project 2 future options to improve the (non- … 2 – future options to improve the (non-reactive)...

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Project 2 – Future options to improve the (non-

reactive) DLO

echelon Consultancy Limited Ph: 01707 339800 www.echelonconsultancy.co.uk

http://www.echelonconsultancy.co.uk/

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Contents

1 Executive Summary 4

2 Current Market Trends 6

2.1 Summary 6

2.2 Key issues from the Budget 2015 6

2.3 Impact on Local Authorities 7

2.4 Insourcing/Outsourcing within the sector 8

3 Current DLO Performance (excluding Reactive Repairs) 10

3.1 Active Consultation 10

3.2 Planned works – current service and initial recommendations 10

3.3 Electrical Mechanical & Environmental – current service and initial

recommendations 12

3.4 Performance 14

3.5 How does the DLO performance compare to peers? 15

3.6 Planned Works Costs 16

3.7 Gas Serving and Breakdown Costs 17

3.8 Initial conclusions 18

4 Contracting options available to the Council 20

4.1 Primary options 20

4.2 Insource model – to retain the existing commercial arrangements 20

4.3 Outsource model – via OJEU procurement to an external contractor 21

4.4 Wholly Owned Subsidiary – Lampton 360 22

4.5 Client service standards to be defined for Lampton 360 24

4.6 Indicative set-up costs to consider 24

5 SWOT Analysis for transfer to Lampton 360 26

6 What could be improved through a transfer to Lampton 360? 28

6.1 Potential productivity gains 28

6.2 Potential quality gains 29

6.3 Personnel requirements and workforce development 31

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6.4 Cultural Change 32

7 Risks 34

7.1 Contracting out versus retention 34

8 Recommendations 36

8.1 Recommendations 36

9 Next Steps and Actions 37

9.1 Generally 37

9.2 Actions for Hounslow Housing 37

9.3 Actions for Lampton 360 39

9.4 Timescales 40

Appendix 1 – Case Studies 41

Case Study 1 - Haringey 42

Case Study 2 – United Welsh 45

Case Study 3 – Echelon 4* Gas Model 48

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1 Executive Summary

1.1.1 echelon Consultancy has been engaged by Hounslow Housing to complete

the following report, to look at the options available to the London Borough of

Hounslow (Hounslow) with its current teams to deliver all non-reactive repair

works to its tenants in the future. We were asked in particular to focus on how

different models would enable the Hounslow to deliver service improvements

whilst also reducing costs, so this has been at the forefront of our thinking in

compiling the report.

1.1.2 This follows and builds on a programme of change already embarked upon by

Hounslow Housing, including the recent review of the responsive repair

service.

1.1.3 echelon is very grateful to the Members’ Group for allowing us to contribute to

the group and for Members’ feedback and contributions to this report.

1.1.4 In preparing the report we have tried to follow a logical sequence as follows:

(1) to analyse the current position and outline from that some initial

recommendations on key issues that need addressing

(2) to set out options for addressing those issues and their relative pros and

cons

(3) to identify service areas for improvement, along with tangible outcomes

to aim for

(4) to recommend the option we feel would best enable achievement of

those outcomes

(5) to specify a preliminary set of actions to deliver the recommended option.

1.1.5 This has been based upon:

(1) documentary evidence about the structure, delivery and performance of

services provided by Hounslow

(2) detailed discussion with staff from across all areas of the maintenance

service and at all levels of the organisation

(3) feedback from elected Members

(4) our knowledge of the public housing sector and national context

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(5) our experience in reviewing, procuring, mobilising and helping to deliver

asset management contracts and services elsewhere.

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2 Current Market Trends

2.1 Summary

2.1.1 National housing policy changes made by the Government over the past few

years have had, and will continue to have an impact on Hounslow and many

other Councils across the country. Welfare reform and changes in respect of

homelessness in particular, have resulted in increased pressure on local

authority resources and indeed public services more generally.

2.1.2 Most recently, the announcements on Right to Buy and through the 2015

Budget will have prompted all local authorities and registered housing

providers to consider what opportunities they have to mitigate and manage

the effects of those.

2.1.3 For Hounslow, these national changes must be viewed in the context of what

has already been a time of significant change and challenge. Whilst some of

the challenges should not be underestimated, they do provide an environment

in which to explore positive options to help continue transforming Hounslow’s

services for its residents.

2.2 Key issues from the Budget 2015

2.2.1 The main points impacting on the housing sector are summarised below:

Social housing rents are to be reduced by 1% per annum for four years from 2016

Social tenants with household incomes in excess of £40,000 in London (over £30k elsewhere) will have to ‘pay to stay’, paying either market or near-market rent – it is not yet clear how registered providers are expected to enforce this

Housing Associations will be able to retain the increased rental income; Local Authorities will have to pay the difference back to the Treasury

The household benefit cap is to be reduced to £23k in London (£20k outside)

Working-age benefits are to be frozen for four years

Tax credits and Universal Credit will be limited to the first two children

There will be no automatic entitlement to housing benefit for 18-21 year olds

There is to be a restriction on lifetime tenancies

Property tax changes were also introduced, such as ‘Buy to let’ mortgage tax relief, Rent-a-Room tax relief and Inheritance Tax.

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2.2.2 The reduction of social housing rents by 1% per annum for (at least) four years

will have significant impact for registered housing providers. To give an

indication, by year 5 rents will be on average around 14% lower than current

business plan projections. The graph below demonstrates the divide between

the previous expectations against those now forecast:

2.3 Impact on Local Authorities

2.3.1 The recent Budget will have some specific implications for stock owning local

authorities.

2.3.2 Through the Housing Revenue Account reforms in 2012, local authorities

assumed responsibility for a proportion of the national debt. To service those

debts loans were taken out, based on business plan projections drawn up to

reflect rent setting policy at the time.

2.3.3 Authorities are now faced with significant cuts in rental income, whilst still

having a requirement to repay what remains of the debt taken on in 2012.

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2.3.4 Local authorities will not be able to retain the ‘pay-to-stay’ rental uplift, and will

only be able to retain 50% of any Right to Buy receipts.

2.3.5 Additionally, authorities will be obliged to sell high value stock assets and pass

the receipts back to the Exchequer.

