of course we’re not getting ripped of by our contractors! presentations... · 2013. 11. 22. ·...

www.apse.org.uk

Joint APSE / Just Housing Seminar, The Hub, Westminster 10 July 2013

Of course we’re not getting ripped of by our contractors!

Then again, maybe we are….

A strategy for improvement

Andy Mudd, Principal Consultant

Procurement Cycle

• Specification • Tendering • Contract management

How it should look?

Review

Specification

Tendering

Contract management

Or is this better?

Review

Option appraisal

Specification Tendering

Contract management

Review

• Started in time? • Evidence driven? • Fully resourced? • How does it avoid vested interest? • Pre-determined?

Option appraisal

• Does it actually happen? • Does it examine all options?

– Contract, no-contract, both? – Size of contract? – The million and one modern delivery options

• What is the evidence base? – Current performance – Future demand – Strategic issues

• Are all outcomes ‘acceptable’?

Specification

• Process – Historical? – Iterative? – Radical?

• Inputs, outputs or outcomes? • Risk transfer?????

– Demand risk – Output risk

Tendering

• Which process? • Why? • Who’s in charge? • How good are we at CD? • Is the final contract fit for purpose? • What matters? • Risk management

Contract management

• Client capacity and capability • Thin client/thick client • Do you manage inputs when the contract

is for outputs? • Can you maintain objectivity? • Does the arrangement deliver continual

improvement?

What does failure look like? • Poor service levels

– Unhappy tenants • Commercial failure

– Contract unviable • Dis-functional relationships • Overcharging by

– Underperformance – High levels of variations at high rates

Prioritising the asset

• What is the asset? • What is it for? • Prioritising over what? • The critical importance of demand?

Demand and the public services

• Demand in a non market system – No price mechanism – And demand is a bad thing right?

• Understanding where demand comes from – Individuals

• Personal services – Society

• Economic prosperity • Social well being • Public service is not philanthropy

Implications: What are we trying to achieve? • Are we listening to the right people? • How do we establish service standards? • Looking after the asset • The difference between private aims and

public aims • Remembering what we are trying to do • Building an effective model for contract

letting and management

Does contracting have to be linear? • Continual improvement

– Lean models • Flexibility

– Living in an uncertain world • Performance (as opposed to contract)

management? – Data collection – Benchmarking

• Can (should) we leave it to the contractors?

Benchmarking: Some Key Issues • Limitations of data benchmarking • Where does the data come from? • Is the comparator sample statistically

valid? • Understanding key accounting differences • Whose responsibility is it? • How robust is the process?

www.apse.org.uk

www.apse.org.uk

Contact details Andy Mudd, Principal Consultant

Email: [email protected]

Association for Public Service Excellence 2nd floor Washbrook House, Lancastrian Office Centre, Talbot

Road, Old Trafford, Manchester M32 0FP. telephone: 0161 772 1810

fax: 0161 772 1811 web:www.apse.org.uk

Partnering

Win-Win Principles

Good intentions

and Common objectives

Ethics into Business

Working Relationships based on trust and teamwork

Proactively avoid

problems & prevent

disputes – No blame process

Step towards

Flexibility

Foster innovation & improvement

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What are you basing your decisions on?

Mark Bramah, Assistant Chief Executive

1. BACKGROUND AND CONTEXT

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Difficult environment for contractors

• Contractor failures – Connaught (2010), Rok (2010), Kinetics (2011).

• 48 building companies a week going bust (Spring 2013).

• Mergers and acquisitions – Mears takeover of Morrison.

• Morrison operating loss for 2011/12 £19.8m on a £290m turnover.

• Kier announced takeover of May Gurney (finalised July 2013)

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“The times they are a changing….”

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• HQN estimate that 30 to 40 housing providers across the UK have opted to manage repairs work in-house.

• Tipping point was the VAT increase to

20%.

• In-house teams no VAT on Labour and no profit element.

• Typically £5k saving on every operative paid an annual salary of £25k.

• ‘Control’ and ‘flexibility’.

