Agenda item

Report of the Director of Placemaking and Housing. To be introduced by the Cabinet Member for Housing Services, Private Renters, and Planning.

To approve the Procurement Strategy for long term delivery of major component renewal, energy works, and additional homes to council homes 2022-32.

The Cabinet Member for Housing Services, Private Renters, and Planning introduced the report which sought approval for the Procurement Strategy for long term delivery of major component renewal, energy works, and additional homes to Council homes 2022-32.

The Cabinet Member highlighted that this was an ambitious procurement strategy covering 10 years with 4 long-term partnering contracts, covering distinct geographical areas to deliver benefits to the capital housing build programme and deliver substantial benefits to residents.

It was noted that the proposed decisions would enable the Council to deliver the Housing capital programme effectively with contract management key to achieving outcomes.

Following questions from Cllr Connor, the following information was noted:

• With regards to the £800m spend , it was important to note the context of this sum over 10 years and note that previously Homes for Haringey had underspent in this area. This capital budget allocation was important in supporting provision of the number of repairs that were needed to bring a lot of dated housing stock up to required specifications. It was noted that the Council were already spending at this level over a longer period of time but not necessarily getting the benefits which will be sought through the procurement strategy.

• Part of the monitoring of the contracts would involve residents, and this will be part of the tenant’s strategy and will form part of the contractual arrangements that the partners will sign up to. Assurance was provided that housing services would bring in a team to support the monitoring of the contract and have an officer dedicated to resident engagement and the training of these residents to take this role forward. The Council will look at resourcing this immediately.

• The plan was for a constant stream of apprentices. The current contracts made it difficult to appoint apprenticeships over long term but now with a long-term agreement there was scope for a rolling training programme of apprenticeships. Homes for Haringey had previous good experience in training apprentices to a high standard and this would be utilised.

RESOLVED

To approve the proposed procurement strategy for the delivery of major works to the Council’s housing stock as set out in Section 7 of the report.

Reasons for decision

At £800 million, split across four contractors, this will be one of the largest procurements ever undertaken by the Council. It is, therefore, felt appropriate to ask for Cabinet support for the partnering approach at an early stage to enable officers to progress the procurement to resident consultation, tender and award stage over the next 12 months.

The proposed route to market will enable us to address many issues with the current approach including not meeting annual delivery targets, having to undertaken full procurements to address urgent issues to blocks, not maximising the social value and community wealth opportunities which should be achieved from this level of investment, the high costs of undertaking regular procurement and that the stock does not appear transformed once investment works have been completed.

Single contract procurement is expensive and resource intensive, requiring the support of external consultants and legal services in most cases. To deliver the current programme of work which is half the annual value of the works proposed under these contracts fifteen to twenty-five contracts are procured annually. This impacts on the delivery of works and diverts resources which could be spent on improving Council owned homes.

In line with the Borough plan objectives, this procurement strategy ensures that these contracts will maximise the benefits of Council investment in the local area. This will be a significant requirement in the tender evaluation and KPIs will be included in the contract to ensure that tender commitments are met or exceeded for the life of the contract.

Long-term area-based contracts will enable the contractors to put roots down in the Borough developing an approach to social value which is based on community needs, working closely with our residents and key stakeholders. This will be especially beneficial for employment and training where these can be seen as long-term opportunities where residents can gain meaningful qualifications and for the local supply-chain where the contractors will be able to guarantee future work.  Resident and stakeholder involvement will be at the heart of the procurement process and on-going management and governance of the contracts. Non-compliance with KPI targets in these areas could result in work being allocated to the other contractors.

Long-term supply arrangements enable an environment of continuous improvement to be included in the contract and governance arrangements. Lessons can be learned from each project that is delivered and residents can be fully involved in this process.

Having long-term contractual arrangements enables contractor involvement in the planning stages of work, which will enable co-design and can increase efficiencies and drive savings, through offering better designs and project delivery, understanding resident and client requirements, being able to engage with the wider supply-chain to get the benefits of the quantum of work being delivered. Efficiency and value for money targets will be included within the contract.

The success of this procurement strategy will also depend on the skills within Haringey to manage the contracts and ensure that robust governance is in place to ensure that the outcomes set out in the procurement strategy are achieved once the contracts go live. Whilst the procurement is being undertaken, training and development will be identified for existing team members and recruitment will be undertaken, where required. The consultants who are supporting us on the procurement have also, within their appointment, been providing support on contract mobilisation, which will include setting up governance arrangements for the contracts and wider partnership. Trained residents will be included in the on-going contract governance arrangements.