2.3.6 Whilst the full impact of these changes is yet to be understood, potential

outcomes are that local authorities consider merging or considering options to

transfer stock. Non-statutory service provision may also be affected, as

housing associations re-evaluate their business plans and priorities in light of

the Budget.

2.4 Insourcing/Outsourcing within the sector

2.4.1 There is constant deliberation within the sector over whether repairs (and

other asset management related services) are best delivered through an in-

house (insourced) or externally delivered (out-sourced) contract. In our

experience there is no ‘one-size fits all’ solution.

2.4.2 Many organisations have existing DLOs that, with the necessary levels of

investment and commercial management, are delivering excellent value for

money services (such as Homes for Haringey).

2.4.3 Other organisations have decided to outsource their repairs service with an

external contractor, although in the most successful models the client and

contractor have formed very close working relationships and have become

almost symbiotic. An example of this is the relationship that Origin has

developed with their Service Provider, Gilmartins.

2.4.4 However, over the last few years a third way has developed that several

organisations have developed.

2.4.5 The organisations that have taken the opportunity to review the requirements

of their service have seen the benefits of an internal delivery model, but are

wary of the commercial risks in creating one from ‘scratch’. As a result, we are

seeing an increase in hybrid models where a new commercial entity is created

to deliver the asset management service that is wholly owned by the

Contracting Authority. An example of this is Celtic Horizons which is a wholly

owned subsidiary (WOS) of United Welsh (which is commercially managed by

Mears).

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2.4.6 There is a trend towards these hybrid models as they un-shackle the asset

management delivery from the rest of the organisation and allow the entity to

run on a more commercial basis. As recommended throughout this report a

critical success factor for both Hounslow and Lampton 360 would be the

appointment of a high calibre Commercial Director to run the new entity,

should that be the option decided upon.

2.4.7 The above notwithstanding, it is acknowledged that whichever model is

chosen, the programme of transformational change already embarked upon

will need to continue and be further built on. When considering the options it

is essential that Hounslow fully understands the needs of the service, as

identified in Stage 1 of the process and set out in our previously supplied,

detailed report.

2.4.8 Positive work is already underway with the retained DLO and has delivered

important improvements In preparing this report we have therefore

extrapolated the learning and outcomes in respect of the other parts of the

service from the Stage 1 DLO options report, developing those into a focussed

appraisal of how best to evolve Hounslow’s approach to asset management

and planning.

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3 Current DLO Performance (excluding Reactive Repairs)

3.1 Active Consultation

3.1.1 The Housing Services department is currently undertaking an extensive

business transformation programme, aimed at improving the efficiencies

within the department and increasing customer satisfaction.

3.1.2 The staffing and structure that are currently in place were inherited from

Hounslow Homes. They included a high volume of temporary staff and

suffered from a number of legacy issues, involving the loss of management

and supervisory capacity, a lack of effective planning and asset management,

and a lack of IT and business systems.

3.1.3 As referenced above, one aspect of the consultation currently underway is to

include within the new structure a dedicated rapid response team for day to

day repairs, which will allow Hounslow to focus on improving the delivery of

its frontline repairs and maintenance services to residents. This part of the

DLO will comprise of 27 multi-skilled operatives.

3.1.4 This report therefore focuses on what options there are for the Council for the

remaining aspects of the DLO, which currently delivers the Council’s planned

and major works, compliance and cyclical works programmes.

3.2 Planned works – current service and initial recommendations

Current service

3.2.1 The Planned Works team is providing a comprehensive service to Hounslow.

It is delivering a significant sized programme of circa £3.2M per annum and

on average opens 7-8 kitchens and bathrooms each week.

3.2.2 The works in each property may include adaptations, kitchen and bathroom

renewal. These are generally completed within 5 days, with only minor follow

up works and/or painting to be completed the following week.

3.2.3 The service operates with the support of a Tenant Liaison Officer, who

facilitates resident contact, the management of colour choices and the start

and smooth-running of works on site. The process is highly organised and the

turnaround times are as good as any we have encountered within the sector.

3.2.4 The cyclical decorations programme is planned out effectively and keeps the

full team busy all year round, predominantly working on a 7-year painting cycle

using the Dulux paint range purchased through Jewson.

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3.2.5 Specialist works are tendered where applicable, for example scaffolding. This

has resulted in increased spend on specialist contractors, since the DLO used

to provide such services, but there is an understanding of the rationale behind

the change.

3.2.6 The works programme is issued to the Planned Works team by the Asset team

now based within the Civic Centre. The planned works team then establishes

a delivery schedule, surveys the sites and builds up a price based on the

Series 400 Schedule of Rates (SORs).

3.2.7 There is no clearly defined Client and Contractor role within the Planned

Works team, and despite an understanding this is required the focus has

remained on works delivery.

3.2.8 The operatives’ feedback about working for the Planned team, however, is

generally very positive, in particular the way works are managed and arranged

for them by the team and the TLO.

3.2.9 The kitchens used are Premier kitchens. The kitchens arrive at a separate

store not located at the depot and operate on a ‘just in time principle’ to reduce

the storage need. All kitchens should come as a single pack, and if they are

not the Store man will package them up for the teams to collect and fit.

3.2.10 It is hard to draw a direct comparison on costs with other services, because

the costs at Hounslow are for total kitchen and bathroom refurbishment plus

possible adaptation. On average this equates to around £9.5K per property,

which seems expensive compared with the kitchen and bathroom costs

detailed in section 3.6.2.

3.2.11 The teams also expressed their frustration at not being able to offer

apprentices full time opportunities after completing their courses, and the need

for a central resource to manage the 24 apprentices into the DLO to replace

the now vacant position – if the intention is for the DLO to continue with

supporting apprentices.

3.2.12 The TLO measures customer satisfaction on planned works, but there do not

appear to be any other KPIs collected and formally reviewed by the team.

Between April and August 2016, 115 tenants were surveyed and 100% were

satisfied with their new kitchen and bathroom.

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Initial recommendations

3.2.13 The team would benefit from support or a dedicated planning resource. The

programmes are currently looked at in isolation and there is not a clearly

defined point at which kitchens fall into the planned works programme from

voids or can be added, whilst in reality that does happen.

3.2.14 There is potential for greater efficiency in respect of the delivery of materials,

for example development of a palletised delivery service to reduce down-time.