Different approaches to service delivery

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In house

Contract Failure

Value for money

Service integration/re

design

Shared services

Management structures

Back office

Economies of scale

Arms Length

Teckal Companies

Trading Companies

Trusts

Strategic Partnerships

Business and support services

Private Finance

Initiative (PFI)

Joint ventures

Outsourcing

Environmental Services

Adult Social Care

Co-Ops and social

enterprises

1. USING EVIDENCE TO SUPPORT YOUR DECISIONS

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Measuring Performance in “tough times”

“Good performance information is the lifeblood for councils trying to deliver value for money and improved services with less money”

Michael Hughes, Former Director of Studies at the Audit Commission 2012

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Performance information has many uses … and many users. • Measuring progress • Giving an account • Finding areas for

improvement • Publicising

achievements • Challenge and review

• Citizens • Service users • Community and

lobbying groups • Elected members • Commissioners • Managers • Staff

Why compare performance?

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3. FITTING A PERFORMANCE FRAMEWORK

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… contributing to decisions at all levels …

Outsourced service

providers

Corporate

(setting direction)

Executive

(allocating resources)

Operational (day-to-day

management)

Direct

Direct Inform

Inform

Inform

Direct

Transformational

Outcome

Output

Process

Input

Transactional

Knowledge for

decision-making

… and using comparisons at all levels …

Outsourced service

providers

Corporate

(setting direction)

Executive

(allocating resources)

Operational (day-to-day

management)

Direct

Direct Inform

Inform

Inform

Direct

Transformational

Strategic (WHY?)

Process (HOW?)

Input (WHAT?)

Transactional

Knowledge for

decision-making

Using performance information in organisations

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4. EXAMPLES FROM PERFORMANCE NETWORKS

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About Performance Networks

• The largest voluntary public sector benchmarking service in the UK

• 180 active local authorities enabling like-for-like comparisons

• Set up in 1998, 14 years of trend data

• 15 service areas

• Developed by practitioners and reviewed annually by the working group

• Independently validated

• Partnerships

PN Service Areas

1. Building cleaning 9. Parks, open spaces and horticultural services

2. Building maintenance 10. Refuse collection 3. Cemeteries and Crematoria 11. Sports and leisure facilities

management 4. Civic, cultural and community venues

12. Street cleansing

5. Culture, leisure and sport 13. Street lighting 6. Educational catering 14. Transport operations and

vehicle maintenance 7. Highways and winter maintenance

15. Welfare catering

8. Other (civic and commercial) catering

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Different uses of the data

• Establishing a baseline. • Internal benchmarking. • Looking at processes. • Scrutinising performance. • Identifying best practice. • Direction of travel. • Holding contractors to account.

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Understanding costs

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Understanding trends

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What is your performance agisnst your peers?

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Performance at a glance

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Direction of travel – No of jobs undertaken within target time (exc voids)

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Case study for commissioned services – A Midlands District Council Strategic outsourcing of a range of environmental

services inc waste management, parks and street cleansing

Contract management review concluded: • Performance failures on the contract against a number of KPIs • The need to further improve the robustness of current data and

reporting systems. • Ambiguities in the contract and issues with clarity and interpretation. • Incomplete fulfilment of contract requirements and gaps in

supporting strategic and management documentation.

Data and reporting systems “With an outcome based contract having accurate data is essential in order to effectively monitor the performance of the contract. Any anomalies with the data can have a direct effect on confidence and trust between all partners.” “ The ‘Council’ needs to continue to ensure that ‘the contractor’ is held to account in relation to all aspects of the contract and the contract team within ‘the council’ needs to be fully empowered and supported to use the tools available to drive delivery.”

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Case study 2 – A Southern unitary council

• Street cleansing and parks. • Contract management of quality, performance and cost

of external contractor. • Performance networks as a tool for ‘smart clienting’. • Bespoke data used in a challenge forum with the client

and contractor and APSE as an independent ‘third party’. • Contractor came out lower cost than family group (exc.

Client costs), but worse on customer satisfaction. • Dynamic robust exercise giving the local authority client

confidence to demand more/different from the contractor. www.apse.org.uk

Conclusion - Why use performance information?

Priorities

Budgets

Value money

Service levels, volumes and entitlements

Service decommissioning

New ways of involving service providers and users

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www.apse.org.uk

Contact details

Mark Bramah, Assistant Chief Executive


Association for Public Service Excellence 2nd floor Washbrook House, Lancastrian Office Centre, Talbot Road,

Old Trafford, Manchester M32 0FP. telephone: 0161 772 1810


www.apse.org.uk




©JUSTHOUSING2012

“Of Course we’re not getting ripped

off by our contractors! Then again, maybe we are….”

