Housing association Orbit’s in-house procurement team has found itself in demand as other social landlords seek its expertise. Jess McCabe finds out the secrets to its success
We weren’t doing it terribly well,’ admits Patrick Symington, the finance, planning and information and communications technology director at housing association First Wessex. He is explaining why the 19,000-home Hampshire-based organisation decided last June to call in the help of another social landlord, Orbit, to spiff up its procurement practices.
Orbit Services, a division of the 36,000-home association, started a procurement team back in 2006. Four years later, it was approached by 6,200-home Welsh housing association Tai Calon which wanted help with a tender for fitted kitchens and bathrooms, and made its first foray into offering the service externally.
Procurement is one of a number of services Orbit provides to about 40 other associations, notes Afzal Ishmail, managing director of the division. It also offers use of its call centre and provides data protection services, and is expecting to turn over just under £1 million in the 2012/13 financial year.
At the moment, Gary Stephens, the procurement team’s director, explains it is working with three external customers, as well as on procurement for Orbit.
So why are some associations seeking help from another landlord to carry out that critical function: acquiring the goods and services that keep the wheels turning?
‘We just don’t have that [procurement] expertise in-house. We were in a position a few years ago where we were rather behind on procurement and it was a godsend to find a whole team of procurement professionals,’ explains First Wessex’s Mr Symington. The housing association’s first foray into outsourcing procurement services was with ‘another agency, a commercial one, which didn’t have that much experience of housing associations’, he recalls. Hiring Orbit has enabled it to access more relevant knowledge, he says.
‘The alternative for us would be to gear up a whole in-house procurement team.’
The right expertise
Orbit is something of the odd one out when it comes to procurement outsourcing. This is mostly delivered by generalist consultants, who might nip from a hospital one day to a local authority the next, before rolling up at a housing association. Gavin Smart, policy director at the Chartered Institute of Housing, adds: ‘There is a strong emphasis on social housing providers offering best value and this kind of outsourcing [from other housing organisations] can be one way to achieve that goal.’
Mr Stephens, who heads the eight-strong team, says: ‘I’m just going on my experience. [Being a housing association too] makes it far easier for us to understand their requirements.’
‘It’s not the cut-throat private sector approach,’ adds Mr Ishmail - Orbit is a non-profit organisation, with the values of a housing association, he argues.
On the flip side, however, Orbit’s reputation in the sector is at stake when it works with its peers. ‘It was quite scary at first,’ admits Mr Stephens.
So how much does it cost to hire Orbit’s help for a procurement? Mr Stephens doesn’t give a direct figure, but reveals that ‘we’d want to save them at least 10 per cent - it depends on each individual project’.
From the client’s perspective, the savings made have to justify spending the money. Mr Symington at First Wessex indicates that the association spends a few thousand pounds on Orbit’s services per contract - for this reason it only uses the service for contracts with a value of £100,000 or more, although this has risen to £5 million for contracts for maintenance materials.
Any manager involved in procurement can access the help Orbit provides, he explains.
It’s not all plain sailing, however - if one housing association sells its services to another, it must still pay VAT of 20 per cent. At the moment, it’s cheaper for First Wessex to use Orbit rather than hire its own in-house specialists. But in the long run, it’s looking to bolster the experience of the internal team.
If more and more housing associations do their procurement through Orbit, does it reduce the field for which firms win contracts?
‘No, I don’t feel that,’ says Mr Stephens. ‘No two procurement contracts are the same and you certainly don’t go pushing the same supplier.’
Instead, Orbit works out what the requirements are for each contract, and designs the procurement to fit, he says. ‘Some of our Welsh clients are keen to award contracts locally,’ Mr Ishmail says.
Value for money
Daren Nathan, business manager at Durkan, a contractor that doesn’t work with Orbit, backs this up. ‘I don’t know how much the registered providers spend on a framework agreement every four years - for some of them [buying in procurement help would be] value for money,’ he notes.
Rather than stretching out the services for Orbit’s own tenants, Mr Stephens argues that taking on extra clients has allowed the team to improve the offer for its internal clients and identify the gaps in its service.
‘I see it as completely aligned,’ he says, with the same service being offered to Orbit as to any other client. ‘Where there were gaps we have closed them.’
For example, the team started to produce handover packs at the end of the procurement process, with a summary of what’s been agreed. This has now been rolled out for Orbit’s own staff who commission procurement projects too.
It also helps keep staff happy, says Mr Ishmail. Orbit has an internal audit team, which is busier and more highly skilled than before. ‘We have excellent internal audit staff. If we didn’t provide them with some interest, we thought we might lose them. We wanted to make sure that by providing services externally, we could hold a greater number of staff. The service for Orbit is better - we’ve got a pool of nine [staff members] at the last count, up from two.’