3.2.15 There should be a mutually agreed set of KPIs for the planned work streams

that are published to demonstrate the good work being achieved.

3.2.16 The finance function within the team also needs to be addressed, ideally to

provide a dedicated function to help track the budget costs and outturn costs

of all the work streams being managed within Planned Works.

3.2.17 A more clearly defined process should be put into place in relation to

adaptations works.

3.2.18 There are currently no joint estate inspections between the client and the DLO

teams. These should be investigated and ideally implemented when there are

ongoing planned works in an area, to help build relationships between the

Planned Works, Housing Management and Communities teams, plus the

tenants local to the area in which they are operating.

3.2.19 Clarity is also needed in respect of apprenticeships, and the expectation

around these for the service moving forward.

3.3 Electrical Mechanical & Environmental – current service and initial recommendations

Current service

3.3.1 As evidenced by the comprehensive compliance report supplied to us, the

EME team is working hard to manage the compliance of the stock and

maintain a good service to all elements of the DLO. Gas compliancy for

domestic properties currently sits at 99.77% and there has been some

demonstrable improvement on performance and work planning.

3.3.2 Significant productivity savings have also been made, for example through

the supplies and gas contracts; but more is needed.

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3.3.3 As with the planned teams, whilst there is an understanding of the need for

Client and Contractor functions to be fulfilled, there is currently insufficient time

or workforce resource to complete both tasks since the focus has remained

on compliance delivery.

3.3.4 There is a high volume of cases and administration work performed by a small

management team for the size of the business unit (circa £10M Total Order).

This results in frustration with the quantity of emails and cases, and means

that if Lagan requests are not dealt with immediately they very quickly build

up to a level that causes a significant backlog.

3.3.5 Frustration was expressed that decisions are often changed around what

services are included or excluded within sheltered stock. Whilst the teams are

happy to undertake the work, they would like greater consistency on what’s

included and clarity on the levels required each year in order to manage the

service more effectively.

3.3.6 Gas servicing is being undertaken by T Brown and managed by the DLO. T

Brown is performing well under the contract originally procured through the

London Area Procurement Network (LAPN). The contract is its 7th, final year.

3.3.7 Like the Planned Works team, there appears to be no support for the financial

administration of the budgets and outturn costs, or general monitoring of

spend.


3.3.8 A change already in hand is to remove the administration of key fobs to a

central location. This would be particularly beneficial to the team and should

be followed through.

3.3.9 Hounslow should consider, as soon as possible, options for re-procuring the

gas service, with the potential for evolving it to deliver a 4* contract instead of

the current 3* model. echelon has recently successfully developed the new

4* model, a case study of which is set out in Appendix 1.3. Details of potential

savings are included.

3.3.10 There is a major need to address issues of project cost, management of value

for money, financial management and control, and workforce costs.

Dedicated support should therefore be put in place for the financial

administration and control in respect of EME works.

3.3.11 Further support is also required in respect of workforce supervision and

deployment to fully understand and manage capacity and productivity.

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3.4 Performance

3.4.1 Below is a summary from the Hounslow Housing Performance Dashboard for

August 2015, showing key performance figures for repairs and voids.

Indicator2013/14

Target

2013/14

Performance

Upper

Quartile

Benchmark

2014/15

target

Q4

2014/15

Outturn

June

Outturn

July

Outturn

August

Outturn

Live Gas CP12 100% 99.67% 99.99% 100% 99.89% 99.74% 99.8% 99.77%

Satisfaction with

repairs - Call Backsn/a n/a 9.72 9 64.5% 86.05% 93.25% 84.18%

Satisfaction with

Major Repairsn/a 77% n/a 79% 93.0% 98.50% 98.7% 98.5%

Urgent and

Emergency repairs

completed on target

98.1%

(combin

ed with

emerge

ncy)

97.70% 98.34% 98.10% 93.8% 93.8% 98.85% 97.49%

% of repairs

completed in one visitn/a 77.70% 89.93% 85% 89.3% 91.72% 91.53% 84.87%

Average time void is

in repairs (General

Needs only)

12 days 21.9 days 11 days 12 days25.59

days

37.64

days

35.65

days14.85 days

Average no of days to

relet void (General

Needs only)

30 days 44.8 days 21 days 30 days66.29

days52.5 days

49.87

days32.85 days

5% or less

out of target

More

than

5%out

of target

Repairs

Voids - HHRS Repairs

Voids

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3.5 How does the DLO performance compare to peers?

Performance comparison

3.5.1 For the purposes of benchmarking we are drawing on data from our own

benchmarking group, amip (www.amip.org.uk). We have used this because

we facilitate the group and as such are confident in the accuracy of the data.

AMIP Performance Benchmarking (based on August 2015 Hounslow

data)

KPI

Hounslow Score

AMIP High AMIP Low AMIP Ave HH

C-Satisfaction with major works

98.5% 100% 86% 95.01%

Emergency completion

100% 100% 71.74% 94.78%

Urgent Completion

96.74% 100% 89% 96.41%

Routine Completion

- 100% 77% 93.88%

Appointments Kept

Not Measured%

98.29% 89.04% 94.33%

Right First Time*

85% 99.59% 86.19% 92.82%

Recalls

Not measured

Not Measured

Not Measured

Not Measured

Void Completions

- Not Measured

Not Measured

Not Measured

Void End to End (in calendar days

32.85 (General Needs)

9 Days (All voids)

37 Days (All voids)

18 Days (All voids)


3.5.2 We recommend a general overhaul of key performance indicators and how

those are being measured and managed.

3.5.3 In particular we believe there are improvements to be made in relation to

customer satisfaction data.

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3.5.4 For example, only one question is initially being asked to determine a score,

which is: “on a scale of 1 to 10, with 1 being the lowest and 10 being the

highest, how do you rate the repairs service from when you first made the

appointment to when I am asking this question now?” If the resident scores

less than 10 a subsequent question is asked, which is: “please tell us how we

could have made it 10” It is unclear what, if anything is being done with the

qualitative feedback gained from this secondary question.

3.6 Planned Works Costs

Current situation

3.6.1 The costs that we have been provided with anecdotally put the average cost

of a kitchen and bathroom at around £9K. This cost is spread across the

programme for the year however, and may include kitchen, bathroom and/or

adaptations works. Costs at Hounslow are not recorded in a comparable

manner but the quoted figure of £9K would indicate a high cost against our

benchmark data.

