Housing and Community Services Quality Assurance team. Some contractual provisions designed to drive quality and innovation, and provide employment of target groups have not been enforced. Although initiatives to address some of these matters have been introduced, more remains to be done.

Contract variations have not been effectively managed as changes to the contract have not been documented or, if they have, the documentation is inadequate. Accordingly there is no audit trail or transparency of decision‐making related to contract variations. Poor documentation of variations presents a risk that the contract will not be effectively managed or enforced.

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Key findings Paragraph

The committee structure provided for in the Total Facilities Management contract has been implemented. While all committees have been generally operating as planned, governance would be strengthened if the most senior committee, the Joint Consultative Committee, improved its oversight of audits, risk, quality and contract management.

2.11

The Housing and Community Services’ Contract Management Plan is current and provides broad guidance to staff, but does not address risks.

2.20

Spotless’ Quality Management Plan does not adequately specify quality assurance activities in relation to key risk areas, such as sub‐contractor performance. Importantly, it does not specify what Spotless will do to ensure its sub‐contractors deliver work of the required quality.

2.23

The Spotless Quality Management Plan is not well aligned with the Housing and Community Services Quality Framework, as it has too broad a focus. The Housing and Community Services Quality Framework deals extensively with the accountabilities and strategies for delivering the quality assurance measures required by the contract.

2.26

The Quality Assurance team in Housing and Community Services has been below its planned strength for most of the Total Facilities Management contract term. While the Community Services Directorate has recently addressed this, it is a concern that adequate resourcing was not provided earlier, given the importance of this team’s role.

2.33

While the key performance indicators set out in the Performance Management System provide a comprehensive framework for driving the achievement of key contract outcomes, opportunities exist to further refine the Performance Management System to improve its focus on measuring impact and outcomes, rather than activities and process throughout the life of the contract.

2.38

The Joint Consultative Committee provides active oversight of the application of the Performance Management System and has proven to be an effective forum for resolving disagreements about the application of individual performance measures and therefore the extent of incentives or abatements applied to Spotless’ base management fee. Over the life of the contract to date, the net impact of the incentives and abatements has been a slight reduction (less than 2 percent) in the base management fee payable to Spotless.

2.45

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Given the importance of work order audits in the overall quality framework, it is a concern that significant issues identified by the Housing and Community Services Quality Assurance team in relation to the conduct of these audits, including the recommendation to cease related incentive payments, were not formally reported to the Joint Consultative Committee.

2.56

Housing and Community Services has not enforced the necessary and required standard for work order audits as set out in the Total Facilities Management contract, putting at risk assurance of the quality of maintenance overseen/performed by Spotless and its sub‐contractors.

2.60

Having regard to issues associated with work order audits identified by both Housing and Community Services and the Audit Office, it would be prudent for Housing and Community Services to arrange for a comprehensive independent audit of Spotless’ conduct of work order audits and the effectiveness of related controls.

2.61

A review of Joint Consultative Committee minutes shows that final reports and findings of targeted audits undertaken by Housing and Community Services Quality Assurance team have not been formally referred to Joint Consultative Committee at any time since the current contract commenced in May 2012.

2.66

Housing and Community Services’ monitoring of the implementation of recommendations from targeted audits undertaken by the Quality Assurance team, including through its participation in the Joint Consultative Committee, has been inadequate.

2.67

Recent policy changes which increase the involvement of the Community Services Directorate’s internal audit group in the conduct of designated ‘high risk’ targeted audits, and require the reports of these audits to be tabled with both the Joint Consultative Committee and the Community Services Directorate Audit and Risk Management Committee, have strengthened assurance in relation to the administration of the Total Facilities Management contract.

2.73

Extending the Joint Consultative Committee’s oversight to include all targeted audits would provide a more comprehensive overview of risk and further strengthen assurance in relation to the management of the Total Facilities Management contract.

2.74

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Full interconnectivity of Spotless and Housing and Community Services IT systems has not been achieved. Improved interconnectivity, in accordance with the requirements set out in the Total Facilities Management contract, would improve the planning of maintenance activities and thereby reduce the risk of inappropriate maintenance occurring, or needed maintenance not occurring.

2.78

Housing and Community Services has no visibility over the reviews undertaken by Spotless’ Works Supervisors for checking that work orders have been completed.

2.81

Spotless’ quarterly performance evaluations have not been routinely provided and, as Housing and Community Services have not insisted on their provision, it has not adequately enforced the Total Facilities Management contractual requirements.

2.83

Ethical suppliers’ declarations, which Spotless are required by the contract to provide to Housing and Community Services every six months, were not produced until August 2015, following a request from Housing and Community Services.

2.86

Formal complaints by Housing and Community Services to Spotless, such as Non‐Conformance Notices and Notices to Rectify, have generally been adequately addressed.

2.91

Spotless have not met the targets for employment of target groups set in the Total Facilities Management contract, although Spotless and Housing and Community Services are continuing to work together to address this matter.

2.96

Given the importance of the Total Facilities Management contract it needs to be supported by its own comprehensive risk plan. At the time of the audit, Housing and Community Services has not established a risk management plan specifically for the Total Facilities Management contract.

2.98

Housing and Community Service’s management of contract variations has not been adequate over the life of the contract.

2.115

Overview of governance arrangements

2.2 The Minister for Housing, Community Services and Social Inclusion has executive responsibility for public housing asset management with day‐to‐day administration being the responsibility of the Director‐General, Community Services Directorate. Within this Directorate, Housing and Community Services is accountable for matters relating to social housing and community services in the Territory.

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2.3 The Housing Assistance Act 2007 governs a range of matters relating to the provision of housing assistance in the Territory. It establishes the Commissioner for Social Housing for the ACT (the Commissioner for Social Housing), who has responsibility for administering, on behalf of the Territory, programs and funding arrangements for delivering housing assistance in the ACT. The Act provides that the Director‐General of the Community Services Directorate is the Commissioner for Social Housing.

2.4 The Commissioner for Social Housing has the power to enter into contracts and other arrangements in relation to the provision of housing assistance in the Territory. Consistent with this power, the Commissioner of Social Housing entered into a Total Facilities Management contract with Spotless on 9 May 2012 for the management and delivery of maintenance, repairs and upgrades for Housing and Community Services’ properties. Use of an arrangement of this nature is intended to increase the effectiveness of the provision of services, but does not reduce the responsibility of the Commissioner for Social Housing under the Act, and therefore Housing and Community Services.

Key responsibilities and committees

2.5 The contract between the Commissioner of Social Housing and Spotless provides a comprehensive governance framework for the management of the contract, including several committees to address specific matters and two which provide a general oversight. These are depicted in Figure 2‐1 below.

Figure 2‐1 Governance committees

Joint Consultative Committee

Meets quarterly

Contract Management Group

Meets monthly

Quality Assurance Group

Meets monthly

Contract Operations Group

Meets fortnightly

Finance Group

Meets monthly

Source: Community Services Directorate, Housing ACT, Facilities and Asset Maintenance: Contract management lifecycle review, Final Report, June 2014, p. 9.

Joint Consultative Committee

2.6 The Joint Consultative Committee is to, among other things, manage overall contract governance, oversee the strategic management of the contract and the overall delivery of services, manage the Performance Management System and consider proposed variations

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to the contract. It also has the responsibility of dealing with issues raised from the Contract Management Group, and generally seeking to solve disputes between the parties. With respect to the Performance Management System, it has the responsibility of recommending changes to the Commissioner for Social Housing. The Joint Consultative Committee consists of three Housing and Community Services and three Total Facilities Manager representatives.

Contract Management Group

2.7 The Contract Management Group consists of the Senior Manager and Contract Manager from Housing and Community Services, and counterparts from Spotless (Total Facilities Manager), supported by other staff as nominated. It has a number of responsibilities related to overall management of the contract and the delivery of the services. These include managing and monitoring the Total Facilities Manager’s Service Delivery and Management Plan, and the Housing and Community Services Contract Management Plan. Furthermore, the Contract Management group also has responsibilities covering financial management, tenant satisfaction, standards of service and the adequacy of resources allocated to deliver the Services. It considers monthly performance management reports and is tasked with improving operations and minimising costs. The Total Facilities Management contract states that it also has a role to ensure information and communication technology and other systems and procedures are appropriate and effective. It can refer issues to the Joint Consultative Committee, and implements decisions of the Joint Consultative Committee; it also considers issues forwarded by the Contract Operations Group.

Contract Operations Group

2.8 The Contract Operations Group is a working level group involving the contract parties’ relevant operational personnel. It meets fortnightly to manage day to day operations and implement decisions of the Contract Management Group and the Joint Consultative Committee. As part of this role, it updates procedures and monitors incomplete or overdue Work Orders and escalates these to the Contract Management Group as appropriate.

Finance and Quality Assurance Groups

2.9 The Finance Group and Quality Assurance Group, each contains members from both parties to the contract. The Finance Group provides oversight, assistance and advice on financial activities of the Total Facilities Manager, reviews financial performance against budget, approves budget adjustments, investigates any non‐compliance and reviews significant accounting and reporting issues. The Quality Assurance Group addresses:

any matters related to Key Performance Indicators, including any reports under Schedule 4 of the contract, which refers to quality assurance;

recommendations from Housing and Community Services quality assurance reports;

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any remedial actions not completed by the Total Facilities Manager;

overall quality assurance governance; and

actual or potential non‐conformance with the contract.

2.10 This contract governance structure operates in conjunction with the normal hierarchical responsibilities of Housing and Community Services staff, and, unless agreed to in writing between the two parties, does not limit or otherwise affect the rights or obligations of the parties (either under the contract or otherwise).

Implementation

2.11 The committee structure provided for in the Total Facilities Management contract has been implemented. While all committees have been generally operating as planned, governance would be strengthened if the most senior committee, the Joint Consultative Committee, improved its oversight of audits, risk, quality and contract management.

2.12 For the Joint Consultative Committee to effectively discharge its responsibilities, it is important that significant issues concerning contract administration and risk are put to it, for information or consideration, as a matter of course. Such action would be consistent with the overarching governance responsibilities of the Joint Consultative Committee, as set out in the contract. This however, does not always occur.

2.13 In a number of instances, significant issues including critical audit findings and changes to contractual arrangements affecting incentives and abatements had not been progressed through the committee structure to the Joint Consultative Committee. Putting such matters to the Joint Consultative Committee as a matter of course would enhance its capacity to effectively contribute to overall contract governance.

2.14 While examination of Housing and Community Services’ minutes of meetings shows these matters have generally been discussed by the parties through other forums, their consideration by the Joint Consultative Committee would better reflect the governance arrangements set out in the contract and increase the capacity of that body to provide effective oversight of delivery and management advice on key risks.

2.15 Housing and Community Services advised that they acted to improve their oversight of quality assurance activities, and in November 2015 introduced arrangements whereby meetings of the Joint Consultative Committee would include standing agenda items on both quality reviews and items escalated from the Contract Management Group. This is discussed further at Paragraph 2.72.

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Contract management

Background

2.16 The Total Facilities Management contract details a number of key structural requirements intended to support effective contract management and promote the realisation of its key benefits. These include having:

a contract management plan;

a quality assurance plan;

policies and procedures to guide maintenance activities;

a Quality Assurance team within Housing and Community Services;

a performance management system; and

regular reporting by the Total Facilities Manager on the details of operations.

Contract management plan

2.17 Housing and Community Services has developed a Contract Management Plan, the latest iteration of which was released in October 2014, to provide guidance to their contract manager and contract management team, including requirements for measuring, recording and reporting on the services to be delivered. It addresses contract objectives, and allocates responsibilities for the conduct of various functions, including:

planned and responsive maintenance;

invoicing;

providing support for meetings of key committees; and

quality assurance.

2.18 The Contract Management Plan also covers obligations of the parties, consistent with the contract, and communications protocols between the parties. However, the plan does not specifically identify risks or address risk management.

2.19 Good contract management includes the identification, management and minimisation of risk. Key risks to contract management include contractor performance, changes in circumstances and the ability of staff to manage the contract overall. In order to effectively manage these risks they should be clearly identified and documented within the Contract Management Plan and allocated to appropriate members of Housing and Community Services for management.