Dr Graham Coupar

Contacts:

Mobile: 07725 025409 Email: [email protected]

mailto:[email protected]

©JUSTHOUSING2012

Partnering – it wont bite..

[2001] Housing Forum

Partnering – will it bite.. [2005] Inside Housing

Partnering – a decade lost [2009 annual conference]

Partnering – the evolving definition…

©JUSTHOUSING2012

Background

⌂ 20+ years in the social housing asset management sector

⌂ 11+ years as a consultant

⌂ Personally reviewed in excess of over 100 DLOs

⌂ Gained a PhD by researching the delivery models of repairs and maintenance in the sector – including DLOs

⌂ Claims to have seen the best… and the worst repairs service!

©JUSTHOUSING2012

Why spend 4 years researching this??

⌂ KLOE 3 push for partnering – or else!

⌂ Clear indicators (not evidence) of higher cost / lower outcomes

⌂ A £1 for every time a ‘partner’ said we would love to go open book with you…

⌂ Theory was not transposing into practice

⌂ I needed to prove myself wrong or all those who thought they had found the universal panacea in partnering.

©JUSTHOUSING2012

The market

⌂ 4 million properties

⌂ Spilt: 2 million LA (Inc. ALMO) / 2 million RSLs

⌂ £1.2 billion spent annually on Repairs

⌂ £0.6 billion spent annually on Voids

⌂ More national contractors enter the market due to the market conditions

⌂ High profile failures

©JUSTHOUSING2012

The Market

⌂ Group structures = fewer / larger clients – but economies of scale are rarely realised;

⌂ JVC’s / LLPs – jury is still out;

⌂ DLOs – resurgence in interest;

⌂ Research showed that some of the large national contractors delivered the lowest outcomes

⌂ Delivering R&M consistently well in a VFM framework is the preserve of the few

©JUSTHOUSING2012

Research project

⌂ Four year project with the Nottingham Trent University

⌂ Looked for tangible benefits of differing approaches to procurement

⌂ Looked at how the procurement model worked in practice

⌂ Looked at which ‘type’ of service provider achieved the best outcomes

©JUSTHOUSING2012

Cost

©JUSTHOUSING2012

Time

©JUSTHOUSING2012

But you clients are not perfect!

⌂ Complacency - the ‘passive’ client; ⌂ Failure to take decisions; ⌂ Not challenging on poor performance; ⌂ Failure to pay on time; ⌂ Failure to provide client information (e.g. an

accurate address list is challenging for some!); ⌂ Poor process control

©JUSTHOUSING2012

When it goes wrong

⌂ MIGRATE BACKWARDS IF THERE IS A PROBLEM (i.e. reverts to a traditional role);

⌂ CLIENT FAILS TO CHANGE THEIR SYSTEMS – (process and procedures frustrate the arrangement);

⌂ CLIENT AND/OR CONTRACTOR ENTER INTO THIS WITH ‘LIP SERVICE’;

⌂ PAY MORE FOR THE SAME (i.e. lack of accountability); ⌂ FAILURE TO INTEGRATE CUSTOMER AND SUPPLY CHAIN; ⌂ LACK OF AWARENESS (some client officers have skills gaps that are

an obstacle to the process); ⌂ OVERLY COMPLEX CONTRACTS

©JUSTHOUSING2012

Common Contractor sins

⌂ CHEAP AS POSSIBLE – use of the preamble is ‘patchy’; ⌂ QUALITY CONTROL / PERFORMANCE MANAGEMENT is often not

robust and vague; ⌂ SEEKS NO REAL INVOLVEMENT OF CLIENT AND/OR SERVICE

USER; ⌂ LITTLE FOCUS ON THE ‘END USER’; ⌂ SOME EVIDENCE OF NOT ENGAGING SUPPLY CHAIN IN

PARTNERING BENEFITS (i.e. do incentives go down the chain??); ⌂ OPEN BOOK; ⌂ CORE BUSINESS – if you are to operate successfully in this market,

you must understand the clients business and how they are regulated; ⌂ BASH THE SUBBY – as well as don’t pay.

©JUSTHOUSING2012

Conclusions

⌂ Partnering is an ‘abused’ concept – it is often more of the same with a badge of partnering;

⌂ The research sample showed that if you look at the service outcomes, DLOs and smaller / regional contractors deliver better on time, cost, quality than national contractors;

⌂ If you look at tender costs – national contractors are cheaper.

