Scottish Procurement in the Affordable Housing Sector

A recent report commissioned by the Scottish Government has shown that there is a need for a more mature approach to procurement resulting in realistic savings of £26-45 million p.a.

Due to the differences in approaches to procurement and the lack of expertise in the area, it is believed that these savings are going to be difficult to obtain in the short-term and need a concerted effort in attitude and change management from key stakeholders.

With little in the way of leverage over the sector, any solution to improve procurement will have to be based on ‘pull’ rather than ‘push’ and will need to provide tangible benefits to Housing Associations: this will, in turn, encourage participation, leading to improved procurement and greater cost efficiency.

Smaller Housing Associations value, and are protective of, high levels of service for their tenants, particularly in reactive maintenance, and, where possible, favour local suppliers, with whom they often have a symbiotic relationship. They are not profligate and, despite a willingness to pay more for a high level of service, they are careful with their costs.

Larger Housing Associations are more likely to be price sensitive, use existing government frameworks and have dedicated procurement resources. In the current economic conditions, goods and services are being procured much more competitively but a number of risks remain: service providers’ viability; increased supplier and contractor costs (leading to significantly higher tender prices in the future); and, certain contractors attempting to re-negotiate existing contracts.

The benefits of procurement and the potential for achieving efficiency savings need to be communicated properly and repeatedly to the sector with quantified examples from their peers, and a concerted effort made by all stakeholders in a unified manner. The spending profile of the sector needs to be identified, and procurement assistance given to the sector to help it achieve efficiency savings and SHQS compliance by 2015.

A questionnaire was sent out to the 196 Housing Associations in Scotland, and highlights of the results are shown below:

Sixty four percent of those responsible for procurement spend less than 20% of their time conducting procurement related activity: this suggests that the majority of procurement activity is not being undertaken by dedicated professional resources.

Procurement activity was viewed strategically by 64% and as part of the day job by 37% of respondents.

The sector shows a high level of collaboration with 61% having had some form of collaborative procurement.

When asked how they procure, 77% did so through local suppliers, 96% through tender process, 49% via some form of collaborative group and 58% by using some form of procurement framework (including ones they had set up themselves).

The amount spent by the sector through procurement frameworks was low with 79% procuring 20% or less via this method.

There is a low level of use of frameworks (Scotland Excel is highest at 31% (although this is likely to include most of the Local Authority respondents which artificially inflates this figure), Scottish Procurement 26%, Procurement for Housing 21% and OGC Buying Solutions 16%).

Out of these procurement frameworks, Procurement for Housing has the most bespoke social housing offerings and experience in the sector. PfH is therefore seeing this as a great opportunity to offer services to the Scottish social housing sector and enable Housing Associations to obtain real financial savings and value for money.