2.20 The Housing and Community Services’ Contract Management Plan is current and provides broad guidance to staff, but does not address risks.

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Quality Assurance Plan

2.21 Under Section 6.1 Schedule 2 of the contract, Spotless is to provide a Quality Assurance Plan that aligns with the Housing and Community Services Quality Framework. A stated aim of the contract is to ensure that Spotless has implemented an effective internal Quality Assurance process. The Quality Assurance Plan is intended to assist in ensuring that the contract is managed effectively, and that outcomes from the contract are of an acceptable standard, via an agreed quality assurance process.

2.22 In September 2014, Spotless produced its Contract Management Plan, of which Section A goes to the fundamentals of contract management, and is labelled the Quality Management Plan.

2.23 Spotless’ Quality Management Plan does not adequately specify quality assurance activities in relation to key risk areas, such as sub‐contractor performance. Importantly, it does not specify what Spotless will do to ensure its sub‐contractors deliver work of the required quality.

2.24 It is important that the plan clearly establish processes for the management of quality as identified by Housing and Community Services through the agreed quality processes outlined in the contract (for example targeted audits and work order audits).

2.25 Effective alignment between the quality plans of Housing and Community Services and Spotless is important for both parties to manage quality effectively, and provides assurance that there is comprehensive and integrated coverage of the key risks inherent in the contract.

2.26 The Spotless Quality Management Plan is not well aligned with the Housing and Community Services Quality Framework, as it has too broad a focus. The Housing and Community Services Quality Framework deals extensively with the accountabilities and strategies for delivering the quality assurance measures required by the contract.

2.27 Furthermore, Spotless’ Contract Management Plan was not discussed or tabled at the Joint Consultative Committee in the meetings that followed its creation. This presents a risk as it restricts the committee in exercising its leadership role.

2.28 To improve quality assurance and meet requirements of the Total Facilities Management contract, Spotless needs to revise its Quality Management Plan to cover key quality assurance risks and align it with the Housing and Community Services Quality Framework.

RECOMMENDATION 1 QUALITY MANAGEMENT PLAN

Housing and Community Services should initiate action so Spotless revises its Quality Management Plan to cover key quality assurance risks and directly align this plan with the Housing and Community Services Quality Framework.

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Policies and procedures

2.29 In accordance with the Total Facilities Management contract Housing and Community Services has developed a two‐volume ‘Contract Management Policy and Information Pack’ which provides key reference material for contract managers, such as the Contract Management Plan, business rules, fact sheets, a communications policy, asset standards, the tenants’ guide to repair and maintenance and many more. Financial delegations define spending and authorisation limits for Housing and Community Services staff and for Spotless employees by function (e.g. defined spending approval limits for call centre staff and Spotless managers). Delegations under the Housing Assistance Act 2007 allow senior staff to make arrangements with other entities for the maintenance of public housing. Housing and Community Services compliance with these policies and procedures is mentioned to provide context but is outside the scope of this audit, and therefore was not examined.

Quality Assurance team

2.30 Housing and Community Services has established a Quality Assurance team in accordance with the requirement of the contract. The Housing and Community Services Quality Framework describes the role of the team, stating:

The QA Team conducts a range of planned and targeted review and auditing projects and activities designed to identify and manage risks and issues and to identify continuous improvement opportunities. The QA Team reports findings to the HaCS senior management and executives.

2.31 This team has a planned staffing complement of four, but there have only been two staff for most of the contract period and there have been frequent changes of team manager. No contractors or consultants have been engaged to assist in implementing the Quality Assurance team functions.

2.32 After the completion of audit fieldwork, the Community Services Directorate advised:

... HACS has already recruited two additional staff into this team. The team is at its planned composition and comprises a Senior Manager and four staff.

The QA team now report to a new Executive position of Director Business and Capital, which structurally separates the role from the TFM contract management team who report to the Senior Director of Housing and Community Services.

2.33 The Quality Assurance team in Housing and Community Services has been below its planned strength for most of the Total Facilities Management contract term. While the Community Services Directorate has recently addressed this, it is a concern that adequate resourcing was not provided earlier, given the importance of this team’s role.

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Performance management system

2.34 Schedule 6 of the Total Facilities Management contract states that:

The Performance Management System is a management tool to monitor and measure the performance of the Total Facilities Manager in delivering the Services as well as measure the long term indicators of success of the Total Facilities Management model. It provides the framework for Continuous Improvement in the management and delivery of the Services and for determination of Incentive payments or Abatement deductions to the Total Facilities Manager.

2.35 Housing and Community Services has responsibility for developing and applying an appropriate performance management framework to support its’ contracting out of public housing maintenance. The Performance Management System included in the May 2012 contract, which reflects contract negotiations with Spotless, comprises:

Key Performance Indicators;

performance assessment, monitoring and management;

performance measurement, including calculating incentives and abatements; and

performance reporting.

Key Performance Indicators

2.36 The Key Performance Indicators, established as part of the Performance Management System, cover the following topics:

the vacant dwelling turn‐around process (timeliness) – 2 KPIs;

customer service quality (satisfaction with maintenance and with the call centre based on surveys; speed of answering telephone calls; speed of handling complaints) – 4 KPIs;

quality and timeliness of works (number of condition audits conducted; timeliness against standards for four different priorities of responsive work orders; planned maintenance costs held above 70 percent of total) – 6 KPIs;

compliance and performance (number of work order audits completed; number of non‐conformance notices; number of invoices rejected) – 3 KPIs; and

expenditure close to budget – 1 KPI.

2.37 Spotless’ performance in delivering the contract is assessed monthly for the majority of Key Performance Indicators, and quarterly, six monthly and annually for the remaining Key Performance Indicators. Monthly assessment and performance scores provide the control mechanism that allows corrective action to be taken if services are not being delivered in accordance with performance targets.

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2.38 While the key performance indicators set out in the Performance Management System provide a comprehensive framework for driving the achievement of key contract outcomes, opportunities exist to further refine the Performance Management System to improve its focus on measuring impact and outcomes, rather than activities and process throughout the life of the contract.

2.39 For example, Spotless conducts a program of work order audits to provide assurance that maintenance work is done as specified in the work order. Under the contract, there is a financial incentive for Spotless to conduct audits of a specified percentage of all work orders; but there is no incentive relating to the quality of the audits (whether the audits were performed properly) or on the quality of the maintenance work itself as revealed by the audits. Similarly, there is an incentive to resolve complaints quickly, but not to reduce the number of complaints.

RECOMMENDATION 2 PERFORMANCE MANAGEMENT SYSTEM

Housing and Community Services should initiate action to review the Performance Management System to increase its focus on impact and outcomes.

Performance assessment

2.40 The Quality Assurance team produces quarterly reports that detail Spotless’ performance against Key Performance Indicators. These reports present how performance against each Key Performance Indicator was calculated, and the result compared to the target. The assessment of performance is based on information in reports provided by Spotless, which provide extensive details of operations, including:

reports on services provided – including number of work orders raised and completed for both planned and responsive maintenance, number of monthly inspections conducted and the outcomes of any tenant satisfaction surveys completed;

a finance report – including reporting actual expenditure against budget, average maintenance cost per dwelling and the ratio between planned and responsive maintenance expenditure;

operations of the call centre – including number of calls received, average answer time and number of calls abandoned; and

complaints – including the number of complaints received, response times and complaint trends.

2.41 The assessments are provided to the Joint Consultative Committee, which under the performance management provisions of the Total Facilities Management contract, is required to consider and agree the incentive payments and abatement deductions to be applied to the base management fee. This consideration is to occur each six months. Incentives and abatements are designed to encourage Spotless to provide services that

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better meet the requirements of the Territory. The operation of the Performance Management System has been a key focus of the Joint Consultative Committee.

2.42 On five occasions, over the twelve Joint Consultative Committee meetings reviewed by the Audit Office, there were disagreements, uncertainty or lack of information which was resolved through discussion and then presented at a later meeting. As the Joint Consultative Committee has three representatives from each party, there is potential for a tied vote. To date, there have been no such tied votes and the scores against the Key Performance Indicators have been resolved and agreed at the working level – sometimes after the Joint Consultative Committee has discussed any disagreements.

2.43 If there is a significant dispute about, for example, payment of incentives under the contract, it could happen that the Joint Consultative Committee would be tied three to three. If negotiation between the parties failed to resolve such a situation, the contract provides a dispute resolution process which includes a requirement that Spotless must continue to carry out the services and otherwise comply with its obligations under the contract while the dispute is considered.

2.44 Housing and Community Services has advised that the dispute resolution provisions of the contract have not been used to date and that, since commencement of this contract, all matters have been dealt with effectively at the Joint Consultative Committee level through commercial negotiations. In the event a dispute cannot be resolved and a breach arises, termination provisions are also available to either party.

2.45 The Joint Consultative Committee provides active oversight of the application of the Performance Management System and has proven to be an effective forum for resolving disagreements about the application of individual performance measures and therefore the extent of incentives or abatements applied to Spotless’ base management fee. Over the life of the contract to date, the net impact of the incentives and abatements has been a slight reduction (less than 2 percent) in the base management fee payable to Spotless.

Providing quality assurance

2.46 While the Performance Management System encourages the provision of services which better meet the needs of the Territory, the contract provides further quality assurance tools including:

requiring Spotless to regularly undertake structured audits of completed work orders, and to provide advice on the quality and timeliness of work undertaken; and

providing for Housing and Community Services to undertake targeted audits on any aspect of the contract or Spotless’ performance, at any time.

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Work order audits by Spotless (Total Facility Manager)

2.47 The contract details the requirements of the Performance Management System. This includes linking incentives and abatements to the quality control exercised over work orders. Specifically, the contract provides that:

The Total Facilities Manager shall pay an abatement ... each month for any failure by the Total Facilities Manager to Audit at least 5 percent of all Work Orders completed each month, otherwise, if an incentive is to apply the scores for auditing percentages greater than 5 percent will be addressed in accordance with KPI 4.1.

2.48 The requirements of the audits to be conducted by the Total Facilities Manager are set out in the contract and include the requirement that:

the audits include an audit scope, criteria and audit plan mutually agreed to by Housing and Community Services and Spotless;

the work audits are done on site;

all documentation relating to the work order is inspected to ensure compliance with requirements;

photographs are taken of all defective works; and within 2 business days of the completion of each audit, Spotless enters into HomeNet

information on each audit, including but not limited to: (i) the date of the audit; (ii) the work order number, and information on each and every job line in the work order; (iii) the correct Dwelling address in full; (iv) the name of the Spotless Auditor; (v) confirmation that the audit was performed at the Dwelling; and (vi) detailed information about every defect, deficiency, omission, error, failure found in relation to the work order including information regarding the type of defect, deficiency, omission, error and failures.

2.49 Control over the work order process is critical to effectively manage the Total Facilities Management contract. Payments of around $42 million annually are made to service providers on the basis of work orders issued by Spotless. The $42 million includes $11 million for responsive maintenance and $28 million for planned maintenance and upgrades. Furthermore, findings from work order audits affect incentives and abatements which determine payments made to Spotless.

Quality Assurance review of Spotless’ work order audits

2.50 The Quality Assurance team has examined the operation of the work order audits conducted by Spotless on two occasions. The audits examined the validity of the assessments of several of the Key Performance Indicators that were used to determine incentive payments. Under Key Performance Indicator 4.1, Spotless may gain incentives or suffer abatement depending on whether they conduct audits of 5 percent of work orders each month. While the basic numbers of work order audits have been achieved, it has not

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been established that they have been conducted in accordance with the Total Facilities Management contract requirements. For example, the Quality Assurance audit of Spotless’ November 2013 work order audits found that:

85 percent of the 21 tenants supposedly audited said they had not received a visit or phone call from Spotless;

no documentation was on the WMS4 data base of required documentation or photos for any of the 21 work orders audited;

Spotless had identified no fails, whereas the Housing and Community Services Quality Assurance team identified that 19 of the 21 work orders had either trade deficiencies or administrative deficiencies; and

Spotless had been asked for, but did not produce, evidence to support their claims by the time the Quality Assurance audit was completed.