©JUSTHOUSING2012

Conclusions

⌂ Organisations adopted Partnering because KLOE 3 said so…

⌂ There is no body of evidence that robustly shows partnering within R&M has produced sector benefits.

⌂ There is evidence to show some paid more and received less

©JUSTHOUSING2012

Final words…

⌂ Residents of one housing provider thought the RSL had changed its name to Thrifty. The ‘partner’ had lease hired so many vans from this hire company and had no regards to cost as it was ‘open book’

⌂ Another invited their ‘partner’ to a residents fun day. The partner made a number of contributions (pens, stickers etc.) and then charged it all back including time attendance to the client.

©JUSTHOUSING2012

Final words…

⌂ RSL with a failing and non compliant gas service provider. Took the service in-house and delivered an externally rated excellent / cost effective service within 8 months.

⌂ Regional contractor with excellent reputation and long track record – took over by Connaught. Quality plunged, costs increased and branch manager incentivised to ‘cover everything in red’.

©JUSTHOUSING2012

Questions…

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What are your options?

Andy Mudd, Principal Consultant

Value from existing arrangements? • Understanding the contract • Volumes • Variations • ‘Best value’ clauses • Performance management • Client side costs

Basic principles of efficiency - whatever the delivery arrangement • Efficiency means meeting the genuine

demand for service at lowest cost – Tackling causes not symptoms – Business processes – Work systems – Use of assets

Genuine demand?

• Do we really know what the underlying demand actually is? – Knowing who the ‘customer’ is – Does consumerism cloud our judgement?

• Do we manage expectations effectively? – Publishing service standard

• Can we manage underlying demand down? – Design – Engagement

Tackling cause not symptoms: changing behaviour

Street cleaning

Enforcement

Education

Lower

Higher

Behaviour changing potential

Lower

Higher

Resource swallowing potential

Tackling cause not symptoms: changing behaviour

Asset repair

Asset maintenance

Asset management

Lower

Higher


Lower

Higher


On a bigger scale: tackling causes saves money

Reactive treatment for stroke, heart disease,

diabetes

Prophylactic medication

Increasing physical activity Healthy school meals


Lower

Higher Lower

Higher


The contract

• Does it prioritise (incentivise) efficiency? • Minimising reactive repairs

– Appropriate maintenance regime – Tenant behaviour – advice, enforcement

• Customer contact processes • Appointment systems • Supply chain management • Work system • Transport

Volume and variations

• Does the contract guarantee volume of work?

• Is there a perverse incentive in favour of reactive work?

• Is all work being paid at the contract rate? • What is the level of variations? • Is it possible to supplement with other

delivery arrangement to cut variations

Best value

• What does the contract say about best value and/or continual improvement?

• Are you managing inputs against an output spec?

• What measures are in place? • Is the client side adequate? • How do you account for council side

costs?

Re-negotiation

• Commercial reality – Recognising conflicting interests – Contracts must be commercially viable to be successful

• The balance of power in the procurement cycle – Pre contract with contracting party – Post contract with contractor

• Data data data – Financial performance – Cost ratios – Staffing and productivity – Commerciality – Ratio of reactive to planned work

The right strategy at the right time

Contract timeline

Power of Council

Contracting strategy

Negotiating strategy

Contract management strategy

Contracting strategy

Negotiating strategy

Contract management strategy

Beginning End/Renewal End/Renewal

End of contract options

• Start planning early • All options should be kept open

Its no longer just make or buy

Council ‘controlled’ options

• In-house variants • Trading

accounts • Budgets • Commissioning

council model • Street-scene

and variants

Semi-independent council ‘owned’

options

• Teckal (wholly owned) companies • ALMOs • General service

providers • S95 – trading

companies

Independent options

• Council established NPDOs

• Council approved M(E)BOs

• Other ‘social enterprises’

• Old fashioned contracting out and variants

Hybrid options

• Trading companies that are also Teckal Companies

Shared Options

• Jointly owned companies

• Other joint ventures

• Administrative shared arrangements

And to confuse things further • Big society initiatives

– Small state and public services • Community right to challenge

– Forced competition but will it lead to contracts for social enterprises?