3.6.2 It is difficult to undertake an exact benchmark comparison as the specification

and sizes vary. However, to provide a reference point we have provided a

comparison of property size archetypes on a comparable specification for

kitchen renewals as follows (for a Housing Association in the southern Home

Counties), based on the 3 final tender prices:

Archetype Kitchen

Cubic capacity Comp Framework Price

Echelon Tender Price

1 Bed 1.7m3 £3,690.14 £3,595.86

2 Bed 2.0m3 £3,802.74 £3,769.52

3 Bed 2.3m3 £3,924.38 £4,015.30

4 Bed 2.6m3 £4,194.28 £4,291.14

3.6.3 We have limited benchmark data on the cost of bathrooms, but have provided

below the costs of three recently procured planned works contracts in the

London area where bathroom replacements are included:

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3.6.4 Detailed analysis is required to understand the full breakdown of planned

works costs at Hounslow in order to form a strategy for making efficiencies.

The present mechanisms for recording and managing costs do not allow for

this so, as elsewhere noted in this report, it is recommended that more robust

arrangements be put in place for financial management, planning and control.

3.6.5 Introduction of the Price Per Property model would assist with financial

management, reporting and control.

3.7 Gas Serving and Breakdown Costs

Current situation

3.7.1 Hounslow currently engages one external gas contractor to undertake gas

servicing and breakdowns via a traditional all-inclusive 3* model. The

contractor and their 3* rate are as follows:

T-Brown - £140.14 (+VAT @20%) = £ 168.17 gross

£140.14 – for a domestic property with boiler not under warranty.

£98.85 – for a domestic property with boiler under warranty (all new boilers come with 5-year warranty)

£17.44 – for district properties where only a drop test is required.

These prices are for 2014/15 and are target prices on the open book contract.

Client 1 Client 2 Client 3 Averages

£1,883.89 £2,694.48 £2,559.00 £2,430.30

£1,638.35 £3,294.56 £2,466.46

£1,359.45 £2,491.62 £1,925.54

£377.78 £894.90 £636.34

£176.76 £291.49 £234.13

Client

Replace wash hand basin as part of above item including

connection to existing services, replacement of splash

back tiles.

Full fit out of separate WC only (excluding wash hand

basin)

Full bathroom replacement and fit out excluding WC

Full bathroom replacement and fit out including WC in

separate room (no additional wash hand basin in separate

WC)

Full bathroom replacement and fit out including WC within

bathroom

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3.7.2 echelon has procured several 3* gas contracts. For benchmarking purposes

we have included the awarded costs of the most recent 3* models we have

procured. For reference the sample projects are summarised as follows:

Project 1 (circa 8,500 units)


Project 3 (scattered stock of circa 1,500 units)




Project Date Procured

Units 3* Rate (Net)

1 01/04/15 8,500 £94.80

2 01/04/15 7,600 £101

3 01/04/15 1,500 £112.39

4 01/04/15 4,000 £88.80

5 01/04/15 3,000 £98

6 01/04/15 8,500 £88.80

T Brown / HH 2007 9190 £140.14

3.7.3 This would indicate that the price being charged by T Brown is higher than the

average of the last six 3* models we have procured.


3.7.4 As noted in section 2.4.11, Hounslow should consider migrating to a 4* model

for the future delivery of their service.

3.7.5 Other recommendations contained in this report should also drive increased

productivity with a target to reduce the charges.

3.8 Initial conclusions

3.8.1 In summary we feel that the key issues to be addressed in respect of asset

management services are:

(1) Overarching approach – more holistic, strategic vision and leadership

are needed

(2) Work processes – these need to be reviewed and streamlined to ensure

a joined up, efficient approach

(3) Resource management and deployment – improved mechanisms are

needed to manage workforce productivity and materials supply

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(4) Financial controls – resource is required to better understand, manage

and reduce costs

(5) Performance management – of both the internal workforce and external

contractors.

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4 Contracting options available to the Council

4.1 Primary options

4.1.1 Working on the premise that Hounslow creates a Reactive Repairs team solely

for responsive repairs, the primary delivery options for the remaining DLO are

as follows:

(1) Option 1 – traditional ‘insource’ model (DLO/Internal Service Provider) –

i.e. the service remains as it is now

(2) Option 2 – complete ‘outsource’ model – following OJEU procurement

process the service transfers to an external contractor

(3) Option 3 – Joint Venture (JV)/Wholly Owned Subsidiary(WOS) models

– the service (plus associated responsibilities and risks) transfers to a

new provider but Hounslow retain significant control

4.2 Insource model – to retain the existing commercial arrangements

4.2.1 For Hounslow this would mean retaining the existing DLO, but putting in place

a more formal contract for delivery of asset management services.

4.2.2 However, it is accepted that even under this option significant changes would

be required in order to deliver service improvements and greater value for

money. Current levels of performance and cost are not sustainable into the

future, particularly in light of the wider contextual situation outlined in sections

2.2 and 2.3 above.

Potential advantages

4.2.3 The main potential benefits of this option in Hounslow’s context are:

(1) There would be service continuity

(2) There would no equal pay risk to the Council

(3) The Council would retain complete ownership of the service

Potential disadvantages

4.2.4 The main potential disadvantages of this option are:

(1) The current organisation does not support optimum delivery

(2) The Council cannot afford to continue with the current salary structure

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(3) It would be more difficult to generate any revenue savings

(4) It could lead to an increase in costs unless significant improvements

are made in key areas

(5) There would be a risk of decreasing workforce productivity linked to any

change in pay arrangements

(6) This option gives limited opportunity to improve the service and less

flexibility

(7) It would potentially be harder to effect and embed positive change as

the service would be perceived by many as ‘staying the same’

(8) There would be reduced opportunity for transparency and a less direct

route for residents to engage with the service

(9) There would still be additional costs in terms of procurement and

implementation, as a number of fundamental changes would still be

required

(10) There would be less control over the service and much more distant

links to corporate objectives without wholesale change

(11) There would be fewer opportunities for integration with other Council

services and for a more joined-up approach due to the legacy issue and

culture.

4.3 Outsource model – via OJEU procurement to an external contractor

4.3.1 Under this option the whole of the service would be put to competitive tender,

to procure a new external contractor to deliver asset management services.