2.51 Similar findings were reported to the Quality Assurance Group in the later audit of 100 work order audits that were conducted in December 2013 and January 2014. This audit found:

a fail rate of 19 percent compared with Spotless’ fail rate of 3 percent;

only 24 percent of tenants audited said they had received a telephone call from Spotless staff to inquire about the works;

only 15 percent of tenants audited said they had received an onsite visit; and

Spotless had not fulfilled its obligations relating to the analysis of data for trends, corrective actions and continuous improvement.

2.52 In its quarterly report January – March 2015, the Quality Assurance team stated that the (work order) auditing activity represents little or no discernible benefit to Housing and Community Services in terms of affecting contractual requirements to achieve value for money and continuous improvement. Issues relating to Spotless’ conduct of work order audits are further discussed in Chapter 3, from paragraph 3.25.

2.53 Community Services Directorate Internal Audit conducted an internal audit of Housing ACT, reporting in June 2014. This audit concluded that Housing and Community Services has established a sound control framework for the administration and monitoring of the Total Facilities Manager contract. However, there are problems in the implementation of activities in support of that framework. These problems were raised in two Quality Assurance audits, discussed above, that were completed earlier in 2014. The earlier Quality Assurance audit was described in the internal audit report status as ‘ongoing’ even though it reported first (in May 2014), and the second was not mentioned.

4 Works Management System – a data base used by Spotless to manage the conduct of maintenance work.

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2.54 The Housing and Community Services quality framework provides that findings from Quality Assurance audits are to be presented to the Quality Assurance Group and then referred upward as necessary to the Contract Management Group and the Joint Consultative Committee. The Contract Management Group does have a standing agenda item relating to the Quality Assurance Group where the status of audit recommendations is mentioned.

2.55 The Housing and Community Services Quality Assurance team has raised significant concerns around the conduct of work order audits, including a specific recommendation to cease incentive payments under Key Performance Indicator 4.1. Housing and Community Services have advised that action in response to this recommendation was overseen by the Contract Management Group and, as a result, over the following year, there were two quarters where no incentive or abatement in respect of this indicator was applied, one quarter where a modest incentive was applied and one quarter where a modest abatement was applied.

2.56 Given the importance of work order audits in the overall quality framework, it is a concern that significant issues identified by the Housing and Community Services Quality Assurance team in relation to the conduct of these audits, including the recommendation to cease related incentive payments, were not formally reported to the Joint Consultative Committee.

Audit Office review of Spotless’ work order audits

2.57 The Audit Office conducted its own review of work order audits for the months of June, July and August 2015. It was found that the conducting and recording of work order audits is inadequate and needs to improve to meet requirements as set by Schedule 4 of the Total Facilities Management contract. In particular, around 60 percent of these work order audits did not use the specified template, but instead were merely copies of the work order with an annotation on it such as ‘OK’. Even when the template was provided, there were many cases where the audits did not record the tenant’s name or signature, the date and time, or answers to questions about sub‐contractor behaviour, work completion and overall satisfaction.

2.58 Schedule 4 of the contract requires that a work order audit be conducted at the dwelling but Housing and Community Services has a practice of allowing Spotless to conduct telephone audits, as indicated by Spotless reporting of the proportion of phone audits in monthly reports. Some reports leave the proportions blank. The monthly report is not subject to review or auditing, so there is no control over how many audits were being conducted by phone or at the dwelling. The proportion of telephone audits reported by Spotless has been as high as 65 percent. In October 2015, the Quality Assurance Team made a recommendation for ‘phone audits to cease until a contract variation is in place’.

2.59 There are circumstances where it would be reasonable to conduct audits by telephone. However, this needs to be considered in the context of setting out agreed, risk‐based principles for conducting audits.

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2.60 Housing and Community Services has not enforced the necessary and required standard for work order audits as set out in the Total Facilities Management contract, putting at risk assurance of the quality of maintenance overseen/performed by Spotless and its sub‐contractors.

2.61 Having regard to issues associated with work order audits identified by both Housing and Community Services and the Audit Office, it would be prudent for Housing and Community Services to arrange for a comprehensive independent audit of Spotless’ conduct of work order audits and the effectiveness of related controls.

RECOMMENDATION 3 WORK ORDER AUDITS

Housing and Community Services should initiate action to improve work order audits undertaken by Spotless by:

a) identifying, in consultation with Spotless, the best way to provide for assurance of work order quality (and define the role of audits by visit or telephone, when to target complex works and the place of joint audits). This should be documented and presented to the Joint Consultative Committee for endorsement;

b) fully documenting any agreement with Spotless to vary the requirements for work order audits as set out in the May 2012 Total Facilities Management contact;

c) monitoring the quality of work order audits by Spotless, including conducting targeted Quality Assurance audits;

d) bringing the work order audits function in house if the quality of the audits remains inconsistent; and

e) arranging for a comprehensive independent audit of Spotless’ conduct of work order audits and the effectiveness of related controls.

Targeted quality audits

2.62 Targeted quality audits are a key tool for Housing and Community Services to address concerns and manage risks regarding services delivered under the contract. The Housing and Community Services Quality Assurance team (see paragraph 2.30) plan, conduct and monitor progress with implementing the findings of quality audits.

2.63 The Housing and Community Services Quality Assurance team has conducted seven targeted audits since the Total Facilities Management contract was signed in May 2012:

August 2012 ‐ Distribution of Maintenance Satisfaction Survey Forms;

September 2012 – Operator Recorded Calls in the Total Facilities Manager Canberra Contact Centre June 2012;

May 2013 – Total Facilities Manager’s Reponses to Complaints;

August 2013 ‐ Total Facilities Manager Call Centre;

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February 2014 ‐ Total Facilities Manager’s Work Order Audits for November 2013;

May 2014 ‐ Total Facilities Manager’s Work Order Audits for December 2013 and January 2014; and

June 2015 ‐ Total Facilities Manager Contact Centres.

2.64 The Quality Assurance team maintains a spreadsheet that records Spotless’ responses to their audit recommendations and monitors progress with implementing recommendations. While the spreadsheet in most instances provides the team with comprehensive information on progress with audit recommendations, it has omissions which need to be addressed by Housing and Community Services. These include:

a general failure to identify who within Spotless has given agreement, or undertaken action, in relation to implementing audit recommendations; and

in relation to the targeted audits of Spotless’ work order audits, a failure to propose or record follow up action where Spotless’ response did not propose any substantive action (the spreadsheet recorded ‘Ongoing No actual commitment from Total Facilities Manager to do anything’ but no further Housing and Community Services action in response to this issue is recorded).

2.65 Targeted audits undertaken by Housing and Community Services Quality Assurance team are tabled at meetings of the Contract Management Group, who are responsible for identifying and forwarding issues to the Joint Consultative Committee. Given the significance of the issues identified in quality audits, including in relation to the Spotless’ conduct of work order audits, it would have been appropriate for these matters to have been referred to the Joint Consultative Committee.

2.66 A review of Joint Consultative Committee minutes shows that final reports and findings of targeted audits undertaken by Housing and Community Services Quality Assurance team have not been formally referred to Joint Consultative Committee at any time since the current contract commenced in May 2012.

2.67 Housing and Community Services’ monitoring of the implementation of recommendations from targeted audits undertaken by the Quality Assurance team, including through its participation in the Joint Consultative Committee, has been inadequate.

2.68 The potential for assurance audits to better support contract administration was recognised in Community Services Directorate Internal Audit of Housing ACT’s contract management, which reported in June 2014. The audit made several recommendations, including that Housing and Community Services:

... develop a joint program of assurance activities to be completed over a 2‐3 year cycle and split across the HACT Quality Improvement Unit and Spotless, targeted to key risk areas identified through a formal risk assessment process, while also maintaining an element of the current compliance audits.

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2.69 Housing and Community Services agreed to the recommendation, noting that it ‘will continue to work with Spotless to review the QA calendar and to develop a joint program of assurance activities to be completed over a 3 year cycle.’ However, as of February 2016, action to develop a joint program of audits had not been progressed.

2.70 In responding to the Community Services Directorate Internal Audit of Housing ACT’s contract management, Housing and Community Services also agreed to continue to formally monitor the findings and recommendations from the targeted audits through the contract management committee structure, starting with the Quality Assurance group and progressing to Contract Management Group and Joint Consultative Committee as necessary; and to obtain formal comments from Spotless.

2.71 The Community Services Directorate has recently agreed to provide greater support for the conduct of quality assurance audits and to strengthen oversight. From 7 September 2015, the Community Services Directorate will designate selected targeted audits as ‘high risk’ (on the basis of recommendations made by the Quality Assurance team, in consultation with the Directorate’s Internal Audit and Risk Management team, to the Audit and Risk Management Committee). These audits will be performed by the Community Services Directorate’s Internal Audit and Risk Management team assisted by the Quality Assurance team (or outsourced).

2.72 The draft reports from designated ‘high risk’ targeted audits will continue to be tabled at the Quality Assurance Group and the Contract Management Group, in line with prior practice. However, the final audit reports of these audits will be tabled, as a matter of course, at the Joint Consultative Committee and at the Community Services Directorate Audit and Risk Management Committee.

2.73 Recent policy changes which increase the involvement of the Community Services Directorate’s internal audit group in the conduct of designated ‘high risk’ targeted audits, and require the reports of these audits to be tabled with both the Joint Consultative Committee and the Community Services Directorate Audit and Risk Management Committee, have strengthened assurance in relation to the administration of the Total Facilities Management contract.

2.74 Extending the Joint Consultative Committee’s oversight to include all targeted audits would provide a more comprehensive overview of risk and further strengthen assurance in relation to the management of the Total Facilities Management contract.

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RECOMMENDATION 4 QUALITY ASSURANCE

Housing and Community Services should improve its quality assurance by:

a) improving internal monitoring of the outcomes of targeted audits, including by documenting actions agreed with Spotless to comprehensively address all audit recommendations;

b) directing the Quality Assurance team to progress the development of a joint program of targeted audits that are based on a risk analysis; and

c) requiring the Joint Consultative Committee to consider all findings of targeted audits, and to monitor the implementation of agreed recommendations.

Other contractual obligations

Alignment of IT systems

2.75 The Service Delivery and Management Plan, Volume 4 of the Total Facilities Management contract, prepared by Spotless, describes the operation of the Works Management System (WMS) and notes that:

The key benefit to HACS is the ability of WMS to interface with HomeNet.

2.76 However, this interconnectivity is not fully functional, nearly 4 years after contract commencement, including with respect to visibility of work order audits.

2.77 SPM, a computerised database used by Spotless to help manage property condition assessments, does not link to HomeNet. For example, SPM, according to Housing and Community Services, had, at one point, too many properties listed (13 492 compared to a more reliable Housing and Community Services figure of 11 580) (although on another occasion, SPM showed 11 935). These gaps in functionality have caused problems such as scheduling planned maintenance that was not, in the opinion of Housing and Community Services, required. It emerged during the audit that there has not been clear agreement between Spotless and Housing and Community Services in regard to the nature and scope of the integration requirement, and while this has been a long standing action item for the Joint Consultative Committee, the matter remains unsettled.

2.78 Full interconnectivity of Spotless and Housing and Community Services IT systems has not been achieved. Improved interconnectivity, in accordance with the requirements set out in the Total Facilities Management contract, would improve the planning of maintenance activities and thereby reduce the risk of inappropriate maintenance occurring, or needed maintenance not occurring.

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RECOMMENDATION 5 CONNECTIVITY OF IT SYSTEMS

Housing and Community Services should initiate action to resolve outstanding issues on connectivity of IT systems and establish realistic target dates for implementing needed actions.

Quality of work

2.79 The Service Delivery and Management Plan, Volume 4 of the Total Facilities Management contract, requires that ‘if a claim is submitted, the [Spotless] Works Supervisor will attend the site and confirm that the work has been completed to a satisfactory standard’. This is not occurring and there is no documented agreement to vary the requirements of the contract in this respect. Spotless’ internal guidance requires inspections of work orders over $2 000; although this requirement is not mandatory according to its 2015‐16 Delivery of Works document.

2.80 Housing and Community Services monitoring of the arrangements established by the requirement for site visits and work order audits (refer to paragraph 2.46) are critical if it is to maintain adequate visibility over the quality of works performed by Spotless and its sub‐contractors.

