1. HAMMAR West Midlands Does size matter in procurement?

2. Central Housing Investment Consortium Ltd John Fisher – Managing Director CHIC - Partner Ark Housing Consultancy

3. CHIC Presentation 1.Asset Management Market Summary – How we see it 2.Where does size matter? 3.CHIC’s response 4.CHIC in brief 5. A view of the future

4. 1.Asset Management Market Summary HOW WE SEE IT

5. Affordable Housing Landlords Business Model ANNUAL RENTAL INCOME c.£4,680 (£90 per week) Asset Spend = £1,600 - £2,000 C.35% - 40% 25% Planned Responsive Management Loans Surplus 20%

6. Labour Preliminaries Overheads Profit Materials 22% 18% % of cost 100% 6% 4% Sub Contractors Contingency Risk 10% 40% Understanding Cost (Not Price) Ownership Management Labour Materials

7. Housing Asset Management

8. Responsive / Cyclical

9. Assumed Unit Costs and Life Cycles – Planned (Low Rise) ComponentLife Cycle (yrs)Unit Rate (incl.)Annual Unit Cost Bathroom302,25075 Boiler152,00067 Chimney6080013 Consumer Unit3050017 External Doors3080027 External Wall Finish603,50058 Fascias/Soffits3075025 Heating Upgrade303,500117 Hot Water Tank3050017 Kitchen203,600180 Rainwater Goods3050017 Roof Covering604,50075 Windows303,200107 Wiring302,50083 £878

10. Assumed Unit Costs and Life Cycles – Planned (Medium and High Rise) ComponentLife Cycle (yrs)Unit Rate (incl.)Annual Unit Cost Bathroom302,25075 Boiler152,00067 Chimney6080013 Consumer Unit3050017 External Doors301,50050 External Wall Finish605,00083 Fascias/Soffits302,50083 Heating Upgrade303,500117 Hot Water Tank3050017 Kitchen203,600180 Rainwater Goods301,50050 Roof Covering606,000100 Windows303,200107 Wiring302,50083 Other Building Repairs101,000100 Communal Area Works5500100 £1,242

11. Typical Unit Annual Costs

12. Responsive Planned Development LABOUR MATERIALS Housing Asset Management Volume of orders Low High Value of orders

13. Client Function – Silos or Integration? Responsive Planned Development MATERIALS LABOUR PRELIMINARIES LOCAL OVERHEADS CLIENT MANAGEMENT CONTRACT MANAGEMENT

14. Planned e.g. Kitchen Replacement

15. Planned e.g. Bathroom Replacement

16. Planned e.g. Rewiring

17. Benchmarked Materials Costs Through Contractors

18. 3 Big Spend Items  People (50-60%)  Materials (20-50%)  Vehicles (10%)

19. Contractor Order Book  Any business needs to know what it needs to deliver  Order book is king  How good is your AMS ?

20. Good strategic planning – avoids the wheels falling off…

21. Procurement Solutions  Is procurement a FUNCTION or a CAPABILITY?  Does the plan drive the delivery solution or procurement drive the plan?  Stage 4 of Planning Process = Order book  Test – sustainable order book for constant volumes?

22. Smooth the Programme?

23. Where does size matter? Assumption: ‘Size’ means more than one RP working alone

24. Responsive Planned Development LABOUR MATERIALS Housing Asset Management Responsive Planned Development LABOUR MATERIALS Volume of orders Low High Value of orders High

25. Opportunities from Aggregated Size 1.Share the ‘costs of shopping’. 2.Combined volume for M&E Servicing contracts (SMEs’) 3.Purchase materials direct (control the price and transparent transactions). 4.Combine planned programmes (shared overheads and prelims and improved social value : CSVs’). 5.Opportunities for SME contractors from ‘market management ’

26. CHIC’S RESPONSE

27. What is CHIC?  Formed in early 2010 CHIC is a company limited by guarantee, established by eight member landlords, which operate together as a consortium across and now beyond the Midlands.  CHIC is established to secure efficiencies in the procurement of asset management services for housing organisations. We pride ourselves on being the first procurement consortium to operate across the Midlands.  CHIC is supported and sponsored by the Homes and Communities Agency (HCA) and is being managed by Ark Housing Consultancy on behalf of its members.

