How we buy stuff

- Or the Dark Art of Procurement

How we buy stuff

• 160 or so housing associations in Scotland• Very diverse businesses• Size of operation - 20 units up to 48,000 units• 97 have less than 1,000 units• 8 have more than 5,000 units.• Procurement and collaborative procurement –

two different things !!!!• Imposed from above or good business ?

How we buy stuff

• Housing associations and co-operatives in Scotland contribute £ 1 BN into the Scottish Economy annually – wages and spend

• Roughly £ 668 M of spend on goods and services and £ 357 M of staff costs.

• Tenants rents, not public grants• Excludes construction spend but includes

maintenance

How we buy stuff

• What do we do now ?• All associations and co-operatives have buying

procedures – standing orders, order processes, authorisation levels, invoicing systems payment approvals. Record keeping is by sophisticated accounting systems – but not readily able to share or collate information

• Putting value into local economy, getting a fair price for goods and services

How we buy stuff

• Why do we need to change anything ?• Drivers• European Legislation• Scottish Procurement Reform• Good business practices and the need to

demonstrate value for money to tenants and others

• Need to maximise effectiveness of resources

How we buy stuff

• European Legislation – the evil empire imposing unworkable systems for unrealistic ends ?

• Aim was to remove barriers to trade and open up opportunities throughout member states

• Treaties and Directives are the basis for Scottish Procurement Law, but how we implement, up to the Scottish Parliament.

• Public Contract ( Scotland ) Regulations 2012

How we buy stuff

• European Legislation - new 2014 Directive• Object to simplify processes, reduce red tape• Pre contract dialogue, encouragement to use

e procurement• Breaking contracts into lots and disallowing

high turnover requirements for PQQ – all to encourage SME’s

• Clarification of a lot of previous case law

How we buy stuff

• Why are we deemed Public Contracting Authorities and subject to public procurement law ?

• NOT mentioned as such in the 2012 Regulations

• BUT since 2004, been recognised in Europe and conceded by UK and Scottish Governments that we are

• French case – definition of “controle”

How we buy stuff

• Thresholds for OJEU advertising:-1. £ 4.3 M ( 5 M Euros ) for construction2. £ 173 K ( 200,000 Euros ) for Part A and Part B, goods and

services

• Perfectly clear – or is it ?• Further duty on public contracting authorities

– is advertising of a contract required anyway, because of three Treaty pillars of transparency, non discrimination and equality

How we buy stuff

• What happens if you don’t ? The threat of challenge by a disgruntled “economic supplier”

• Realistic ? Risk ?• A few associations have faced threats of legal

challenge – slowed down tender process, but• In climate of regulation and financial

uncertainty, voluntary boards are uneasy.

How we buy stuff

• Scottish Procurement advice is that goods and services contracts above £50,000 should be tendered and advertised. Some HA’s apply this limit to construction contracts as well – huge amount of effort. Not clear if benefits identified – compliance not adoption

• Yet procurement specialists not the norm in housing associations – but do we need ?

How we buy stuff

• Government focus on HA reform• Review of Procurement in the Affordable

Housing Sector, Turner Townsend Report March 2011

• £ 530 M spend -“more mature procurement” - £ 26M to £ 42M savings – collaborative activity identified as key

• A bit short on practical recommendations, however – SFHA vehicle was the main one

How we buy stuff

• Procurement Reform ( Scotland ) Bill • Sits on top of the 2012 Regulations, does not

replace, so HA’s are deemed Public Contracting Authorities

• New thresholds introduced - £ 50,000 for goods and services and £ 2 M for construction

• To use Public Contracts Scotland, up to EU thresholds, when OJEU notices as well.

How we buy stuff

• Other clauses on procurement strategies, community benefits and sustainable issues – well meaning, but more bureaucracy

• We will remain deemed as Public Contracting Authorities because of EU position - not sensible to classify up to 80% of our membership as having businesses on the same scale as local authorities and NHS Trusts.

How we buy stuff

• Construction Review – published 22nd October• Procurement Capability Assessments – de

rigeur for Local Authorities, suggestion will be required for all projects with government grant.

• Some HA’s have used as an improvement tool, but may not be appropriate for housing activity – needs reform

How we buy stuff

• Local Authorities, in planning investment programmes to look at procurement routes and whether RSL or inter LA opportunities.

• Seems like a great opportunity for collaboration, but in reality how this can work on diverse sites with diverse timescales is not clear

• “bundling up tenders” – a small part of the story

How we buy stuff

• A project on a difficult site can take 4 or 5 years to get to tender and can be subject to many delays – planning, legal, environmental (bats, diamond headed ants), cost. How can this be planned for MMC etc ? Devanha approach

• General provisions all sensible – project bank accounts, whole life costing, design, Construction Advisor for Scotland

How we buy stuff

• Many associations are considering how procurement tools can achieve savings

• Use of Frameworks – very attractive idea, a pre established framework contract that you simply join to gain benefits

• Disadvantages – have to use commercial framework contractors

• Or set up your own framework – bit of a hassle but once done…………………….

How we buy stuff

• Procurement groups – I Flair, Trust/Bield/Cairn/Hanover

• Started with Lead Developer arrangements• Now used for repairs, maintenance and

procurement of furnishings for older people• Need commitment to actually use – Cyntra

issue• Savings not always apparent

How we buy stuff

• So, working in a world which imposes behaviour on us through legislation and policy

• Not always appropriate to our sector – scale and undefined benefits

• Are opportunities for collaboration, better ways of working and potential savings for our tenants

• Not always big ticket contracts – construction• Shared services, bulk purchasing, maintenance• Needs commitment for the long term, not short term

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