2.81 Housing and Community Services has no visibility over the reviews undertaken by Spotless’ Works Supervisors for checking that work orders have been completed.

2.82 Spotless is required to provide Housing and Community Service with quarterly ‘quality performance evaluations’, but the content and aim of these is not further defined in the contract.

2.83 Spotless’ quarterly performance evaluations have not been routinely provided and, as Housing and Community Services have not insisted on their provision, it has not adequately enforced the Total Facilities Management contractual requirements.

2.84 The only quarterly evaluation that had been provided at the time of audit covered the 12 months April 2014 to March 2015. This report was reviewed by Housing and Community Services to give advice on future editions. The subsequent quarterly report was late again, and Housing and Community Services allowed the April‐June 2015 report to be omitted.

Ethical supplier obligations

2.85 Under the Total Facilities Management contract, Spotless is to provide, every six months, an ‘ethical suppliers’ declaration’ that states adherence (or lists breaches) to a range of legislation, primarily referring to obligations of employers.

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2.86 Ethical suppliers’ declarations, which Spotless are required by the contract to provide to Housing and Community Services every six months, were not produced until August 2015, following a request from Housing and Community Services.

RECOMMENDATION 6 CONTRACTUAL OBLIGATIONS

Housing and Community Services should enforce all the requirements of the Total Facilities Management contract including requiring Spotless to provide quarterly performance evaluations and ethical suppliers declarations.

Management of maintenance services

Issue of non‐conformance notices

2.87 Under the Total Facilities Management contract, there are several mechanisms for Housing and Community Services to express formal dissatisfaction to Spotless. If Spotless fails to deliver in accordance with the contract, Housing and Community Services may issue a general Non‐Conformance Notice (NCN) or an audit non‐conformance notice.

2.88 A Housing ACT employee can submit a request for a Non‐Conformance Notice to Spotless, specifying whether the issue is an ongoing issue, at the call centre or on quality of work, a specific work order issue, or a conduct issue. Spotless will then determine whether to issue the Non‐Conformance Notice. If it issues one, it must then provide a ‘Cure Plan’ detailing how the non‐conformance will be addressed.

2.89 If Housing and Community Services determines that the Cure Plan has not been effective in rectifying the non‐conformance, Housing and Community Services may issue an ’Instruction’ to Spotless to rectify the non‐conformance. Housing and Community Services instituted another process, outside of the contract, for issues of lesser significance, called a ‘Notice to Rectify’. These can be submitted by either Housing and Community Services or Spotless to the other party. They should be responded to, within seven days (or 48 hours if urgent), with an ‘Action Plan’.

2.90 As at June 2015, Housing and Community Services had issued no ‘Instructions’ but had issued 38 Non‐Conformance Notices, covering most areas of the contract. In most cases they were addressed, although two from 2012‐2013 were still current. Four ‘Notices to Rectify’ had been issued, and all have been addressed.

2.91 Formal complaints by Housing and Community Services to Spotless, such as Non‐Conformance Notices and Notices to Rectify, have generally been adequately addressed.

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Employment of target groups

2.92 The contract requires Spotless to support specified target groups by providing employment through either direct service delivery or through its sub‐contractors. The employment target for each group will be reviewed by the Joint Consultative Committee on an annual basis and performance endorsed at the appropriate Contract Management Group Meeting. The results do not contribute to a Key Performance Indicator and so are not reviewed by the Quality Assurance team. The initial targets were:

Aboriginal and Torres Strait Islander persons: 10;

tenants or occupants of dwellings: 30;

persons with a disability: 43; and

youth: 25.

2.93 The October 2012 and February 2013 meetings of the Joint Consultative Committee discussed processes to employ people from target groups, and agreed that results would be presented through the Total Facilities Manager monthly reports. In December 2013, the Joint Consultative Committee noted that, notwithstanding action by Spotless to employ approximately 17 people from target groups as part of its provision of in‐house maintenance services, Housing and Community Services had issued Non‐Conformance Notices to Spotless for consistently missing the majority of the targets. The Joint Consultative Committee nonetheless agreed to retain the same target numbers.

2.94 In August 2014, the Joint Consultative Committee discussed ways to improve performance, and the need to agree on the cohort numbers for the next year but this was not done at the December 2014 Joint Consultative Committee, or in the February or May 2015 meetings.

2.95 Figures reported by Spotless in July 2015 continued to show its inability to meet all targets, although the Aboriginal and Torres Strait Islander employment almost met the target and Youth numbers were well in excess of defined targets. Housing and Community Services advised of its work with Spotless to address shortfalls, noting:

HACS worked with Spotless to engage with Habitat, Northside Community Services, Communities @ Work, Salvation Army, Electro Group and the Australian Apprenticeship Group aimed to encourage cohorts to apply for potential positions with Spotless or their contractors. Spotless maintained a register of interested parties and continues to refer these to their sub‐contractor base.

In addition, Spotless met with the AMC to discuss day labour employment opportunities for release of inmates

2.96 Spotless have not met the targets for employment of target groups set in the Total Facilities Management contract, although Spotless and Housing and Community Services are continuing to work together to address this matter.

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Risk management

Risk management plan

2.97 A previous audit by the Audit Office (Maintenance of Public Housing, August 2008) recommended, and Housing and Community Services agreed, that such a contract‐specific risk management plan was needed. Housing and Community Services advised the Audit Office in July 2015 that a dedicated Risk Management Plan for this contract was to be developed, with an initial meeting in August 2015 between Community Services Directorate Internal Audit and the Total Facilities Manager. However, at the time of the audit, this matter was yet to be substantively progressed.

2.98 Given the importance of the Total Facilities Management contract it needs to be supported by its own comprehensive risk plan. At the time of the audit, Housing and Community Services has not established a risk management plan specifically for the Total Facilities Management contract.

Management of risks

2.99 Housing and Community Services has relied on Community Services Directorate’s overall Risk Management Framework and on risk registers established by both Spotless and Housing and Community Services rather than developing a specific risk plan for the Total Faculties Management contract.

2.100 The risks identified by Spotless in its risk register are focused on meeting the Key Performance Indicators and the register is a proprietary document, not visible to Housing and Community Services.

2.101 The risks identified by Housing and Community Services risk register are broad, and focus on people (deaths) and reputation (due to failure to maintain properties). It does cover financial risks, but focuses on failure to attract funding rather than poor expenditure control over payments. There is nothing specific on value for money from services.

2.102 The Quality Assurance team has developed a register of issues, recommendations and risks. This is not used to target audits, but is a list of risks identified from the findings of past Quality Assurance audits. This register also includes a calendar of proposed activities, but there is no evidence that the choice of activities on this calendar is targeted at risks identified by prior audits. The Quality Framework for the Total Facilities Manager does not refer to the program of Quality Assurance activities needing to be risk‐based.

2.103 At the time of this audit, this register was not promulgated beyond the Quality Assurance team. This set of risks should be used to drive the Quality Assurance program, to focus the work of the Quality Assurance team on higher risks. This was recognised by the Housing and Community Services internal audit report of June 2014 which recommended a joint

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program of audits with the Quality Assurance team and Spotless directed to key risk areas (as discussed at paragraph 2.68 above).

2.104 An internal audit conducted by the Community Services Directorate also identified key risks which could be appropriately addressed in a comprehensive risk management plan, including sub‐contractor compliance with workplace health and safety; whether work was completed to standards; and sub‐contractors meeting their employer obligations.

RECOMMENDATION 7 RISK MANAGEMENT

Housing and Community Services should improve its risk management by:

a) developing a comprehensive risk management plan for the administration of the Total Facilities Manager contract; and

b) including in the overall Housing and Community Services risk register key risks that relate to this contract.

Fraud management

2.105 The Fraud Risk Integrity Register for the Community Services Directorate identified a risk of contractors overcharging for services. Controls identified included:

the schedule of rates;

a review of 5 percent of activity undertaken by the Total Facilities Manager;

Directorate approval of sub‐contractors; and

Staff training and awareness of correct expenditure.

2.106 The Audit Office notes that of these controls:

the schedule of rates is subject to sub‐contractors tendering at more than or less than the stated rate;

the risk register incorrectly identifies this 5 percent review as an in‐house activity, and the problems with the audit of work orders are discussed elsewhere in this report;

the processes for the Directorate to review sub‐contractors are not addressed in this audit, but it is understood this only occurs when they join the panel; and

staff do review invoices (discussed at paragraph 3.56).

2.107 Housing and Community Services’ Fraud and Corruption Prevention Risk Treatment Schedule identifies a risk of overcharging for property maintenance services, and assesses the risk level as high, with a proposed treatment of more robust enforcement of abatements and more assertive contract management. This analysis and proposed treatment is consistent with the findings and recommendations in this audit report.

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Managing contract variations

2.108 It is reasonable to expect that the Total Facilities Management contract will need active oversight and may require amendment throughout its life.

2.109 Housing and Community Services and Spotless anticipated the likelihood of changes being needed and established provisions in the contract for making amendments to it, and for providing effective oversight of the amendment process.

2.110 Properly considering, executing and documenting contract variations are critical if risks are to be managed effectively and the Territory interests adequately protected. A failure to do so can lead to a contract that may be difficult to administer or enforce, that may not achieve the outcomes originally sought and which may not protect the financial interests of the Territory or the housing needs of tenants

2.111 Housing and Community Services:

had difficulty in readily identifying the number and nature of variations made to the contract, with different written advice submitted to the Audit Office on at least three occasions;

did not effectively distinguish between agreements on administrative process and agreements to substantively vary a specific provision in the contract; and

did not document the matters considered in deciding to vary to the contract, including whether the decision was likely to lead to increased costs or a reduction in value for money.

2.112 On 18 February 2016, Housing and Community Services advised that the 2012 Total Facilities Management contract had been varied on 11 occasions and provided the documents available to support and describe those variations. Audit Office analysis indicates that, in most cases, the variations:

are not supported by documentation which adequately identifies the contract provision to be varied, or which provides a precise definition of the revised contract provision;

are not supported by documents which demonstrate a clear agreement between the parties on the nature and detail of proposed variation;

do not clearly identify the date of effect of the proposed amendment; and

have not been progressed in a way that would be reasonable to expect in light of the governance arrangements established by the contract.

2.113 Documentation provided by Housing and Community Services identified a further significant variation to the contract: the removal of one of the key performance indicators included in the contract to inform the performance management system. Housing and Community Services have advised that ‘this KPI was discontinued due to a Joint

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Consultative Committee decision on 25/11/2013’. While agreeing that this change had been made, Housing and Community Services have been unable to provide the Audit Office with any contemporary documentation relating to the change, and did not include this as one of the 11 contract variations to date.

2.114 At the time of this audit, Housing and Community Services did not have a consolidated register of document variations to support contact administration which adequately identified which provisions of the 2012 Total Facilities Management contract had been varied, the nature of the revised provisions, and the date from which the revision should be applied. Rather, Housing and Community Services rely heavily on the experience and understanding of existing personnel, thus considerably increasing contract risk that could be realised by the departure of key staff.

2.115 Housing and Community Service’s management of contract variations has not been adequate over the life of the contract.

RECOMMENDATION 8 MANAGING CONTRACT VARIATIONS

Housing and Community Services should improve its management of variations to the Total Facilities Management contract by:

a) developing and sharing with Spotless an accurate up‐to‐date register of contract amendments which identifies the provisions of the 2012 Total Facilities Management contract that have been varied, the nature of the revised provision, and the date from which the revision should be applied;

b) centrally maintaining documentary evidence that clearly demonstrates agreement between the contract parties as to each of the amendments, and where agreement to prior amendments is not available, liaise with Spotless to develop appropriate documentation; and

c) implementing a system whereby all future amendments are clearly specified and adequately documented. Matters considered in agreeing to an amendment should form part of the documentation (including but not limited to measures to protect risk and value for money).


3 TIME, QUALITY AND COST

3.1 This chapter discusses the arrangements implemented by Housing and Community Services to determine whether delivery of housing maintenance services by Spotless (the Total Facilities Manager) is within time and quality standards, and costs are controlled.

