Thursday, 21 August 2014

Contractor says billions could be saved by switching outsourcing

A contractor claims savings of up to £2.9 billion could be made by housing associations, ALMOs and councils if changes were made to the outsourcing of housing maintenance and management.

In a report, Tougher Times, Smarter Ways, Morrison has called on housing providers to switch to a ‘transformational’ model of outsourcing which, it claims, could see savings rise to 20 – 35 per cent compared with working in-house.

The company says that currently providers with a traditional outsourcing contract have savings of 10 - 15 per cent and those with collaborative outsourcing contracts make savings of 15 – 25 per cent.

According to Morrison ‘traditional’ outsourcing involves the provider undertaking activities prescribed by the client with costing done per activity and with a contract lasting three to five years.

Collaborative involves the client and provider agreeing inputs, activities and outputs with contracts lasting five to 10 years and costing done per activity and gainshare.

Transformational outsourcing allows the client and provider to agree outputs with costing agreed upfront for a set of outputs for the contract length, which can last ten years plus.

Gordon Brockington, executive director, Morrison said: ‘The financial savings come from increasing the amount of housing providers adopting outsourcing models whilst those who already outsource their maintenance and service management move to bolder methods of outsourcing.

‘The reason collaborative and transformational models offer greater savings over more traditional models is because there is increased efficiency driven through the process, which will help to reduce costs.

‘By truly working in close partnership with clients, a service provider is able to help remove duplication and simplify processes.

‘By opting for a transformational outsourcing model, thus transferring the risk to the private sector, it allows service providers to change the way they deliver services and indeed how they charge for services.

‘By up-skilling our front line workforce, empowering our staff to make decisions on the ground and by reducing the complexity of detailed diagnostics, we can send an appropriately qualified and skilled tradesperson to a job and it will be completed in one visit – reducing cost for the client and improving the tenants experience. 

‘What is more, whilst the tradesperson is in situ, they can carry out proactive preventative repairs to avoid being called out again in the near future for a further responsive repair.’

Readers' comments (15)

  • Chris

    I can well believe the statments by Morrison - indeed, if you pursue the logic then the most efficient and effective model would be to have an even longer term contract based on continuous improvement. Such forward stability in the contract would allow the investment in the development of staff, forming a high-skilled, multi-trade, flexible and responsive workforce that know the area and feels part of the community that they serve. There is even a name for such an arrangement. DLO or DSO, historically.

    Well done Morrison for going part way to reinventing the wheel. Now, as soon as enough people realise this as the truth we can get back to more sensible arrangements than the current short term squeeze as much out of the public purse as we can get away with conduct.

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  • Jack Daniels

    The best model involves the client becoming 'intelligent' by employing skilled people in-house to manage their contractual arrangements with third parties. It does not matter if the third party is a DLO or a private sector contractor because the culture of profit and 'us and them' will remain regardless.
    From my experience, the longer the contract, the longer the pain.
    The shorter the contract, the harder the pain.
    The client contractor relationship was never meant to be a marriage made in heaven, it was always a pact with the devil.
    The problem is that nowadays, the client seems to have forgotten how to dance with the devil...

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  • Choose your partners wisely would be the best move.
    We have all seen the Connaught, Rok and now Kinetics/Shambolics of this world all try and make a fast buck on the back of trying to run maintenance and failing abysmally with the loss of significant jobs and inability to meet creditors’ payments.
    It's about people, trust, honesty and not having the wool pulled over your eyes by greedy investors and fat cat CEO's looking to 'privatise' long standing and well delivered public services for their own personal gain.
    Put the skills in the right place and leave the ego's in the board room and there may be a chance to make it all work. If it doesn’t then it won’t be long before the clients have the ‘buck of blame’ passed to them by out of depth CEO’s for another contractor default.

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  • Optimism, or a case of old meat and new gravy?

    The report's authors clearly felt that there must be some benefits to the sector's 1500+ Registered providers as they dedicated an entire section on 'Examples of Bolder Outsourcing Models'. They must have struggled as they appear to have found...................One

    I thought the season for own goals had ended

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  • Rick Campbell

    So, a few housing associations get together and dole out a long-term contract ... there are likely to be different standards required in the different housing associations which is likely to mean that the 'average' could be the standard applied. Ergo, some tenants suffer.

    Stinks of some sort of return to CCT to me.

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  • Fear & Loathing

    The DLO may have been over unionised, the operatives were perhaps a bit bolshy but at least they were there when you needed a repair. The Thatcherite philosophy of privatising everything may be good for raising a bit of profit for a select few but it's not the answer to everything especially where prompt customer service is the primary objective.

    At least you could be sure that somebody at the DLO was there to answer the phone (eventually!) if you rang in a repair - you didn't suddenly find they'd gone bust!

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  • The answer as always lies between the two extremities of DLO and fully private; the main issue i feel is clients are always under the assumption that the contractor is making vast profits and the contractor feels the client is there to ensure no profit at all. If we truly want to put the occupant/tenant/customer at the forefront of everything then there needs to be a paradigm shift in what we all do!

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  • Saving 20% on VAT moving to DLO services is easy. The debate needs to be about value and not just cost. What is wrong with local providers providing quality local services by local people and for local people, creating real and lasting jobs, opportunities for a new generation and having a bit of social vision, rather than having these services consumed by unsustainable mega service providers that invest nothing back into the communities that are so keen to take over.

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  • My own landlord the Orbit Group based in Coventry now manages across three subsidiary groups with their own boards of governance some 34000 homes from the West Midlands to the East of the country and the south east. It boasts it employs 2000 staff to do this which equates to one member of staff per 17 dwellings.

    They operate a centralised call centre which fields over 600,000 calls a year for repairs and other inquiries and operates 24/7.

    A resident reports at night that a light is not working in a communal area and instead of a warden changing a light bulb the next day the repair is put out to contractors who might be called out immediately to change the bulb. Highly lucrative work if you can get it !

    It has taken me 4 weeks and several emails to get a damaged fire door repaired by one contractor. Communal repairs can take weeks to get undertaken as the landlord has reduced the amount of times wardens now show up on our estate as in the past we had what we considered to be a designated warden who reported all communal repairs.

    In the past we had a grounds maintenance contractor who despite the terms of the contract cut our communal grass 5/6 times a year instead of 17 as per the contract. The contractor was still paid as if he had cut the grass 17 times by electronic monthly payment.

    The problem with all services whether in-house or contractual is none or ineffectual monitoring by the landlord, and I guess that goes for most landlords.

    If you want some information as to the disaster that wide scale voluntary stock transfers have resulted in higher costs, poorer services, higher rents, increases in staffing costs to manage former Council homes then you would do well to read Basingstoke and Deane Borough Council commissioned report ten years after they sold off their housing stock to two housing associations.

    http://www.google.co.uk/search?q=Basingstoke+%26+Deane+Borough+Council++Stock+Transfer%2C+Ten+years+on+&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

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  • I simply cannot believe the shear stupidity of some of the comments - in reality DLO - Hi Cost Poor performance - Private - Low profit hi Turnover - Tenant - gets a poor service everytime!

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