How will the new procurement regime impact smaller landlords?
Trowers & Hamlins’ Rebecca Rees and Stuart Brown talk to Inside Housing about how to prepare for the changes in rules
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With the government’s response to its consultation on transforming public procurement expected imminently, now is a good opportunity for housing associations to take stock of the current procurement landscape and anticipated changes. There are some key considerations to make now, and this article highlights some of the big issues that smaller housing associations should have in mind.
In June, the Cabinet Office published Procurement Policy Note 05/21 introducing the National Procurement Policy Statement (NPPS). The NPPS was trailed in the government’s green paper on transforming public procurement and is the first piece in the jigsaw of upcoming legislative and policy reform.
The NPPS highlights the importance for all contracting authorities to consider their capability by reference to their procurement skills and resources, with an eye on ensuring that their public contracts deliver value for money. Importantly, the NPPS requires all contracting authorities to identify any existing gaps in capability, and smaller associations should draw up a plan now as to how any skills gaps can be addressed.
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A development plan is particularly important for associations that might not have their own standalone procurement teams or experts, and there are numerous ways in which these organisations can develop their procurement skills.
Housing associations could consider making use of third-party framework agreements, and drawing on the skills and expertise of central purchasing bodies to benefit from compliant routes to market. Notwithstanding the availability of such arrangements, smaller housing associations should give consideration to both value for money under the NPPS and the fees involved in accessing such frameworks to ensure value for money.
The NPPS also recommends that contracting authorities make use of ‘placed-based’ procurement opportunities, or adopt collaborative working practices with other contracting authorities. Smaller housing associations could therefore consider partnering with other organisations.
Social value
The NPPS also highlights that price is not the determinative factor in the public procurement process, and provides that contracting authorities should take a broader view of value for money.
Smaller associations are perfectly placed to ‘punch above their weight’ in terms of delivering social value outcomes through their public contracts, and many already deliver excellent social value initiatives, including through their supply chains.
The green paper also sets out proposals to move away from the current requirement to evaluate bids on the basis of the most economically advantageous tender (MEAT), with a focus instead on evaluation being aligned to the concept of most advantageous tender (MAT). The rationale is to provide greater reassurance to contracting authorities that they can take a broader view of what can be included as part of the evaluation
of tender responses.
Largely, this is a ‘reshuffling of the deckchairs’, as arguably the current evaluation basis of MEAT already allows for wider considerations to be taken into account. Nevertheless, it is a useful reminder of what can be considered as part of the evaluation process.
Smaller housing associations should remember that there is no requirement for a contract to be delivered at the lowest price, and there is scope to deliver greater value through a contract, and this may be considered the most advantageous solution from the point of view of the contracting authority. The green paper also proposes removing the requirement for evaluation to be based on the point of view of the contracting authority, and housing associations are likely to be able to take into account wider impacts of a tender, although such considerations will be based on a framework that will be provided in further guidance.
Finally, the Cabinet Office has confirmed that as part of the roll-out of procurement policy change, there will be a programme of learning and development available for all contracting authorities. This ties in with the need to identify skills gaps under the NPPS, and we would recommend that all associations familiarise themselves with the learning and development opportunities that will be developed and delivered by the Cabinet Office.
We know that there is a raft of legislation and guidance yet to be published, but there are various key elements of the reforms that smaller associations can address immediately to get themselves fit and nimble for the task ahead. They should take this opportunity now to prepare themselves for what is to come, and start thinking creatively and collaboratively about how to embrace the new flexibilities of the forthcoming regime.
“The government is making changes to the rules and regulations governing public spend”
David Smith, head of business partnerships, South East Consortium
It is easy to lose sight of the amount of change that has taken place in our sector over the past 18 months. Through tough climates, we have remained robust, resilient and managed to keep our sector going – providing valuable support to the residents and communities we serve every day.
One significant change happening as a result of Brexit is the upcoming procurement regulation reform. The government is making changes to the rules and regulations governing public spending now that we have left the EU. The Cabinet Office is regularly releasing updates in the form of Procurement Policy Notes (PPNs) and changes to procurement law are under way. While the evolution of public contract regulations may not be deemed hugely significant by many, there are some stand-out changes that will have a significant impact on delivery across the sector as a whole. These will be of particular interest to public sector buyers and framework suppliers.
At South East Consortium (SEC), we are known for our wide-ranging support services to the housing sector, but procurement still remains at our core. It is for this reason we have dedicated part of our website to keeping our network up to date on the changes as and when they are announced by the Cabinet Office. The four key areas of which housing sector clients should be aware are: capability, social value, market engagement, and published pipelines. The examples overleaf take a look at some of these; the publication of procurement pipelines is mandated only for contracting authorities above a certain size, and as such is of less relevance to smaller housing organisations.
With a network of more than 160 suppliers across our frameworks, one of the biggest changes is under PPN 06/21, in which public sector contracts more than £5m should make sustainability-conscious evaluations of bidders. Suppliers for such works should evidence their plans to operate at significantly lower levels of carbon emissions and impact. We have been working with our suppliers to ensure they are prepared for this change.