Summary

Conclusion

Spotless has met timeliness targets for the delivery of the more urgent maintenance services, but not for routine tasks. While this is the case, the reliability of the timeliness data is uncertain and Housing and Community Services needs to assure itself of its reliability.

Housing and Community Services does not have sufficient oversight of Spotless’ quality control activities; in particular over Spotless’ work order audits and the allocation and quality of maintenance work undertaken by Spotless’ in‐house maintenance provider.

Spotless’ payment incentives or abatements are dependent on the results of customer satisfaction surveys. These have a very low response rate and problems with them have been identified in quality audits. While Housing and Community Services has initiated action to improve the response rate, it remains low. If this persists then an alternative means for determining Spotless’ incentives and abatements will need to be pursued.

Spotless has not delivered the continuous improvement plans or Service Delivery reviews required by the contract.

Housing and Community Services and Spotless have established cost and price control arrangements and implemented processes for effectively managing payments to subcontractors.


Timeliness of repair tasks managed by Spotless has been satisfactory for the more urgent maintenance categories but the target was not achieved for routine (within 20 day) tasks and consequently Spotless did not receive an incentive payment in relation to this category of maintenance.

3.11

Housing and Community Services needs to assess whether Spotless has addressed the problems in the reporting of timeliness that were identified by Spotless in its 2015 audit. This audit was limited in scope to the examination of a random sample of 111 work orders allocated to a single sub‐contractor over a five month period in 2014, which was around 10 percent of the work orders allocated to this contractor

3.16

3: Time, quality and cost


over the period. However, in light of the nature of the findings and their impact on the reliability of related timeliness data, it would be prudent for Housing and Community Services to initiate action to assure itself that the problems identified in that audit are not experienced more generally, and that Spotless staff and sub‐contractors are undertaking the correct processes for the completion of work orders and for data entry into relevant systems.

Current reporting does not provide Housing and Community Services with adequate visibility over Spotless’ Work Supervisors inspections of works undertaken by Spotless or its sub‐contractors.

3.24

Given the key role of work order audits in providing assurance around service delivery and in contributing to incentive payments, the significant and persistent gap between the failure rates found by Housing and Community Services (for example 19 percent and 57 percent) and the failure rates reported by Spotless (for example 3 percent and most recently 0.3 percent) is a matter of concern which Housing and Community Services needs to address.

3.28

Housing and Community Services does not have visibility over the work orders selected by Spotless for its audits; therefore it does not have any assurance that the audit results are representative and reliable.

3.30

Spotless and Housing and Community Services have instituted a process that allows for joint audits of work orders. Over the period of the contract, 85 work orders have been subject to a joint work order audit, although the last one was conducted in January 2015. Audits of work orders by Spotless, for which the number conducted is a key performance indicator that leads to incentive payments, are not conforming to requirements under the contract and not providing adequate assurance on the quality of work performed by Spotless or its sub‐contractors.

3.33

To date, the work done by Spotless’ in‐house maintenance provider, Asset Services, has been inspected by in‐house supervisors but has not been subject to independent quality assurance. Independent quality assurance of the work undertaken by Asset Services would provide assurance that this arrangement is delivering value for money for the Territory, and would assist in managing any real or potential conflicts of interest that may arise from Spotless overseeing the maintenance services provided by Asset Services.

3.36

Measurements of tenant satisfaction with maintenance services managed by Spotless (used as a basis for incentive payments to Spotless) are based on very low tenant response rates. While Housing and Community Services provide some incentives for tenants to complete survey forms, response rates have not significantly improved and there has been no formal follow‐up to address the

3.42



critical findings of Housing and Community Services’ 2012 audit into the conduct of the maintenance survey.

The Total Facilities Management contract encourages continuous improvement initiatives. For example, the contract requires that Spotless produce a continuous improvement plan and conduct Service Delivery Reviews each six months with the intent of identifying improvements. Neither the improvement plan nor the reviews have been delivered by Spotless and Housing and Community Services has not required them to be delivered.

3.46

Through the development and maintenance of a comprehensive schedule of rates, and the implementation, in cooperation with Spotless, of arrangements for allocating and reviewing costs for individual tasks, Housing and Community Services have established a generally sound framework for the control of costs allocated to individual tasks.

3.58

Background

3.2 As outlined in paragraph 2.34, Housing and Community Services’ management of time and quality is achieved through establishing and monitoring the performance management system with its accompanying Key Performance Indicators. The Key Performance Indicators encompass the main features of the Total Facilities Manager services from a timeliness and quality perspective. However, they do not directly address cost.

3.3 Cost is controlled and monitored via a Schedule of Rates that provides a standard costing system for maintenance activities and internal controls that cover the invoicing and payment cycles.

Timeliness

Performance against standards

3.4 Housing and Community Services Maintenance policy sets out four levels of priority for maintenance, namely:

Urgent 4 (U4) – to be attended to within 4 hours;

Priority Next Day (PND) – to be completed by 6:00 p.m. the following business day;

Priority 96 (P96) – to be completed within 96 hours (4 days); and

Normal 20 (N20) – to be completed within 20 days.



3.5 Urgent repairs are defined by the Residential Tenancies Act 1997 and mostly relate to the restoration of essential services such as power, gas or water, re‐establishment of cooking or bathing facilities or repairs to damage that would make a property unsafe or unsecure.

3.6 Housing and Community Services has established business rules to define the types of maintenance that fall within the other categories as follows:

Priority Next Day – carried out where there is a maintenance issue causing significant inconvenience or has the potential to develop into a health, safety or security risk;

Priority – work that is required to fix a problem that is not urgent (or an emergency), but that is causing significant inconvenience and could develop into a health, safety or security risk if not fixed promptly; and

Normal – works that do not fall into the other categories but still require attention.

3.7 Key Performance Indicators (KPIs) for timeliness are assessed on a monthly basis. Targets for performance against the timeliness standards are set in Schedule 6 of the Total Facilities Management contract, with the following targets:

KPI 3.2: 96 percent of urgent (within 4 hours) repairs are completed on time;

KPI 3.3: 96 percent of priority next day repairs are completed on time;

KPI 3.4: 96 percent of Priority 2 (within 96 hours) repairs are completed on time; and

KPI 3.5: 96 percent of normal (within 20 calendar days) repairs are completed on time.

3.8 In 2014‐15, Spotless reported that the:

urgent maintenance tasks reached the target of 96 percent timeliness in every month;

priority next day tasks missed the target for one month;

Priority 2 (within 96 hours) tasks missed the target on two occasions; and

normal maintenance tasks missed the 96 percent target every month.

3.9 Housing and Community Services advised that:

... not achieving the target for routine tasks has been discussed at CMG and JCC with agreement to review and identify possible opportunities for improvement.

... the TFM has been scored appropriately under the PMS and has not received an incentive payment, averaging a score of 91.5 percent for the last two quarters of 2014/15 falling 4.5 percent short of the target of 96 percent.

3.10 In addition to the four priority levels defined above, work orders may also be classified as requiring completion within 12 months. Timeliness for work orders relating to vacant properties is allocated on a case‐by‐case basis. Overall performance against allocated completion time frames in 2014‐15 is set out in Figure 3‐1.



Figure 3‐1 Timeliness of work order completion – 2014‐15

Source: AO analysis of Housing and Community Services data

3.11 Timeliness of repair tasks managed by Spotless has been satisfactory for the more urgent maintenance categories but the target was not achieved for routine (within 20 day) tasks and consequently Spotless did not receive an incentive payment in relation to this category of maintenance.

Reliability of reported timeliness

3.12 When a work order is generated, and the priority level allocated by the call centre, the target completion time is then set by Spotless (as opposed to being automatically generated from the urgency setting). Spotless also enters the time completed (as sometimes there are multiple trades required before the job can be stated as done).

3.13 When the work is completed, the details, including the completion time, are required to be inserted into its WMS within two days. The achieved duration is simply the difference between these times, and this is then compared to the urgency standard. With sufficient reason, say unavailability of materials or the tenant not granting access, Spotless can change the target date based on a sub‐contractor e‐mail without Housing and Community Services approval, leading to a risk of incorrect timeliness reporting. Such changes do generate an audit trail that can later be inspected and checked, and Housing and Community Services have advised that:

Changes to due dates can occur in circumstances such as where the contractor advises that the work cannot be done by the due date (e.g. because the tenant has made another appointment for when they will be at home).

0 5000 10000 15000 20000 25000 30000 35000

vacant properties

up to 12 months

within 20 calendar days

within 96 hours

next day

within 4 hours

Invoiced work orders

Priority Ca

tegory

On time Not on time



Any changes made by Spotless to the work order due dates are transparent to HACS in the service portal and on HomeNet and in the overdue work order report. HACS scrutinises and changes to work order identified in the report.

The overdue work order report is generated by HACS through HomeNet and is tabled by HACS every fortnight at the COG meeting. HACS has access to this report and it is run daily. It is closely monitored by HACS.

On completion of work the contractor enters the actual completion date and returns a copy of the signed work order to Spotless for payments. This is all visible through the service portal.

3.14 Notwithstanding current arrangements for oversight by Housing and Community Services, work undertaken by Spotless suggests substantive issues may persist in this area. In 2015, Spotless conducted a targeted audit of reporting by one of their sub‐contractors and found that most (86 percent) of the work orders had defects, primarily due to the sub‐contractor, but with some the fault residing with Spotless. These errors primarily occurred because of communication errors, incorrect or no documentation and inconsistency of completion dates between a work order and data entered into WMS. All such discrepancies understated the time taken, mostly by one day, but there were several of 3‐5 days, and Spotless highlighted the instance of one work order where the discrepancy of several weeks seemed designed to record an elapsed time just within the target.

3.15 No other similar audits have been conducted by Spotless or the Housing and Community Services Quality Assurance team.

3.16 Housing and Community Services needs to assess whether Spotless has addressed the problems in the reporting of timeliness that were identified by Spotless in its 2015 audit. This audit was limited in scope to the examination of a random sample of 111 work orders allocated to a single sub‐contractor over a five month period in 2014, which was around 10 percent of the work orders allocated to this contractor over the period. However, in light of the nature of the findings and their impact on the reliability of related timeliness data, it would be prudent for Housing and Community Services to initiate action to assure itself that the problems identified in that audit are not experienced more generally, and that Spotless staff and sub‐contractors are undertaking the correct processes for the completion of work orders and for data entry into relevant systems.

RECOMMENDATION 9 TIMELINESS OF MAINTENANCE TASKS

Housing and Community Services should strengthen assurance in regard to the reported timeliness of maintenance activities by:

a) assessing the extent to which the issues indentified in the Spotless 2015 audit in relation to sub‐contractor practice have been rectified and whether it is satisfied with the reliability of timeless data; and

b) conducting Quality Assurance audits or joint audits on this matter.



Quality

Background

3.17 Several actions are needed to establish quality maintenance services. These include:

assessment of the sub‐contractors before they join the Spotless panel;

inspection of sub‐contractors’ work by a Spotless Works Supervisor;

quality assurance by Spotless quality assurance officers of a sample of work;

review of this quality assurance work by Housing and Community Services Quality Assurance team;

gathering information from complaints and feedback by tenants; and

continuous improvement initiatives.

Selection and retention of sub‐contractors by Spotless

3.18 Spotless’ Service Delivery and Management Plan, which is part of the Total Facilities Management contract, describes the processes for selecting sub‐contractors as being based on value for money and in conformance with government procurement guidelines; and that there were ongoing processes for managing the quality of services provided. Although there is no provision in the contract for testing adherence by Spotless to its Service Delivery and Management Plan, the process as at 2015 was for the Spotless to conduct tender evaluations and for Housing and Community Services to give approval to the tender evaluation report. Housing and Community Services therefore has some visibility over this process.

3.19 Spotless maintains a spreadsheet of all employees of sub‐contractors, together with details of qualifications. This is not subject to monitoring by Housing and Community Services.

