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"How exposed are your maintenance contracts to
incompetence and fraud?" asks Just Housing Consultancy
director, Keith Simpson.
The economic downturn evidenced by falling property prices and
the credit crunch is putting the business plans of many housing
associations under severe pressure. Consequently, more associations
are being driven to ensure they are obtaining value for money on
day-to-day responsive repairs and void contracts.
The national move towards partnering over the last decade has
been fraught with problems and has not produced the results
anticipated. The three major objectives of reducing costs,
improving quality and providing continuous improvement simply
cannot be demonstrated nationally, as indicated in the recent Audit
Commission report, For better, for worse: Value for money in
strategic service-delivery partnerships.
In my opinion, Sir John Egan never, in his wildest dreams,
envisaged that partnering could apply to "a man in a van full
of ball valves", as can be evidenced in his report, which is
focused solely on major construction projects such as
Heathrow's fifth terminal.
As a result of this mismatch between strategic partnering and
day-to-day repairs, a plethora of consultants have been engaged to
create a whole range of models for open-book partnering. Many of
these are not fit for purpose, leave the client exposed and are not
even fully understood by technically weak and under-qualified
clients. This situation is compounded by inadequate IT systems and
poor integration that does not allow effective control and
monitoring of budgets. Regular overspending on responsive repairs
has resulted in planned maintenance programmes frequently being
raided to bail the client out, and keep poor client management
below the chief executive's radar.
This process has created a serious situation, as the major
contractors continue to win long-term partnering contracts where
clients are encouraged to transfer more and more clientside
responsibility to the contractor, purportedly as a means of cutting
costs. A major contributor to this position has been the 60/40,
quality/price evaluation model, which lacks credibility. As a
result, contractors can employ expensive bid teams in an attempt to
sway impressionable residents and clients, without having to
demonstrate an agreed quality standard, corrupting the tender
process.
Competitive tendering should always adopt a clear quality
threshold, which all contractors must achieve in order to move
forward to the Invitation to Tender process (ITT). The ITT process
is then purely about price, with assurance having already been
provided in relation to the quality of service. So, invite six or
eight contractors to tender, making it clear that the award will be
to the lowest price. It is easy; not only do you achieve the best
price, but you dispense with the 'beauty parade' which
corrupts so many tendering processes.
Whether the contract is open-book or schedule of rates, the only
challenge is to manage the contractor successfully so that they
deliver what they have promised. Accepting that many clients are
technically weak and unable to confront the major contractors'
professional teams with confidence, it is essential to undertake
regular independent 'contract audits'. These should not be
confused with forensic audits, carried out by accountants. The
contract audit is undertaken by suitably qualified surveyors who
are familiar with the contract. They take samples of recent work,
including photographic evidence, and revalue it against invoiced
costs; they then report on over/under claiming.
Our two contract audit teams are currently being overwhelmed by
clients who have real concerns about their repairs and maintenance
contractors – and rightly so, since we have secured up to
six figure repayments for clients following our audits.
However, the story does not end there. How can we deal with the
issue of technically weak clients to ensure they develop the skills
and understanding to be able to manage the contract? Just
Housing's contract auditors conduct workshops with the client
team, where the findings of the audit are set out and discussed,
enabling robust inspection and verification processes to be
established and embedded to ensure further audits are
unnecessary.
The current situation requires action from both clients and
contractors if value for money is to be evidenced. The confidence
that partnering once enjoyed in this part of the sector has
evaporated and there needs to be a return to robust contract
compliance and quality assurance that can give clients an
evidence-based guarantee that they are receiving value for
money.
Just Housing is a membership organisation and a
consultancy covering all the social housing
disciplines
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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