For a service the size of that at Hounslow this would involve a full procurement

exercise undertaken in compliance with European procurement rules and the

Council’s Standing Orders.


4.3.2 The main potential benefits of this option are:

(1) All responsibility (and risks) would sit with the new contractor

(2) There would be flexibility in procuring the service in Lots / Areas

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(3) It would enable the Council to test the market not just for price but also

innovation, potentially resulting in a more creative and/or

technologically advanced service

(4) The competitive procurement exercise has potential to deliver savings

(depending on market conditions at the time)

(5) There would be no equal pay risk to the Council


4.3.3 The main potential disadvantages to this model are:

(1) A service that is culturally disconnected from the Council and its

corporate objectives

(2) Least control over the service and less potential for joined up working

with responsive repairs delivery and housing management

(3) Reduced flexibility, as changes would be more difficult to implement than

with the WOS option and costs more difficult to control

(4) Procurement comes with the risk of leading to a service that is less

productive and more costly than the current one

(5) Costs and time associated with procurement and mobilisation, including

those to put in place robust contract monitoring/performance

management frameworks – and the price of this option could be higher

than expected due to changes in the ever-changing construction market

(6) Reduced transparency of service and a less direct route for tenants to

engage with the service.

4.4 Wholly Owned Subsidiary – Lampton 360

4.4.1 Under this option asset management services would transfer to a wholly

owned subsidiary organisation (provisionally titled Lampton 360). In

summary, this would result in Lampton 360 taking over responsibility for:

Employment and management of the workforce

The overheads to manage the workforce

Commercial and service delivery risks

Performance and service improvement

Financial controls and delivery of all asset management programmes

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4.4.2 The main potential benefits of this option are:

(1) More control, flexibility and accountability to the Council in managing

the service, enabling it to be fully integrated into the Council and to work

in close partnership with other relevant key Council services

(2) This option is expected to generate sustainable year-on-year revenue

savings, and longer term there will be further opportunities to reduce

duplication, join up procurement with other Council services and

increase efficiency within the service

(3) It would also make it easier to structure the service around the

proposed housing management areas, with staff potentially based in a

particular neighbourhood

(4) Direct delivery of the service through Lampton 360, with minor elements

of it being outsourced to locally-based contractors wherever required

(5) The service would be directly linked into the Council housing,

governance and engagement framework, enabling customers to more

easily have direct influence on how the service is shaped and delivered

in the future

(6) Lampton 360 brings with it the potential to run the service as an

externally-trading Council function in the future – for example

undertaking planned and compliance work on behalf of other social

landlords and/or businesses

(7) If done well, this option would represent the ‘best of both worlds’: direct

delivery of the service through an established and locally based

workforce, over which the Council would retain ultimate control, but with

the flexibility and focus to drive necessary changes to deliver significant

savings and performance improvements.


4.4.3 The main potential disadvantages of this option are:

(1) Moving the current workforce into Lampton 360 may impact on staff

motivation and so lead to initial reduced productivity and decreased

customer satisfaction

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(2) If at the point of transfer staff resource levels do not match service

planned programmes there could be budget implications for the Council

in terms of potential redundancy costs

(3) If the time and resources allocated to managing the transfer are not

sufficient it would result in delays and increased costs.

4.5 Client service standards to be defined for Lampton 360

4.5.1 To help ensure the Council’s goals are delivered, if the third option is taken

forward it would need to identify what it wants Lampton 360 to deliver, and

help shape the structure and service standards to achieve that.

4.5.2 Some of the key considerations the Council would need to decide on in

relation to Lampton 360 are:

Strategic leadership and direction – the engagement of a high calibre Commercial Director for Lampton 360 would be a priority and would be critical to its success

Duration of Contract - we would recommend 10 years, and for this to be aligned with Hounslow’s requirements for gas services

Form of contract – this would need to be carefully considered and understood by all parties

Gaps in data – could these be filled before a transfer to Lampton and if so, how?

Incentivisation – what incentives could/should be included?

Lot structure – what would the optimal delivery model be?

Performance – through a robust Key Performance Indicator framework

Social Value – what are Hounslow’s priorities and what can be delivered?

Property intelligence and resource planning – use of stock condition data to support a more holistic approach to asset management.

4.6 Indicative set-up costs to consider

4.6.1 In order to help inform its decision on the options, the Council will need to give

due consideration to the potential costs of each. Below are some initial

indicative costings, based on experience from undertaking similar exercises.

DLO Retention Cost

Lampton 360 Potential

Outsource Cost

Staff/resident consultation

£50,000 £50,000 £50,000

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Consultants £100,000 £100,000 £85,000

Legal teams £100,000 £100,000

Total £150,000 £250,000 £235,000

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5 SWOT Analysis for transfer to Lampton 360

5.1.1 Below is a summary of the high level strengths, weaknesses, opportunities

and threats that we feel may be presented by a transfer to Lampton 360.

Should the Council decide to explore this option further, we would recommend

that it review the below list in greater detail.

5.1.2 It may be worth highlighting that some of the issues set out below would also

need addressing should either of the other two options be taken forward.

Similarly, those options would bring some different potential strengths,

weaknesses, threats and opportunities with them, and no option is without risk.

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Strengths Weaknesses

Existing relationship with LBH – and would remain wholly owned

Cheaper/cleaner than other options

Established and known workforce

Single entity/single service supplier

Focussed service delivery

100% responsibility for workforce would rest with the subsidiary

Commercial risk would sit with the subsidiary

Established, successful model

Locally based with local knowledge

Current customer satisfaction levels on planned works

Company name, logo and initial website in place

Single point of contact

Service Provider incentivised to drive improvements

Job safety for employees

Less duplication

‘Open book’ approach gives transparency

Complexities around ‘teckal’ for delivering services to others

Lack of existing infrastructure for performance and financial management

Poor systems for managing data

Ineffective current use of ICT

Reliance on sub-contractors

No communications plan or brand guidelines

Lack of established company reputation

No formal contract yet in place

Inconsistent employee contracts, terms and conditions

Lack of tendering experience and resource

May cost more before it costs less (e.g. initial set up costs, procurement of new systems)

Safety of employment

Only works for larger companies

Will take time to implement and ‘bed in’

Opportunities Threats

Opportunity to contract out to third parties

‘Fresh start’ for the service and workforce plus improved workforce development

Engagement with SMEs

Improved delivery of capital programmes

Break-off

Potential for significant savings

Potential for business growth and new income streams

Cultural change – resulting in increased productivity

Aligned objectives and joint working

Establishment of recognised/trusted brand and reputation

Potential for shared services (e.g. materials supply) – value for money/reduced costs

Failure to deliver savings/surpluses – e.g. if incentives outweigh efficiencies

Inability to secure external work due to lack of experience

Competition in the marketplace

Failure to embed cultural change and address performance issues

Suitable structure and infrastructure not put in place

Failure to align objectives and integrate teams and working practices

Lack of clarity on contracts/T&Cs etc.