Inspection of works by Spotless

3.20 As mentioned in paragraph 2.79, the Service Delivery and Management Plan, part of the contract, states that ‘if a claim is submitted, the Works Supervisor will attend the site and confirm that the work has been completed to a satisfactory standard’. Spotless’ internal guidance refers only to inspections of work orders over $2000; although this requirement is not mandatory according to the Delivery of Works. No change had been made to the contract to reflect this position.5

5 Spotless has advised that ‘the responsive repair procedure inspection process is not accurately reflected in (Spotless’) Service delivery and management plan. The inspection process for responsive repairs includes a minimum inspection regime of 5% of all work order orders. Spotless will need to amend the service delivery and management plan to accurately reflect the Audit regime. This will align with KPI 4.1.’



3.21 The 2015 Spotless audit (refer to paragraph 3.14) noted that for the sample of works in the audit, there were six work orders over $2 000 where an inspection was required, none of these claim inspections were compliant with procedures.

3.22 In its monthly report, Spotless lists the ‘recalls’: instances where tenants call again about unsatisfactory work or the appliance failing again. These instances are not counted as complaints. A total of 437 recalls were issued for the month of June 2015.

3.23 Spotless can also issue ‘Business Improvement Forms’, which can relate to timeliness of completion of work orders or to administrative issues such as failure to supply documentation at all or on time. However, there is no record in the monthly reports, inspected during this audit, about the extent or results of inspections by Spotless’ Works Supervisors.

3.24 Current reporting does not provide Housing and Community Services with adequate visibility over Spotless’ Work Supervisors inspections of works undertaken by Spotless or its sub‐contractors.

RECOMMENDATION 10 INSPECTION OF WORKS

Housing and Community Services should improve quality control of works undertaken by Spotless and sub‐contractors through measures such as targeted audits of Spotless’ Work Supervisor processes for undertaking inspections.

Audits of work orders by Spotless

3.25 Many work order audits undertaken by Spotless have relied on telephone calls to tenants rather than physical inspection. Re‐performance of selected work order audits by Quality Assurance has found many more defects than originally reported by Spotless. For example, Spotless’ quarterly report for the year to March 2015 noted a total of 57 ‘fails’ compared to 3320 work order audits, a failure rate of 1.7 percent. The most recent quarterly analysis of Spotless data by Housing and Community Services Quality Assurance, relating to July – September 2015, reports a fail rate of work order audits of 0.3 percent, leading the Quality Assurance team to conclude that:

The auditing activity represents little to no discernible benefit to HaCS in terms of contractual requirements to achieve value for money and continuous improvement.

3.26 By contrast, the targeted audits conducted by Housing and Community Services found 19 percent of a sample of 100 work orders for December 2013 to January 2014 had failed (when Spotless reported a fail rate as 3 percent). An earlier audit, of 21 work order audits in November 2013, found an even higher failure rate of 57 percent.

3.27 As discussed earlier (paragraph 2.50), the contract provides for Spotless to select a random 5 percent from a 10 percent sample of work orders provided by Housing and Community Services. Two issues arise here. First, there is no assurance that the selection



of cases, from the provided sample, is random; and given the incentive for performing larger numbers of work order audits, there could be a bias to select simpler cases. Second, in early 2014 Housing and Community Services increased the sample size to 15 percent based on reported problems in contacting tenants. Spotless has described such problems, but in their statistical reports the number of ‘no access’ cases was very small or zero.

3.28 Given the key role of work order audits in providing assurance around service delivery and in contributing to incentive payments, the significant and persistent gap between the failure rates found by Housing and Community Services (for example 19 percent and 57 percent) and the failure rates reported by Spotless (for example 3 percent and most recently 0.3 percent) is a matter of concern which Housing and Community Services needs to address.

3.29 The Audit Office was advised by a representative of Spotless that its process was first to split the Housing and Community Services sample into North and South Canberra (for their two Quality and Compliance Auditors), then remove all works over $2000, all planned works and vacant properties. The justification for these exclusions is not understood by the Audit Office. For the work for a particular day, an auditor would choose a particular suburb and then take every second work order off the Housing and Community Services list. If they fail to contact the tenant, they move on to the next work order. Housing and Community Services has no visibility over this selection process and it is a significant part of the method for work order audits. Spotless provides a statistical summary of the results of the work order audits in its monthly report, but this does not include the number of failures detected.

3.30 Housing and Community Services does not have visibility over the work orders selected by Spotless for its audits; therefore it does not have any assurance that the audit results are representative and reliable.

3.31 The 2012 contract provided an example of a checklist of a work order audit with 15 items and this was confirmed when the template was tabled at the Joint Consultative Committee. A revised version with eight items has been introduced, based on discussion at a Quality Assurance Group meeting in early 2014. Housing and Community Services have advised that revised arrangements are scheduled to take effect from March 2016.

3.32 Housing and Community Services are able to request the results of Spotless work order audits, but had not done so until they received a request from the Audit Office on 17 October 2015 to examine a sample of these work order audits.

3.33 Spotless and Housing and Community Services have instituted a process that allows for joint audits of work orders. Over the period of the contract, 85 work orders have been subject to a joint work order audit, although the last one was conducted in January 2015. Audits of work orders by Spotless, for which the number conducted is a key performance indicator that leads to incentive payments, are not conforming to requirements under the contract and not providing adequate assurance on the quality of work performed by Spotless or its sub‐contractors.



3.34 A recommendation has been made in Chapter 2 (Recommendation 3) to address these findings.

Quality of Spotless’ in‐house maintenance provider

3.35 Spotless has its own in‐house maintenance provider; Asset Services. The approved program of work to be undertaken by Asset Services is agreed annually between Spotless and Housing and Community Services, as part of the development of the planned maintenance schedule for the following year. Housing and Community Services have advised that, in 2014‐2015, Asset Services were allocated 1 888 work orders, with a total value of $1 122 460.

3.36 To date, the work done by Spotless’ in‐house maintenance provider, Asset Services, has been inspected by in‐house supervisors but has not been subject to independent quality assurance. Independent quality assurance of the work undertaken by Asset Services would provide assurance that this arrangement is delivering value for money for the Territory, and would assist in managing any real or potential conflicts of interest that may arise from Spotless overseeing the maintenance services provided by Asset Services.

RECOMMENDATION 11 IN‐HOUSE MAINTENANCE PROVISION

Housing and Community Services should initiate action to provide for independent quality assurance in regard to the maintenance work undertaken by Spotless’ in‐house maintenance provider.

Satisfaction surveys

3.37 Tenant satisfaction with maintenance performance is an important indicator of overall performance. Two Key Performance Indicators (KPIs) under the contract address satisfaction:

KPI 2.1: More than 90 percent satisfaction of those tenants surveyed (call centre survey); and

KPI 2.2: More than 90 percent satisfaction of those tenants surveyed (maintenance survey).

3.38 While achievements against Key Performance Indicator 2.2 have been very high, for example around 97 percent in January‐March 2015, the response rate is very low at around 4 percent in 2015. Tenants receiving maintenance services are issued a survey form at the time maintenance is completed and invited to send it in to Housing and Community Services. The survey is handed out by the sub‐contractor who undertakes the work and there is no mechanism for ensuring it is actually issued or that it is completed by the tenant.



3.39 A targeted audit conducted by Housing and Community Services Quality Assurance team in 2012 identified significant issues in relation to the conduct of the maintenance survey. In particular, none of the tenants contacted reported having responded to the survey (either by mail or on‐line) and over 70 percent of tenants said they did not receive a survey form. The audit also noted that a significant number of work orders (45 percent) did not describe the work that was done, or did not describe it accurately. This creates a risk that the tenant may not have known the exact nature of the work (and therefore the level of performance that could be expected) they were commenting on.

3.40 Tenant satisfaction with maintenance measured through the annual Housing and Community Services survey, while still positive, is considerably lower, around 78% for 2014‐15. While differences in methodology and scope mean that this survey cannot be readily compared with the survey of tenant satisfaction with maintenance surveys, the Quality Assurance team observed that ‘differences in results between the two surveys and issues with the method of distribution for the monthly Key Performance Indicator 2 survey with regard to conflict of interest and independence should be the subject of Housing and Community Services internal discussion.’

3.41 Housing and Community Services advised that it has taken measures to encourage the completion of survey forms, and has sought variations to work order forms to promote compliance by sub‐contractors with the requirement to provide to the forms to tenants. However, the survey response rate remains low and, while survey responses are reviewed as part of the ongoing management of the Performance Management System, there has been no comparison of response rates with other jurisdictions, nor any formal follow up to the 2012 audit. Housing and Community Services advised that ‘(f)urther targeted audits may be included in future audit programs once finalised.’

3.42 Measurements of tenant satisfaction with maintenance services managed by Spotless (used as a basis for incentive payments to Spotless) are based on very low tenant response rates. While Housing and Community Services provide some incentives for tenants to complete survey forms, response rates have not significantly improved and there has been no formal follow‐up to address the critical findings of Housing and Community Services’ 2012 audit into the conduct of the maintenance survey.

RECOMMENDATION 12 TENANT SATISFACTION SURVEYS

Housing and Community Services should assess the appropriateness of using the tenant satisfaction surveys as a basis for Spotless incentive payments given the very low response rate. If this survey is considered appropriate, a mechanism should be developed to secure reliable data and a satisfactory response rate (formally addressing the critical findings of Housing and Community Services’ 2012 audit into this issue may assist).



Condition of vacant properties

3.43 Spotless is responsible for performing maintenance on vacated properties to restore them to a standard so that the property is lettable to the next tenant. Housing and Community Services Housing managers have consistently commented that the condition of properties is often not satisfactory, and that additional Quality Assurance would assist.

Complaints management

3.44 In 2013‐14, Housing and Community Services reported 860 complaints about maintenance, from over 80 000 works orders. In 2014‐15, there were 574 complaints from over 81 000 work orders. Most were handled within the time allowed, but a small number (14 over the year) were late. A Housing and Community Services Quality Assurance review of the quality of the responses found that they varied from poor to excellent, with an overall rating of ‘good’.

3.45 In contrast, a database of ‘recalls’ – occasions when the maintenance work needed to be re‐done or completed – recorded over 500 instances for the month of June 2015. Additional assurance of the level of complaints recorded might be provided by this matter being reviewed by the Housing and Community Services Quality Assurance team.

Continuous improvement

3.46 The Total Facilities Management contract encourages continuous improvement initiatives. For example, the contract requires that Spotless produce a continuous improvement plan and conduct Service Delivery Reviews each six months with the intent of identifying improvements. Neither the improvement plan nor the reviews have been delivered by Spotless and Housing and Community Services has not required them to be delivered.

3.47 Housing and Community Services have acknowledged that Service Delivery Reviews required by the 2012 contract have not been undertaken. However, Housing and Community Services advised that Spotless had been constantly reviewing Service Delivery requirements (resources, systems, processes etc) and improvements were then included in the Housing and Community Services Contract Improvement Plan. Housing and Community Services have advised that examples of Spotless’ contribution to continuous improvement include:

... the introduction of new services such as the LED lighting initiatives, introduction of an alternate heating product, which provides better efficiency outputs resulting in cost saving for tenants.

3.48 The Housing and Community Services Contract Improvement Plan (which takes the form of a register of issues to be addressed rather than a comprehensive improvement strategy) does not identify either of the matters cited by Housing and Community Services at paragraph 3.47. Furthermore, while each issue in the plan is allocated a priority, a target date and actioning manager (with Spotless allocated responsibility for pursuing several



issues), it is not possible on the basis of the plan to identify which improvements have been identified and advanced by Spotless.

3.49 In addition to the Housing and Community Services Contract Improvement Plan, Spotless maintain an innovation register which is discussed and agreed in the Contract Management Group and presented to the Joint Consultative Committee for information. The register tracks the Spotless‐initiated innovation (such as the LED lighting initiative) and the person responsible and the timeframe for implementation. It also provides a framework for estimating and monitoring savings, although at the time the register was reviewed by the Audit Office, no savings data was included.

3.50 While noting actions taken by Housing and Community Services and Spotless, the Audit Office notes that Housing and Community Services Quality Assurance Unit has identified concerns with respect to the contribution of Spotless to continuous improvement over the life of the contract (as discussed at paragraph 2.51). The Joint Consultative Committee does consider ‘Innovation’ as a standing topic to facilitate discussion between the parties on improvements but a more consistent approach, including Housing and Community Services requiring delivery of Service Delivery Reviews and Continuous Improvement Plans, is needed.