Alternative options considered

Contractual Options

Continue with procuring contracts individually. This route does not support wider corporate objectives referred to in the cabinet members introduction as it limits the opportunities for co-production and delivery of social value. This approach will be at risk of the uncertain market conditions in the construction industry. When contractors have the certainty of longevity it enables them to invest in the contract, implement social value and drive down supply chain costs, this cannot be achieved when contracts are let individually. The Council are not permitted to segregate contracts to avoid having to tender to the open market for contracts with a value over the public works threshold of £4.733m. There is also the management cost of continuously producing specifications and going out to tender as well as running leaseholder consultation processes. This would allow officers to concentrate resources on contract management.

To put in place a framework with annual contract awards. A framework agreement is a type of contract that is commonly used as a multi supplier agreement, establishing a relationship to deliver works as an approved contractor. This arrangement does reduce some of the risk of single contract procurement because works are delivered through a framework and an annual award is given to contractors. However, because continuity of work is not guaranteed, the wider social value can be reduced, especially in terms of meaningful employment and technical apprenticeships, as decisions are taken annually. Also, as there is an annual award of work it is harder to involve contractors early in the planning stages. One of the advantages of this type of contract is that work can be removed for performance issues on an annual basis, however, this does impact on an environment of continuous improvement. The uncertainty of continuity could also deter the market in uncertain times. Frameworks are limited in timescale, to 4 years, limiting the longevity of the relationship and limiting financial and social value.

Awarding contracts based on type of work. The approved Asset Management Strategy is that works to residents’ homes are delivered in a holistic manner, the reason for this is to reduce the impact on residents, as works are undertaken at the same time. If the contracts were let based on work types rather than property it would be a departure from the strategy. The in-house team could undertake works coordination, but this is not a skill set which we currently have and liability for delays would become the Councils responsibility not the contractors if we were going to take on this role. There are significant financial advantages to delivering works holistically as it reduces access, site set up and management costs that are incurred when works are delivered under separate contracts. There can also be an impact on warranties and contractor liabilities if another contractors’ work could be seen as the reason for product failures or damage.

Deliver the works in-house. Currently, the Council delivers its housing repairs and maintenance service through an in-house team for a value in the region of £20 million per annum. A small kitchen and bathroom programme, circa £1 million was delivered in-house in 2020/1, this highlighted that at the current time there are not the skills in-house at management or operative level to deliver this type of work. The step change required to deliver this type of work would be significant. Alongside this there is a significant amount of risk attached to this type of work which have implication for Health and Safety, Building Safety, supply-chain, and availability of the labour. There will be a 5-year break option in these contracts, and it can be reviewed at this point as to whether this situation had changed. The contracts will also include the option for some elements of the contract to be delivered in-house, if at any time it is considered that Haringey have developed the capability to do this. Working with contractors in a partnering arrangement will also enable our staff to develop key skills, which if at a future date it was seen as appropriate to move to an in-house delivery model there would have been considerable learning from commercial partners in delivering works of this nature.

Partnering Options Considered

Period of the Contract Across the local authority and housing sector several partnering contracts for major works have recently been awarded or are going through the procurement process. Clarions let their major works partnering contract for 20 years, London and Quadrant are procuring their contract for 15 years and Hackney are currently out to market for a 4-year major works framework. After taking market advice, 10 years with a 5-year break clause was considered appropriate for Haringey. The procurement and full mobilisation of the contract will take in the region of 2 years and therefore the contract needs to be long-enough to be attractive to contractors to want to bid for the work and for the Borough to gain the long-term contractual benefits. It was felt there would be too many changes in the wider environment to commit to a contract in excess of 10 years. The five-year break clause can be used for one or all of the contracts, which gives a high-level of flexibility.

Number of contracts Options were considered for the number of lots which the £800 million pounds worth of work would be divided into. One or two contractors were ruled out due to the capacity of contractors to deliver this level of work per annum and the risks associated with only working with one or two contractors including poor performance and contractor insolvency. More than four contracts were ruled out as it was felt that this would dilute the benefits of long-term agreements with a small number of committed contractors. Alignment with the Localities’ Strategy seem to enable the best synergies for the Borough, as the social value elements of the contract can be focused on the priorities of the localities. When the levels of work were reviewed, a decision was taken to split the East of the Borough, due to the concentration of social housing in this area. The contract values also means that two of the lots will be more attractive to medium sized regional contractors which will encourage greater diversity in the number and types of contractors who bid for these contracts.