Skills shortages due to external market factors

Management capacity to make changes and deliver new work

Implications of Budget 2015

Impact of any further changes to budget, housing policy and/or legislation

Need for robust auditing arrangements

Need for open book approach

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6 What could be improved through a transfer to Lampton 360?

6.1 Potential productivity gains

6.1.1 Currently, whilst there are defined teams within the whole DLO, resources are

often moved between teams. This can lead to inefficiencies across the work

streams being delivered. The consultation currently underway suggests that

some repairs operatives will work in Resident Services. This would enable

the management and trade teams within the DLO to transfer to Lampton 360.

The benefit of this would be Lampton 360’s ability to focus on the delivery of

planned and major works programmes in the most efficient and effective way,

without the distraction of day-to-day routine repairs.

6.1.2 Transfer to a new organisation would enable the Council to develop a new

structure, with supportive infrastructure that would create the right

environment for success. The Council could define precisely what ist required

of Lampton 360 in terms of:

Management fee and capital budgets

Service Level Agreements and detailed specifications

Use of ICT for resource (including workforce) management and reporting

Improved works planning and asset management

Greater financial controls and reporting

Performance management and monitoring arrangements

Staffing arrangements, costs and outputs – including a move to single status and revised terms and conditions

Termination arrangements.

This would lead to productivity gains and efficiencies, and allow a

transparency and accountability of services that would benefit both the Council

and its residents.

6.1.3 A revised structure would ensure each team can be adequately resourced to

deliver improved supervision, technical support, performance management

and controls. Taking a more strategic and holistic view of the service would

also enable improved integration and streamlining of teams and working

practices, plus a better, more joined-up use of resources to support teams in

respect of financial, systems and data administration.

6.1.4 More efficient working would, over time, enable the workforce either to be

reduced or redeployed to deliver new services.

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6.1.5 An improved commercial function would support the potential for financial

gains. This would allow a greater commercial focus to be taken across all

operational, procurement and materials spends. Better contract and resource

management would reduce project overheads as well as improve service

delivery.

6.1.6 Transferring the DLO to Lampton 360 would allow the Council wider corporate

opportunities as well, from business growth and potential income streams. The

revenue generated by Lampton 360 could be shared with the Council and

reinvested in public services. The services offered by Lampton 360 could be

extended to private householders plus community, charitable and commercial

businesses within the borough. Charging more commercial rates to private

owners and businesses would maximise return and thus the surpluses

available for reinvestment.

6.2 Potential quality gains

6.2.1 Materials – controlling materials and overheads is one of several steps that

Hounslow should take to improve performance. Management of materials

needs to be given a higher profile, as it appears that the ‘Managed Stores’

model procured by Hounslow Homes is not delivering its objectives or meeting

its contractual obligations. This could be reshaped as required to support

Lampton 360, and with the guarantee of work would allow Lampton 360 to

compete with contractors in securing the best value for money.

6.2.2 Supervision – through meeting with operatives, supervisors and managers it

has been established that there is a structure in place. However, due to

resources and supervisory ratios, plus the huge amount of change the teams

have been through, the linking of business goals and personal development

for craft operatives and many managerial staff is not robustly in place or being

managed. Developing a new workforce structure as part of the transfer to

Lampton 360 would enable this to be addressed.

6.2.3 Sub-contracting control – the potential change in management structure

would allow the teams to focus on their delivery and minimise the reliance on

sub-contractors over time.

6.2.4 ICT – upgrading and better use of ICT would enable a whole raft of

improvements for the service, including:

Comprehensive stock and asset data, with the ability to use this more intelligently to forecast and plan for future investment needs

Improved financial controls and reporting

Improved performance management and reporting

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More efficient workforce planning and deployment

Reduced duplication and reliance on multiple and/or manual systems for administration

6.2.5 Aligned working practices and hours – to improve its service Hounslow will

need to align the hours within which it operates across a number of customer

facing and non-customer facing services. The hours currently worked across

a number of different departments need be reviewed as part of the wider

restructure of the Housing Department. This will allow a consistent approach

and the removal of any peer envy.

6.2.6 Removal of the bonus structure – whilst the current bonus structure appears

to work well for some teams, it is derided by others. In addition, we carried

out a direct comparison between the wages earned by Hounslow operatives

over the past four years with wage costs supplied to us through tenders of

equivalent services. This demonstrated that Hounslow operatives across the

whole DLO have been earning well in excess of those across the rest of the

industry.

6.2.7 As noted elsewhere in this report, work is already underway and separate

plans likely to be taken forward for the Reactive Repairs operatives within the

DLO. This report therefore focuses on the impact of the current bonus

structure on wage costs for the remaining DLO.

The data below was provided to echelon from the Hounslow payroll. It shows

a summary of wages for the past four years for all operatives except those

working on response repairs. It includes bonus figures. Clarification is

awaited from Hounslow’s payroll team as to whether any other figures are

included, such as on-costs.

This can be compared with the ‘Market Median’ wage data provided in the

Capita report. The below figures also include bonuses:

2011 2012 2012 2013 2013 2014 2014 2015

Average Wage (Inc Bonus) 46,883.55£ 42,375.90£ 49,385.15£ 48,395.79£

Average Top 50 (Inc Bonus) 58,973.54£ 58,856.72£ 61,428.65£ 61,027.53£

Total Wage Bill Per Annum 5,766,676.56£ 6,165,130.05£ 6,995,499.63£ 6,678,619.57£

Total Number of Operatives 123 148 141 138

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Trade Market Median (inc. bonuses)

Bricklayer £29,088

Carpenter £29,088

Driver Labourer £19,974

Electricians £34,462

Glazers £29,088

Heating Engineers £32,000

6.2.8 Even if a decision were to be taken to retain the remaining DLO within

Hounslow, the bonus structure plus the issues around inconsistent contracts,

working hours and terms and conditions would need to be addressed as a

priority.