Whether you are a local authority, a social housing provider or a supplier to the sector, the SEC team is always on hand to support solutions for the sector’s future and we stand by our ethos of being more than just a procurement organisation.
Key areas covered by new rules
Capability, social value and collaboration are three key areas that should be on the radar for smaller social housing providers in light of the new procurement rules. Here is why
Capability (training and upskilling)
“All contracting authorities should consider whether they have the right organisational capability and capacity with regard to the procurement skills and resources required to deliver value for money.”
Procurement Policy Note 05/21: National Procurement Policy Statement
Many smaller housing providers do not have a dedicated procurement department. That job can often fall to staff in other departments, who may lack the knowledge to get the best value for their organisation and residents.
Gavin Wolstenhulme, procurement manager at South East Consortium, explains why learning some basic procurement skills is crucial for smaller organisations.
“Smaller associations that aren’t set up with a procurement department need to be trained to have a better understanding of the regulations that are coming, so that they can tie that in with their plans for the future of their stock. I recently worked with an asset manager at a small association. They were looking to put in place a lift maintenance contract from one of our frameworks. Their organisation doesn’t have a procurement department, so they relied on us to guide them through the process. They asked for the cheapest option, rather than looking at quality and value for money – and they needed it to be done as soon as possible, because their contract was going to run out in a matter of weeks. This meant we didn’t have time to do a mini-tender – which would have given them the best value for money.
“Many smaller organisations leave it to the last minute, which reduces their routes to market. Framework providers recommend you do a mini-competition from their frameworks to test the market. If you lack the budget or capability to employ a specialist procurement person, someone in your finance or asset management teams should have some basic knowledge around public procurement. We can help our members with that, but if providers can employ someone, even better. It’s worth the investment, because they will guide the organisation through the rigours of the new regulations.”
Social value
“All contracting authorities should consider the following national priority outcomes alongside any additional local priorities in their procurement activities:
- Creating new businesses, new jobs and new skills
- Tackling climate change and reducing waste
- Improving supplier diversity, innovation and resilience”
National Procurement Policy Statement
As part of its work to help providers improve and leverage social value across their businesses, HACT – working with consultancy Simetrica Jacobs and other organisations across the sector – has developed a social value roadmap. The aim is to help the sector use information and data about social value to improve its services, decision-making and overall impact.
Matthew Grenier, business development director at HACT, explains how procurement can be used as a way to improve the lives of both residents and the wider communities in which they live.
“There is much more that the housing sector could be doing to leverage its own spending power, particularly around procurement, to increase the social value created not only for its residents, but also for communities. The traditional focus has been around things like apprenticeships – but there is much more that can be done. Take broadband – if you were to add a social value requirement for the installation of broadband in social housing, it could have several benefits. Broadband could enable associations to deploy smart home technology, for example; technology can help to monitor the health of the homes themselves, but it can also improve the well-being of the residents living in those homes.
“Another example might be the building safety agenda. One of the key things residents tell us at the moment is that they are worried about safety in their homes. So just by including that in your procurement request, that can reduce anxiety.
“Another area is environmental retrofit. A huge amount of investment is going to be going into creating sustainable homes – so we need to make sure that investment also results in sustainable communities.
“How much of an effect could [procurement] have? It could be transformative if it is applied rigorously. The roadmap will enable associations and contractors to measure social value using the same metrics; it’s very difficult for organisations to do this at the moment, because different associations use different metrics.
“We are driving to make social value as easy as possible to use across the sector, regardless of the size of the organisation. We want the online tool we are developing to be accessible to every association; more broadly, we are trying to ensure that social value is not just siloed within community investment, but is used across the business of social housing.”
Collaboration
“As well as considering key stages of delivery, contracting authorities should consider opportunities for working with each other to deliver best value for money both at national and local levels.”
National Procurement Policy Statement
The benefits of smaller organisations working together are clear on paper. As well as economies of scale, larger procurement projects can attract better-resourced contractors.
But collaboration isn’t always straightforward. Mr Wolstenhulme at South East Consortium explains what providers should consider.
“If you have neighbouring authorities or organisations which are buying the same thing, then it’s better to work together, to increase the size of the prize to attract better quality and get better value for money.
“We have an example of this at the moment with two providers in the same county – a local authority and a smaller housing association, which work together on our responsive repairs dynamic purchasing system. Because they are both smaller organisations, they are working together to get one provider to fulfil all their requirements,” he says.
“We are guiding each side through the process and making sure the process is compliant, and that all parties have what they need. We see ourselves as an advisor and a facilitator to put that tender out.
“How should other providers start this process? Firstly, understand the requirements of your own organisation and your own stock. Before you even take the first steps towards working with other people, you’ve got to understand what you need. That’s critical. And then it’s a case of reaching out to your partners, people you have relationships with, local and neighbouring organisations, to see whether they have similar requirements at the same time,” he says.
“Essentially it’s reaching out to see whether you can collaborate. Holistically, it’s about sorting out your own house, and then reaching out to neighbouring organisations. And they should be looking to do exactly the same thing, because the new regulations are pointing them that way
