Building strong relationships is key to maintaining long-term quality-based contracts and securing savings, according to the UK's largest housing association.
Peter Nourse, director of assets at housing association Clarion Housing Group, told delegates at Homes 2019 conference in London the firm had recently concluded a large-scale procurement exercise that resulted in the award of three 20-year contracts to build and maintain homes.
“We made some really key decisions at the start. We decided that this procurement wasn't going to be a big bang approach. We spend £130m a year and to start the process again from scratch would have put us at risk. We identified our two best performing contractors and extended those contracts by five years,” he explained.
“We did a residual procurement for the remaining three regions in the country and took the deliberate decision to make these contracts a 20-year arrangement. I think that's quite unique.
“We spent almost two years getting to where we are now. For that investment, we didn’t really want to repeat that exercise too often. The other key decision we made was about the quality/price ratio; we went for 75% quality and 25% price,” he said.
At the end of the bidding process, contracts were awarded to construction firms Wates and United Living and energy supplier Engie. The contracts have also secured Clarion, which has 125,000 properties spanning 176 local authorities, £1.9m of savings annually over the 20 years.
Nourse explained that it is important to have a succession plan in place to ensure long-term contracts can continue to be managed effectively throughout the duration.
“It's not just about the technical delivery of the contract. It's about relationships and it's about competencies. We put all of our staff through what we call the 'exceptional client journey' so they understand the culture and behaviours expected of us as clients.
“It's also about making sure that we embed those behaviours with our contractors as well. We do an awful lot of with contractors to make sure that that culture is embedded and is sustained throughout the contract period.
“The success of any contract is not just about the contract's performance, it's about the way that contract is planted. We need to make sure that we don't just have the technical skills, but the cultural skills to manage that contract,” he said.
During a panel discussion on procuring for quality, Katie Durie, senior procurement sourcing manager, Nottingham City Homes, added: “You could have a contract for 100 years but as long as it's got a break clause in, it wouldn't matter. The contract is only ever as good as the relationship, isn't it? Any contract can carry on or it can end. I would normally go for about three years, but it depends on the circumstances.
“I like to see what's out there in the market like new technological innovations. There’s been so much change in the last 20 years, such as the internet and smartphones, which have transformed the way that we work,” she said.
Following the Grenfell tragedy and the subsequent Hackitt review, Andrew Gray, member relationship manager at Fusion21, believes procurement professionals are more focused on delivery quality over price.
“Public sector organisations are recognising that it can no longer be a race to the bottom, and even though there are all sorts of budgetary constraints, there is now a focus more on quality,” he said.
“In the past, I think that procurement professionals were often seen as a blocker. The operational team just wanted the process delivered quickly. They probably had contractors who they wanted to use and would try and influence procurement teams. We think it's absolutely important that procurement now is seen as a strategic response.”
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