6.3 Personnel requirements and workforce development

6.3.1 In our view Lampton 360 would need the following resources to ensure it could

succeed:

(1) Strategic leadership and direction – through the employment of a high

calibre Commercial Director for Lampton 360 (this is a priority);

(2) Enhanced management and supervisory roles;

(3) Dedicated financial support;

(4) Dedicated resource for asset and capital works planning;

(5) Dedicated Human Resource skills and support;

(6) Clear definition of client (Hounslow) and Contractor (L360) roles;

(7) Contract – clearly defined contract between parties defining service

requirements

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6.3.2 A key benefit to be gained in transferring the remaining DLO into a single

subsidiary is that it would afford a natural opportunity to engage with the

workforce and unions in developing standardised contracts, wage structures,

terms and conditions. This would address the actual and perceived

inequalities between posts and teams, and improve working relations both

within and across teams. A reasonable assumption is that, following a period

of ‘bedding in’ workforce productivity would also rise.

6.3.3 As part of the creation of Lampton 360, a robust employee performance

management framework would need to be established, based on a culture of

proactive employee appraisal and feedback. In conjunction with IT solutions

for resource management, this would provide a holistic view of workforce skill-

sets and performance, and enable any issues to be appropriately addressed.

6.3.4 A longer term workforce development plan would need to be developed,

aligned with the service’s current and future aims, setting out how Lampton

360 would effectively recruit, retain, develop, engage and empower its

workforce to deliver excellent services. This would enable a more planned

approach to meeting any skills shortages and also ensure that the workforce

remains focussed and equipped to meet the business needs and targets

moving forward. Those priorities would be established with direction from

Hounslow as sole shareholder, as part of the annual business and budget

setting cycles.

6.3.5 Improved workforce arrangements should also address any issues of ‘churn’

in turnover and reduce the need to use temporary staff to fill vacancies. This

would increase overall productivity and lessen waste.

6.4 Cultural Change

6.4.1 One of the most important elements required to ensure the success of

Lampton 360 would be to effect and embed cultural change. Effort would be

needed within the teams to ensure new ways of working can be adopted, and

historic attitudes reviewed and changed.

6.4.2 It would only be through the establishment of new working practices and

processes that the drive for service excellence could be supported and

delivered. This would likely be one the greatest challenge for current

members of the DLO, particularly given that changes to contracts, wage

structures, terms and conditions would be required in conjunction with the

other operational changes.

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6.4.3 It would therefore be crucial that the Council involve all members of the DLO

and those transferring to Lampton 360 to help shape the future of Lampton

360 and its requirements. Only by being part of this service definition and

shaping of the future requirements would the teams be able visualise and help

set the future goals.

6.4.4 We would recommend that Hounslow considers setting aside extensive time

for workshops to engage with staff and managers to help define this together.

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7 Risks

7.1 Contracting out versus retention

7.1.1 We have identified the following high level areas of risk faced by Hounslow in

considering whether to transfer the remaining DLO (i.e. excluding reactive

repairs).

Risk area Detail Mitigation Notes

Governance Legal status and nature of Lampton 360 (L360)

Legal services to be instructed

Indicative costs included in section 4.6.

Governance Formal contract Legal services to be instructed


Governance Lack of clarity on client/ contractor roles/ responsibilities

Would form part of contract and associated SLAs

This would be harder to address if the service was retained

Financial Financial systems and controls

System to be procured; dedicated financial resource is recommended as part of Lampton 360 structure

Would still be required if service was retained

Financial L360 fails to deliver savings

Targets will form part of contract

Insource delivery model less likely to generate savings

Financial Reducing repair/capital programme budgets

Risk transfers to L360 as part of contract arrangements

Improved efficiency, incentivisation and targets on cost reduction would help mitigate the impact

Insource delivery model less able to mitigate the impact of reducing budgets

Transfer of service

DLO’s state of readiness to transfer

Prioritised list of actions needed has been drawn up

See section 9

Transfer of service

L360’s readiness to take on the service

Prioritised list of actions has been drawn up- a more detailed project plan is recommended

See section 9

Transfer of service

Ineffective transfer/ mobilisation arrangements

Robust project plan to be developed

See section 9

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Consultancy support

Workforce management

Contracts, wage structures, terms and conditions – challenge on equal pay

New structure and engagement of workforce

Would still need to be addressed if DLO retained

Workforce management/ engagement

Failure to gain support for transfer – leading to poor performance

Human Resource, Management and Supervisory support built into new structure

Change may lead to a dip in productivity to begin with but longer term this should improve to beyond current performance levels

Resident engagement

Failure to consult/ gain support for transfer

Resident consultation forms part of the recommendations/ action plan


Business development

Lack of capacity and capability

Would form part of L360 Business Plan and Workforce strategy

Insource delivery model does not include potential for business growth

7.1.2 A more detailed risk register would need to be drawn up for Lampton 360 itself,

should the decision be taken to transfer the service. This process could

usefully be commenced through a stakeholder Risk Workshop if the Council

is minded to explore the potential of Lampton 360 in greater detail. We’d

recommend that a tiered approach be adopted: with overarching, strategic

risks set out in a top register, supported by a suite of operational risk plans

and assessments owned by service managers beneath.

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8 Recommendations

8.1 Recommendations

8.1.1 We fully endorse the actions that the Council has already taken, and those

underway to review and revise the structure of its Housing Department and

create a new Reactive Repairs team.

8.1.2 Following the detailed review of the DLO that echelon assisted with, and the

consideration of options explored here, we would make the following fresh

recommendations:

(1) To transfer to Lampton 360 the DLO that remains after the establishment of the Reactive Repairs team

(2) To continue the Member Working Group chaired by the Lead Member for Housing, supported by communications and consultation with the wider body of elected Members throughout the process

(3) To undertake a staff ‘opinion poll’ about the proposed changes

(4) To consult with tenants and leaseholders about the proposed changes

(5) To carry out more detailed analysis on current financial performance and

agree potential targets for savings

(6) To convene a stakeholder workshop to consider in more detail the

SWOT analysis and risks associated with a transfer to Lampton 360,

plus a provisional new suite of KPIs.