28. Current Membership  25 Member organisations throughout the UK comprising:  21 Housing Associations  2 Local Authorities  1 ALMO  1 Consortium (we also work closely with another) Collectively managing 287,500 homes

29. CHIC’s USP’s 1.Joint Procurement– Share the cost of shopping. 2.Contract with ‘ecommerce’ agent 3.Procured Materials / Merchants contracts 4.Joint (M&E) Service Contracts 5.Member benchmarking 6.All contracts have E & S requirements (including materials)

30. Works & Services Contracts Example Specialist, Mechanical & Electrical Services Electrical Services Electrical Testing, PAT Testing, Upgrades & Rewires Laker Building Management SolutionsCentral England (Based in Birmingham) Upgrades & RewiresG F Tomlinson Midlands (Derby, Birmingham & Worcester) Specialist Mobility Lift Servicing – Service, Repair & Installation Lift & Engineering Throughout England & Wales (Some restrictions may apply) Fire Safety – Supply, Service & Repair Sunfish Services Midlands, including Cambridge & Peterborough Water Hygiene – Inspection, Testing, Risk Assessment, Cleaning, Disinfection Green Compliance (Pure Group)Nationwide Gas Auditing BlueFlame AssociatesThroughout England & Wales

31. Actual Efficiency Gains – Works & Services Business Plan target 7% Actual Saving 18% Members saved >£1m on the cost of shopping in 2010/11 – 60 Lots in one go Plus annual contract efficiencies: Delivery SavingsSpend £’kSaving £’k% Responsive Repairs/Voids3,4871,06323 Kitchen replacements1,4711318 Bathroom replacements95910110 Central Heating replacements1082116 Gas Servicing3904210 Electrical Upgrades55 50 Replacement Doors4095311 2011/12 Total6,8791,46618%

32. Materials Supply Overview  Long term 5 year (+ 5 year) contracts  All EU Compliant  Currently used by in-house and external contractors  Unique Nationwide Merchants Framework  Managed by ecommerce provider, Valueworks Ltd  Suited to Asset Management and New Build works  Can be used within external contracts & contractors Key benefits:  Savings, 19% average saving by members in 2011/12  Price control & Invoicing compliance  Consolidated invoicing  Transaction accuracy  Supply chain management  Reduced administration

33. Materials Supply (1) - ‘Big Ticket Items ’ DescriptionSupplier / Manufacturer Boilers & Associated Heating Products Bosch Thermotechnology (Worcester) Vaillant Baxi Heating (including Potterton) Ideal Heating KitchensRixonway Kitchens – Delivery Nationwide* SanitarywareTwyford Bathrooms ShowersApplied Energy Products PVC Windows Nationwide Windows – Delivery nationwide* Wrekin Windows – Delivery nationwide* Composite Doors (incl. Fire doors)Nationwide Windows – Delivery nationwide* PVC Doors (incl. Fire doors)Wrekin Windows – Delivery nationwide* Timber DoorsManse Masterdor Ltd Aluminium WindowsSovereign Group Limited Fires & SurroundsBe Modern Group *Some delivery restrictions may apply

34. Catalogue Management – Cashable Savings

35. Actual Efficiency Gains - Example Example individual item savings achieved by members are summarised below: Item Previous Price Paid Price Paid through CHIC Saving £Saving % 28kW Combi Boiler£713.78£442.78£27138% Pedestal£13.96£11.91£2.0515% RCD Consumer Unit (Min 9 way) incl. MCBs & RCBOs £279.20£245.41£33.7912% 2 way light switch£2.20£1.87£0.3315% Loft Insulation (150mm/18m 2 )£22.85£18.51£4.3419% 1000x600 Full Height Base Unit (Kitchen)£72.85£49.29£23.5632% Electric Fire incl. Surround, back panel & hearth £245.26£146.38£98.8819%

36. So Does Size Matter? Yes….But  Programme planning is key (sustained order book = continuity for workforce)  Understand the detail (cost, not price)  Be prepared to do it differently (materials vs, labour / joint contracts)  Commitment for Employment and Skills Strategy

37. Does it work?

38. A VIEW OF THE FUTURE

39. Real Choice of Service Delivery Models OptionTypeArk’s View 1Contract Best private model (SMEs’ or big contractors for big projects) 2WOS – Managed Service Yet to be proven still being tested – stepping stone to 4? 3JV Co. – Managed Service Too complex and expensive /HMRC Risk 4IHC Best insourced model (not a DLO!) 5Cost Service Vehicle Real opportunities – may become the market solutions 6 Shared Services Vehicle – Managed Service

40. Materials Procured Direct Shared Costs of Shopping