RECOMMENDATION 13 CONTINUOUS IMPROVEMENT PLAN AND SERVICE DELIVERY REVIEWS

Housing and Community Services should initiate action so Spotless produces a continuous improvement plan and conducts Service Delivery reviews each six months with the intent of identifying improvements, or remove these requirements from the Total Facilities Management contract.

Cost

3.51 Achieving value for money under the Total Facilities Management contract requires not only that appropriate maintenance services are delivered in a timely manner, but also that there are appropriate arrangements to control the costs attributed to individual tasks. Under the 2012 contract with Spotless, cost is controlled and monitored through establishing a Schedule of Rates that provides a standard costing framework for maintenance activities, and internal controls that cover the invoicing and payment cycles

Schedule of Rates

3.52 The process to achieve economical delivery of maintenance services is primarily through establishing a comprehensive list of service codes to describe each maintenance activity, with an associated standard cost. These tasks and costs are described in the Schedule of Rates, (Volume 2 of the contract). The Schedule of Rates is negotiated between Spotless and Housing and Community Services each year. In 2013, this was based on pricing



information from the market gained with the assistance of a quantity surveyor, and in 2014 it was based on adjusting the Schedule of Rates to the average of the rates submitted by sub‐contractors.

3.53 The adjusted Schedule of Rates was sent to potential sub‐contractors to bid for acceptance on the panel. Each sub‐contractor can bid for a group of Schedule of Rates codes at a percentage above or below the rates in the Schedule of Rates; they also need to indicate how many work orders they could complete each day. The decision on allocation of each work order to a sub‐contractor is based on availability, the rate offered and their previous history. Spotless have advised that, as a consequence of this arrangement, the average price of the services procured by Spotless is 4 percent lower than the base rates included in the Schedule of Rates. Spotless have also advised that increases in the consumer price index have not been passed through to the base rates included in the Schedule of Rates, providing further improvements in value for money.6

Internal Controls

Control of costs of a task

3.54 When a tenant calls the Spotless contact centre with a problem, the contact centre will attempt to define the maintenance task using the definitions in the Schedule of Rates. Sometimes the task is larger than the tenant described, but there is also a risk of over‐expenditure through the sub‐contractor claiming for a more expensive task than was actually required or delivered. The control for this is through Spotless checking the invoice received from the sub‐contractor for reasonableness. In addition, works are sometimes over the set value allowed and there is no approval for this. In these cases, the estimate is reviewed by Spotless and sometimes rejected.

3.55 Where quotes are over $15 000 (or over $5 000 if the work order includes items outside the Schedule of Rates) authorisation is required from Housing and Community Services.

Invoice checking and payment

3.56 In addition to the arrangements for site inspection and audit described at paragraphs 2.46 to 2.84 and paragraphs 3.20 to 3.34, all invoices submitted by sub‐contractors are subject to desk‐top audit and a review for compliance with business rules. Spotless has advised that, between July 2015 and March 2016, it rejected 2596 (6.5 percent) of sub‐contractor claims as a result of internal review processes.

3.57 Invoices are then submitted by Spotless to Housing and Community Services for reimbursement of the payments made to sub‐contractors. Housing and Community Services reviews each invoice and raises exceptions, known as rejected work orders. At the end of each month, Housing and Community Services reviews all work order rejections

6 In the course of the audit, the Audit Office did not independently assess the extent of savings that may have arisen from these initiatives.



and Spotless responses to see if the rejection should be upheld or dismissed. There can be several iterations of this process.

3.58 Through the development and maintenance of a comprehensive schedule of rates, and the implementation, in cooperation with Spotless, of arrangements for allocating and reviewing costs for individual tasks, Housing and Community Services have established a generally sound framework for the control of costs allocated to individual tasks.


4 PLANNED MAINTENANCE

4.1 This chapter discusses planned maintenance and strategic asset management. It also addresses how priorities for planned maintenance are set each year.

Summary

Conclusion

Housing and Community Services is planning maintenance activities using multiple information system. A long‐term plan to consolidate information to create a centralised comprehensive asset register of ACT housing assets is needed.

Spotless has made significant progress in increasing the proportion of properties that have had a recent condition assessment audit. Given this it would be timely to assess whether the relevant key performance indicator should be changed to better drive performance by identifying a desired outcome rather the conduct of a specific number of annual audits. Furthermore, condition assessments are an important tool in determining the program of planned maintenance but the priority given to these in influencing the planned maintenance program has declined. This needs to be corrected.

Some maintenance tasks that are classified as planned maintenance are not. This can lead to an overstatement of the amount spent on planned maintenance. The 70 percent requirement for planned maintenance, in the Total Facilities Management contract, is an important element of the Public Housing Asset Management Strategy and also contributes to Spotless’ incentives or abatements. It is important therefore that the claimed planned maintenance expenditure is accurate.


The report to the Minister on specified performance indicators that is required by the Public Housing Asset Management Strategy 2012‐2017 has not been produced.

4.8

Housing and Community Services lack a centralised asset register that contains comprehensive information on public housing properties. Such a register would reduce the risk that scheduled maintenance decisions may be based on incorrect or incomplete information.

4.11

Housing and Community Services acknowledge that information on public housing assets is not centralised, but have advised that the core requirements of a comprehensive asset register are met within its business systems. While this is

4.12

4: Planned maintenance


noted, it would be prudent to develop a long‐term plan for progressively centralising information on public housing assets as IT systems are upgrade and/or replaced.

Spotless’ condition assessment audits have not met the target in any quarter from contract commencement in 2012 through to October 2015, and Spotless did not provide required Energy Efficiency Rating reports in the first two years of the current Total Facilities Management contract.

4.20

Changes made by Spotless, in consultation with Housing and Community Services (including outsourcing the conduct of condition assessment audits) have resulted in the target being met each month since the revised arrangements were implemented in October 2015. Housing and Community Services needs to monitor the revised arrangements to ensure targets continue to be met.

4.21

Given Spotless’ progress in completing condition assessments of properties Housing and Community Services needs to adjust the key performance indicator to reflect progress toward the objective, namely having all properties with a condition assessment no more than five years old, rather than maintaining its focus on the number of assessments conducted.

4.24

Current business rules governing the classification of maintenance expenditure as either planned or responsive need to be improved so that the ratio of planned to responsive maintenance is correctly reported. Accurate reporting of this figure is important because it informs Housing and Community Services strategic decision making, and is linked to incentives and abatements under the Total Facilities Management contract.

4.30

Condition assessment audits are an important source of information to drive strategic decisions about the maintenance of the Territory’s public housing asset. While condition assessment audits have been an important driver of new planned maintenance work over the last three years, the priority attached to work identified through the condition assessment audit process has been declining. The condition assessment audit drove less than 25 percent of new work planned for 2015‐16, a substantial reduction from 68 percent in 2014‐15 and well below the three year average of 40 percent. Given the extent of works carried over, the low priority accorded to works identified through condition assessment audits increases the risk that they will not be completed in the year initially planned.

4.35



Strategic asset management

4.2 The Australian Housing and Urban Research Institute considers that strategic asset management denotes a higher level of management: linking asset management with organisational need and connecting asset purposes with broader organisational objectives, rather than just ensuring integrity though maintenance. According to the Australian National Audit Office, an asset management strategy is a key element of corporate planning, and should consider the whole asset life cycle.

4.3 The Victorian Auditor‐General’s Office stated that a comprehensive asset management strategy should:

• follow an integrated approach—align asset management requirements and service outcomes to overarching plans and objectives;

• focus on service delivery—all planning, decisions and reporting should focus on the type and quality of services the community needs; and

• make evidence‐based asset decisions—by relying on rigorous information about the costs, benefits and risks of alternatives across the asset life cycle.

A comprehensive asset management strategy is then supported by:

• an acquisition plan that defines the type and timing of asset requirements and provisioning options, including financing and cash flows, and considers property cycles and market fluctuations;

• a maintenance plan that details expected life cycle costs and requirements, regardless of whether they will be met, to enable a better understanding of accrued maintenance liability;

• an operations plan that sets out operating policies and the resources required to manage the asset, including a breakdown of administrative costs by business unit;

• a vacancy management plan that outlines a strategy to measure and minimise property vacancies; and

• a disposal and risk management plan.

A comprehensive asset management strategy puts these principles into practice by directing activity and resources in a coherent and justifiable way.

4.4 The key document for strategic planning of the housing maintenance stock is the ACT Public Housing Asset Management Strategy 2012‐2017. Principle 4 of the strategy states the following intentions:

the portfolio will be maintained to established condition standards to ensure appropriate amenity and safety for tenants and to preserve the value of the assets;

well directed maintenance expenditure will help to deliver the overall housing strategy, as well as protection of the asset and community safety;

stock condition audits will continue to be used to make decisions on maintenance requirements and capital refurbishment. These audits will help to determine the



holding strategy for properties (i.e. retain, upgrade and retain, maintain short to medium term, redevelop, or dispose); and

a planned maintenance program will be prepared annually using the stock condition information to prioritise expenditure. The maintenance program focuses on improving the physical amenity and safety of public housing stock.

4.5 The ACT Standing Committee on Health, Community and Social Services report on Provision of Social Housing in the ACT, August 2012 expressed concerns with the asset management strategy for public housing. The Committee noted that the ACT Asset Management Strategy did not:

include a comprehensive analysis of which stock cannot be sold or redeveloped due to heritage legislation;

detail what would happen to current tenants during any redevelopment period;

address what would happen if the land presented for sale did not sell at the expected price point, or if a sale failed to go ahead; or

plan for future maintenance needs of stock that had been recently completed, or was currently being built.

4.6 The Committee recommended that the current strategy be considered interim and updated. The Government response of February 2013 disagreed, stating that the strategy had been endorsed by the Government and established a sound decision‐making process that integrated maintenance and management.

4.7 The current strategy calls for an annual report to the Minister which is to include a specified set of performance indicators addressing the topics of rejuvenation of stock, building sustainable communities, flexibility of stock to meet needs, targeted maintenance and value for money.

4.8 The report to the Minister on specified performance indicators that is required by the Public Housing Asset Management Strategy 2012‐2017 has not been produced.

RECOMMENDATION 14 PERFORMANCE AGAINST THE PUBLIC HOUSING ASSET MANAGEMENT STRATEGY

Housing and Community Services should report annually to the Minister on its performance against the Public Housing Asset Management Strategy 2012‐2017 using the indicators specified in that Strategy or seek the support of the Minister to remove this requirement.



Asset register

4.9 The asset register is a cornerstone of an asset management strategy. It should provide accurate and comprehensive data on key characteristics of assets, including location, value and condition, to sufficient detail to assist decision‐making on the maintenance, upgrade or disposal of the assets. However, a single comprehensive register of ACT public housing assets and matters associated with them does not exist. The Audit Office found key strategic information is held in several places: HomeNet (basic property information), SPM (condition of asset), WMS (warranty details, but not all, missing is warranty expiry date or period for parts and labour) and Community Services Directorate Oracle database for financial information such as property values and depreciation. There is a monthly reconciliation between Oracle and HomeNet to confirm that the register of properties is updated to cover sales, disposals and purchases, and HomeNet updates WMS with this data three times a week.

4.10 HomeNet currently holds information relating to all property holdings, past and present. There is some property element information attached to this, such as market rent value, number of bedrooms, block size and dwelling size. This is initially entered into HomeNet at the time the property is bought or constructed. There is no regular updating of most property elements, and these have been entered using different units of measurement. Also, there is no current process to reconcile the information in SPM (the database used by Spotless to manage condition assessments) with Housing and Community Services data bases such as HomeNet or Oracle.

4.11 Housing and Community Services lack a centralised asset register that contains comprehensive information on public housing properties. Such a register would reduce the risk that scheduled maintenance decisions may be based on incorrect or incomplete information.

4.12 Housing and Community Services acknowledge that information on public housing assets is not centralised, but have advised that the core requirements of a comprehensive asset register are met within its business systems. While this is noted, it would be prudent to develop a long‐term plan for progressively centralising information on public housing assets as IT systems are upgrade and/or replaced.