(7) To produce a detailed timetable to deliver the actions identified in section

9 of this report.

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9 Next Steps and Actions

9.1 Generally

9.1.1 We have divided the recommendations from this report into two sections:

firstly to identify actions that should be carried out by Hounslow Housing;

secondly, to set out actions that Hounslow should ask Lampton 360 to

undertake. Clearly, there will be some cross-over and a number of issues

where joint input will be required, but we have tried to identify which part is

best or most appropriately placed to lead on each activity.

9.1.2 Within each section we have broken the list of actions down further, grouping

together actions to deliver service improvements, activities to consult on and

start preparations for any transfer, and finally actions that would be required

to facilitate transfer of the service to Lampton 360, should that be the delivery

model Hounslow decides upon.

9.2 Actions for Hounslow Housing

9.2.1 Priority actions to deliver service improvements through the DLO

9.2.2 The following are key actions that will be critical to deliver sustainable service

improvements coupled with reductions in cost. These should be undertaken

irrespective of, and as a prerequisite to any transfer of the service.

(1) Secure supervisory, management and quality control resources

(2) Implement the Price Per Property (including Price Per Void) model

(3) Review and re-engineer the current voids process, with a target to

reduce turnaround time by 50%

(4) Review and re-engineer other work process to reduce waste and

improve overall efficiency and value for money

(5) Implement ICT improvements to help manage productivity

(6) Review arrangements for the collection and use of customer feedback,

engaging a third party to undertake satisfaction surveys

(7) Review the use of sub-contractors and rationalise/formalise future

delivery

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(8) Carry out a review of how the Materials Supply Contract/Managed

Stores are performing against the contract requirements, and develop

an improvement plan

(9) Implement a 4* model for gas services

(10) Implement a more holistic approach to asset management, developing

a more joined-up approach in service delivery between revenue and

capital programmes

(11) Bolster and streamline the financial support, administration and

management across all three work streams

(12) Implement integration of financial information – develop enhanced

reporting templates for commercial performance and ensure theses are

used as a management tool at all management tiers

(13) Develop a more structured approach to selecting and undertaking

quality inspections

(14) Review the process for adaptations works

(15) Introduce joint estate inspections.

9.2.3 Actions to consult on and prepare for transfer

9.2.4 We would recommend that the following actions be undertaken in conjunction

with the service improvement plans set out at 9.2.2 above. This will ensure

that a robust process has been followed to consult and communicate with key

parties about proposed changes, and consider fully the implications of

transferring the service compared with other delivery models.

(1) Draw up a detailed timetable and schedule for the process, to include

arrangements for regular reviews of the teams and monitoring of

progress against specified actions

(2) Draw up and implement a communications plan for the process,

ensuring engagement with all stakeholders

(3) Convene stakeholder workshop(s) to further consider the SWOT

analysis and risks that would be associated with a transfer to Lampton

360

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(4) Hold stakeholder workshop(s) to agree high level goals, drivers and

requirements for the service moving forward, including revised KPIs

(incorporating customer satisfaction) and redefined values. Depending

on the size and make-up of stakeholder groups this could be combined

with action (2)

(5) Develop clear client/contractor roles and responsibilities

(6) Start staff consultation on the process and proposed changes

(7) Consult tenants and leaseholders on the proposed changes

(8) Engage the workforce in defining clear goals, objectives and

responsibilities for each team – this should include confirmation in

respect of the expectation regarding apprenticeships moving forward.

9.2.5 Actions to facilitate transfer of the service

9.2.6 Should the decision be made to transfer the service to Lampton 360,

Hounslow Housing will need to undertake the following actions:

(1) Draw up detailed Service Level Agreements and contract

specifications, setting out what Lampton 360 would be required to

deliver

(2) Agree with Lampton 360 a framework for performance management

and monitoring

(3) Determine financial arrangements, management and control,

incorporating details around the management fee and capital budgets

(4) Facilitate arrangements for TUPE transfer of staff

(5) Develop and implement a formal contract between Hounslow and

Lampton 360

(6) Jointly with Lampton 360 develop Term Briefs, giving more detailed

specifications for each of the three primary work streams.

9.3 Actions for Lampton 360

9.3.1 Actions to demonstrate readiness for transfer

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9.3.2 To ensure Lampton 360 would be suitable and prepared for a transfer of the

service, Hounslow should require it to carry out the following actions. These

should be undertaken in parallel with those in section 9.2.4 above.

(1) Create and recruit to the new role of Commercial Director/Manager

(2) Compile a Business Case for transfer of the service to Lampton 360.

This will need to incorporate as a minimum the company’s:

(a) Legal status and nature of entity, ensuring that it is legally viable

(b) Corporate governance arrangements, demonstrating how it will be

accountable for its operation and performance

(c) Organisational leadership and structures

(d) Financial, staff and business management arrangements

(e) Proposals for transfer of staff, including terms and conditions; and

(f) Proposals to deliver and further improve the DLO services, plus any

plans for business growth and the timing of those.

9.3.3 Actions to facilitate transfer

9.3.4 Should the decision to be taken to transfer the service, Hounslow should

ensure Lampton 360 undertakes the following. These would need to be

carried out at the same time as the actions set out in section 9.2.6 above.

(1) Prepare and implement a detailed transfer and mobilisation plan (the

outline of this should be included in the initial Business Case and built

upon here)

(2) Prepare a longer term Business Plan for Lampton 360

(3) Prepare for and complete TUPE transfer of staff

(4) Finalise a comprehensive suite of risk registers, business continuity

plans and other key operational requirements in readiness for transfer.

9.4 Timescales

9.4.1 The Council will need to agree a timetable to complete the actions identified.

Based on experience of similar situations elsewhere, we would consider an

overall timeframe of around 12-18 months to be appropriate.

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Appendix 1 – Case Studies

1. Haringey

2. United Welsh

3. Echelon 4* gas model

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Case Study 1 - Haringey

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Case Study 2 – United Welsh

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Case Study 3 – Echelon 4* Gas Model

project 2 future options to improve the (non- … 2 – future options to improve the (non-reactive)...

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