• Ever evolving European case law – Teckal – Part B competition

• Austerity – Fragmentation v shared services – Income generation and commercialism

So how do we choose the right model? • We don’t • The model should emerge

– What are we trying to achieve? – How will we know whether we have achieved

it? – What is the best way to achieve it?

• Starting with the solution is the wrong approach

Back to basics

• Knowing what we need to do? – Principles of demand analysis – The potential for demand management

• Figuring out the best way of doing it? – Form must follow function

• Joined up thinking – But ….

www.apse.org.uk

www.apse.org.uk

Contact details Andy Mudd, Principal Consultant


Association for Public Service Excellence 2nd floor Washbrook House, Lancastrian Office Centre, Talbot

Road, Old Trafford, Manchester M32 0FP. telephone: 0161 772 1810


Creating a Successful DLO ©JUSTHOUSING2013

The Case for Direct Delivery

⌂ Research evidence strongly indicates DLOs produce better outcomes than contractors

⌂ External contractors, including under partnering, typically recover 35% of their total cost as preliminaries and overheads, on top of the cost of the work even when this is subcontracted

⌂ DLOs give the client effective control and full transparency over the entire repairs process and enhance accountability


Building a Firm Foundation

Building Blocks of Success:

⌂ Operational Structure-(people) ⌂ Process Design and Management-

(process) ⌂ Performance Management-(culture) ⌂ Health & Safety and IT–(systems)


Operational Structure

⌂ Lean operational structure ⌂ Resource scheduling alongside the

contact centre ⌂ Quality management must sit with

operational delivery and line management of the workforce

⌂ Appropriate staff to operative ratios and multi trade supervision


Completions Information on completion and redefinition

of work carried out notified to CCS

Satisfaction and Quality

Telephone survey carried out any non conformance

audited.

Customer Service request received

Works Orders Raised

CCS Processed in line with repairs policy.

Completions Information on completion and redefinition of work

carried out notified to CCS

Follow on repair. Appointment made by repair contractor

direct with tenant and feed back provided to CCS

Urgent Repairs

Not appointed

Reactive Repairs Appointments made at initial contact

via appointment diary

Complex Repairs Inspection appointment made at initial

contact via appointment diary.

Progress chasing or further information requests responded to.

WORKS ORDER PROCESS


Process Management

⌂ Clear processes and procedures to control workflow, operative deployment and productivity

⌂ Regular daily contact to update work done ⌂ Appointments made during the call from the

tenant ⌂ Customer Services Team work closely with

the teams delivering the service ⌂ Only 100% appointments kept is an

acceptable KPI ⌂ Operatives work flexibly to meet customer

needs


Performance Management

Culture of Managerial Accountability: ⌂ Financial – performance against budget, separated

between at least reactive, voids, programmed and subcontracting

⌂ Operational – measuring completions, appointments, overdue jobs and learning from complaints

⌂ Productivity – analysis operative performance against income

⌂ Customer Focus – Detailed analysis from the tenant perspective, reviewing monthly survey statistics and trends. How did we involve them and what do they expect? Texting can play a major role in obtaining accurate tenant satisfaction information


Information Technology

⌂ Selection of the right IT system to match

the outcomes sought and the business processes adopted

⌂ Effective with hand held technology to give full functionality in setting appointments, allocating work and job progression

⌂ Full job visibility required for Contact Centre to inform customers chasing progress


Health and Safety

⌂ Strong emphasis on providing information and training to achieve the highest standards of health and safety and a robust health and safety management system

⌂ Extend this to include the supply chain ⌂ IT Management System to hold the risk

assessment for every task and COSHH assessments for all materials


Culture and Motivation ⌂ Openness and trust with staff. ⌂ Continuous communication and involvement of

staff in business development ⌂ Realistic target setting linked to incentives &

rewards ⌂ Creating pride and passion in the business and

service performance ⌂ Continuous training and development

programme ⌂ Visible leadership and hands on management ⌂ Programme for generating employee ownership


First Steps

⌂ The Management Team should publicise their

ambitions for the development of the DLO throughout the parent organisation

⌂ A time related SMART Action Plan should be developed and implemented

⌂ Each action point should have a nominated “Project Lead Officer”

⌂ Key milestones should be agreed with the team against the Action Plan

⌂ A Resource Plan needs to be developed to ensure that the DLO project is properly resourced to deliver a high performing organisation

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of course we’re not getting ripped of by our contractors! presentations... · 2013. 11. 22. ·...

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