RECOMMENDATION 15 ASSET REGISTER

Housing and Community Services should develop and progressively implement a long‐term plan for consolidating existing data sources to create a centralised comprehensive asset register of ACT public housing assets.



Condition assessment

4.13 Better practice is to carry out condition assessments as a means of informing maintenance planning as expressed, for example, in the Australian National Audit Office Better Practice Guide on the Strategic and Operational Management of Assets by Public Sector Entities, September 2010 and Australian Housing and Urban Research Institute Towards best practice for public housing asset management, May 2009.

Assessing condition

4.14 Key Performance Indicator 3.1 in the Total Facilities Management contract requires that Spotless implement a condition assessment audit program that provides strategic planning information. In addition, the contract expresses the aim of all dwellings being assessed at least once in a five year period.

4.15 Spotless is tasked with carrying out condition assessment audits in order to update information on the housing stock and facilitate the strategic decisions on its management. Under the Key Performance Indicator 3.1, a target is set of 280 each month, or 3 360 a year. With a housing stock of 11 600, this is more than enough to provide for the aim of all housing stock having a condition assessment in the last five years. Housing and Community Services has advised that it is able to produce a variety of reports from its SPM tool which detail the condition assessment status of properties and which can be used to inform maintenance planning.

4.16 The current assessment processes requires an assessment of the conditions of each specified component of a house (e.g. external walls, carpet) on a scale from C1 (best) to C5. The condition grading is based on the estimated remaining useful life of the component, for example C4 means 11 percent ‐ 25 percent remaining useful life. This information is to be transferred by Spotless to the Housing and Community Services system, HomeNet. However, there are problems in transferring this data, as discussed in paragraph 4.10, and inconsistencies in key data occur such as the number of properties.

4.17 The 2012 Total Facilities Management contract provides that, if a tenant has broken an appointment for a condition assessment audit, the site visit may be counted as a completed condition assessment audit. Up to September 2015, notes entered into the HomeNet system by Spotless were assessed by the Quality Assurance Unit as not providing sufficient justification for claiming a broken appointment tenant booking process, and in July and August 2015, the Quality Assurance Unit invalidated all of the claims for broken appointments on grounds of insufficient evidence.

4.18 Housing and Community Services has advised that this outcome is an example of the Quality Assurance process working as intended and the outcome has been accepted by Spotless. The invalidated claims were reflected as abatements in the scoring of KPI 3.1 for July/August 2015. A revised process for managing broken appointments was agreed



between Housing and Community Services and the Spotless in May 2015 and is required to be in place from September 2015 onwards.

4.19 Under the Total Facilities Management contract, condition assessment audits were required to contain an Energy Efficiency Rating (EER) report. From contract commencement to July 2014, this requirement was not met, despite this being a contractual requirement that attracts incentive payments. This led to Spotless incurring abatements (although Housing and Community Services offered Spotless a refund of the abatements if they caught up with outstanding EERs).7 A new standard for EERs was accepted by Housing and Community Services, but the Quality Assurance unit has expressed some concern that the new arrangements may provide less useful information than the standard set in the contract.

4.20 Spotless’ condition assessment audits have not met the target in any quarter from contract commencement in 2012 through to October 2015, and Spotless did not provide required Energy Efficiency Rating reports in the first two years of the current Total Facilities Management contract.

4.21 Changes made by Spotless, in consultation with Housing and Community Services (including outsourcing the conduct of condition assessment audits) have resulted in the target being met each month since the revised arrangements were implemented in October 2015. Housing and Community Services needs to monitor the revised arrangements to ensure targets continue to be met.

Status of assessments

4.22 Notwithstanding difficulties in achieving desired rates for condition assessments, reports provided by Housing and Community Services indicate that, as of late February 2016, over 80 percent of properties had had a condition assessment audit completed in the last five years.

4.23 This compares favourably with the situation at the outset of the current Total Facilities Management contract, with Housing and Community Services reports suggesting that, on 1 July 2012, 45 percent of properties had no record of a condition assessment.

4.24 Given Spotless’ progress in completing condition assessments of properties Housing and Community Services needs to adjust the key performance indicator to reflect progress toward the objective, namely having all properties with a condition assessment no more than five years old, rather than maintaining its focus on the number of assessments conducted.

7 Spotless has confirmed that, although the process was not well defined at the beginning of the contract in 2012, the conduct of condition audits was subject to discussion through the Contract Management Group and arrangements for the completion of audits agreed between Housing and Community Services and Spotless.



RECOMMENDATION 16 CONDITION ASSESSMENTS

Housing and Community Services should initiate action to improve condition assessments by:

a) continuing to monitor the revised condition assessment arrangements implemented by Spotless to ensure the targets for condition assessments are consistently met and that Energy Efficiency Reports provide adequate support to maintenance planning; and

b) assessing whether Key Performance Indicator 3.1 should be changed to reflect the objective of ‘all properties having a condition assessment no more than five years old’.

Conduct of planned maintenance

4.25 The Total Facilities Management contract aims for a ratio of 70 percent planned maintenance by value, 30 percent for responsive, with abatements and incentives depending on the result. The 70 percent planned has been accepted as a benchmark by other government bodies to plan maintenance.

4.26 Performance against the target is shown in Table 4‐1.

Table 4‐1 Expenditure on planned maintenance as a proportion of total maintenance expenditure – 2012‐13 to 2014‐15

Year Planned Maintenance Expenditure % Impact on Spotless Management Fee

2012‐13 68.30 Abatement applied

2013‐14 71.18 Incentive paid

2014‐15 72.73 Incentive paid

Source: Housing and Community Services Quality Assurance Quarterly Performance Report, April‐June 2015

4.27 The robustness of the reported figure is dependent on the application, by Housing and Community Services and Spotless, of appropriate business rules for the classification of individual work items. The practice of inappropriately classifying works as planned rather than responsive has been raised by Housing and Community Services at the Joint Consultative Committee (August 2014):

A lot of works that [Housing and Community Services] allows Spotless to claim under Planned is fixed on failed; it is not really a planned work...

4.28 ‘Fixed on fail’ describes a policy whereby particular assets (such as hot water systems and stoves) are only replaced when they fail (rather than in accordance with a planned schedule). A proportion of the replacements are related to assets which fail early or unexpectedly and which should be properly counted as responsive maintenance.



4.29 Counting all ‘fixed on fail’ as planned maintenance inflates the planned maintenance figure. As the ratio of planned to responsive maintenance is a Key Performance Indicator (3.6) under the contract and linked to incentive payments, this presents a risk that Spotless is receiving unwarranted incentives payments.

4.30 Current business rules governing the classification of maintenance expenditure as either planned or responsive need to be improved so that the ratio of planned to responsive maintenance is correctly reported. Accurate reporting of this figure is important because it informs Housing and Community Services strategic decision making, and is linked to incentives and abatements under the Total Facilities Management contract.

RECOMMENDATION 17 DEFINITION OF PLANNED MAINTENANCE

Housing and Community Services should initiate action to improve current business rules governing the classification of maintenance expenditure as either planned or responsive, so that the ratio of planned to responsive maintenance is correctly reported.

4.31 Annual planned maintenance is documented in a ‘Delivery of Works’ document for each financial year. Spotless drafts this document, and through discussion with Housing and Community Services a final version is agreed. The Delivery of Works document includes estimates of costs and priorities and outlines a procurement process that is consistent with ACT procurement principles, although it does not specifically include milestones in the sense of allocation of tasks over the year.

4.32 Priorities for planned maintenance have varied over the years of the contract as outlined in Table 4‐2. SPM, a computerised database, is used by Spotless to help manage property condition assessment audits (as described at paragraphs 4.15 and 4.16 above). Works which are prioritised in response to the condition assessment audits are designated as ‘SPM identified’.



Table 4‐2 Priorities for planned maintenance

Priority Key

Priority reasons 2013‐14

Number (%)


Number (%)


Number (%)

1 Housing and Community

Services/Spotless Commitment/ Complaint

53 (6%)

Housing and Community Services

Commitment

53 (8%)

Housing and Community Services

Commitment

41 (7%)

2 Recommended for 12/13 but not

included, Carry over from 12/13 Delivery of Works Reserve

428 (46%)

Carry over from 13/14 Delivery

of Works Reserve

282 (44%)

Spotless priority 119 (20%)

3 SPM identified 169 (18%)

Spotless identified

62(10%)

Carry over from 14/15 Delivery of

Works

168 (28%)

4 Identified by Spotless

285 (30%)

SPM identified 246 (38%)

Spotless identified 157(27%)

5 SPM Identified 105 (18%)

Source: Audit Office analysis of documents provided by Housing and Community Services

4.33 Over the three years examined, the most significant category was planned work identified as a priority but not completed in the previous year (40 percent of all work). This includes priority works unable to be included in the agreed Delivery of Works schedule due to funding limitations, as well as planned works included in the schedule but deferred due to other emerging priorities or factors outside of the control of Housing and Community Services or Spotless. The backlog of maintenance is a common issue across Australian social housing providers and, in September 2015, Housing and Community Services estimated the total value of backlog of works as approximately $161m.

4.34 For new work, the most significant priority category over the period examined (2012‐13 to 2014‐15) was work identified by Spotless (48 percent of new work), followed by planned maintenance identified through condition assessment audits (SPM identified) (40 percent of new work) and work in response to a specific commitment by Housing and Community Services or Spotless (11 percent of new work).



4.35 Condition assessment audits are an important source of information to drive strategic decisions about the maintenance of the Territory’s public housing asset. While condition assessment audits have been an important driver of new planned maintenance work over the last three years, the priority attached to work identified through the condition assessment audit process has been declining. The condition assessment audit drove less than 25 percent of new work planned for 2015‐16, a substantial reduction from 68 percent in 2014‐15 and well below the three year average of 40 percent. Given the extent of works carried over, the low priority accorded to works identified through condition assessment audits increases the risk that they will not be completed in the year initially planned.

RECOMMENDATION 18 CONDITION ASSESSMENTS IN PLANNED MAINTENANCE

Housing and Community Services should review how it develops the annual program of planned maintenance to ensure that condition assessment audits remain an important priority for identifying planned maintenance work.


Audit reports

These and earlier reports can be obtained from the ACT Audit Office’s website at http://www.audit.act.gov.au.

Reports Published in 2015‐16

Report No. 01 – 2016 Calvary Public Hospital Financial and Performance Reporting and Management

Report No. 10 – 2015 2014‐15 Financial Audits

Report No. 09 – 2015 Public Transport: The Frequent Network

Report No. 08 – 2015 Annual Report 2014‐15


Report No. 07 – 2015 Sale of ACTTAB

Report No. 06 – 2015 Bulk Water Alliance

Report No. 05 – 2015 Integrity of Data in the Health Directorate

Report No. 04 – 2015 ACT Government support to the University of Canberra for affordable student accommodation

Report No. 03 – 2015 Restoration of the Lower Cotter Catchment

Report No. 02 – 2015 The Rehabilitation of Male Detainees at the Alexander Maconochie Centre

Report No. 01 – 2015 Debt Management




Report No. 05 – 2014 Capital Works Reporting

Report No. 04 – 2014 Gastroenterology & Hepatology Unit, Canberra Hospital

Report No. 03 – 2014 Single Dwelling Development Assessments

Report No. 02 – 2014 The Water and Sewerage Pricing Process

Report No. 01 – 2014 Speed Cameras in the ACT

Report No. 08 – 2013 Management of Funding for Community Services


Report No. 06 – 2013 ACT Auditor‐General’s Office Annual Report 2012‐13

Report No. 05 – 2013 Bushfire Preparedness


Report No. 04 – 2013 National Partnership Agreement on Homelessness

Report No. 03 – 2013 ACT Government Parking Operations

Report No. 02 – 2013 Executive Remuneration Disclosed in ACTEW Corporation Limited’s (ACTEW) 2010‐11 Financial Statements and Annual Report 2011

Report No. 01 – 2013 Care and Protection System


Report No. 09 – 2012 Grants of Legal Assistance

Report No. 08 – 2012 Australian Capital Territory Public Service Recruitment Practices


Report No. 06 – 2012 Emergency Department Performance Information

act auditor–general’s report · audit of spotless’ conduct of work order audits and the...

Documents