How Housing Associations buy stuff?

Housing Associations spend about £23.7bn pa on building and maintaining homes, with something like £12bn being spent on overheads, systems and services. Naturally, many suppliers want to sell to housing associations. But they encounter obstacles that confuse or frustrate them. This short article explains how to avoid common pitfalls.

Housing Associations have to buy products and services in a transparent and fair way, at the best value cost to the tenant or leaseholder. This is generally called procurement. I would like to thank Sandip Shergill MCIPS for helping me with this article.

The process is:

• A team within the HA, for example the asset management team, will decide they need something. The team has the need and a budget, and they know in a general sense what they want (say a stock condition database that prices and writes down components over the correct time period). They will consider what is available, ask other HAs or advisors for suggestions, and carry out soft market testing. At this stage, it’s typical that they won’t know exactly what they want.
• They write a specification, taking care not to over or under-specify. It is hard to avoid both drawbacks and it’s advisable to allow the suppliers to influence the specification by explaining what is available, what it costs, and how they can help. However the decision on whether features are needed, are robust and tested, and feasible must be determined by the specifying department (taking staff and tenant preferences into account) taking up references, piloting the service, and visiting reference sites.
• Normally the procurement team are involved. They will ensure the specification is legally correct and satisfies other internal departments. With the example above the asset management team must buy technology that will interface effectively with the finance system, for example. Each central team will ensure compliance.
• Formal tender documents are produced. A contract notice is issued through an e-procurement plasform, such as Delta, Proactis, Mytenders, or Intend etc – and suppliers interested in providing asset management systems will get an alert, explaining the opportunity and the process.
• With really large projects – say building work with a value of over £5mn – there will be a pre-qualification period, a financial assessment, a check on key policies, DBS, and usually a schedule to price. This information allows the HA to assess the quality and price.
• With smaller contracts, say of about £50,000, the HA would simply ask for a quote for the specified service.
• Evaluation involves making sure the bid is compliant, determining any shortcomings, understanding what efficiency savings are being offered – both financial and non-cashable, determining social value, special benefits to residents and diversity considerations etc.
• Feedback is given to the unsuccessful bidders to help them improve.
• The contract is let and should be actively managed by the HA.

The more essential services, like electricity, insurance, maintenance, gardening or auditing, on relatively long contracts, are tendered periodically to ensure best quality and price. For a procurement team in the bigger associations there will be over 100 such contracts. They will test the market regularly and interested parties, including the incumbent, will be approached to indicate and price their offer.

Making changes, investing in new technology or wanting to procure a new product such as leased electric cars will usually be lead by the department or team with the budget. Suppliers need to work out who is the budget holder and what he or she is looking for.

The business leader (usually second or third tier managers) may be interested in new products and services and will offer suppliers an opportunity to demonstrate. Like any purchase they will have to think about its value to them. In most departments they will be unhappy with some of their systems, products or regular suppliers and they get to the stage that they are ready to go shopping. This gives challengers an opportunity. Sometimes the people who want the change are not in charge of the budget.

Most of this is just a transparent and formalised buying and selling process.

However HAs share features with public sector organisations – they are accountable to stakeholders, residents on restricted incomes, local authorities and the government. Their processes must be beyond reproach. But unlike the public sector they are independent organisations and make money from their commercial activities. This means they need a reasonable appetite for risk if they are to make commercial returns. However, their buying decisions are often very risk averse when it comes to trying something new. They tend not to risk bringing in a new way of doing things which have the potential to reduce costs considerably. The fear of failure and risk to their reputation means they often stumble at the first hurdle. With areas such as technology they are especially risk averse, preferring to stick with the tried and tested, even if it’s not very good, and costs a lot of money.

How do organisations decide if a product is right for them? The evaluation process usually gives a score out of 100, with say 60% depending on price and 40% based on quality. Clearly these crude measures can be counterproductive. If a low price overrides quality the contract will require interventions which will usually make it more expensive over time. And the balance of quality and price must depend on the product. A relatively simple piece of kit – such as a digital signature system – can be evaluated on around 80% price. A new finance system, on the other hand, will be much more challenging. The HA may not initially know what is available or what a new system might offer, so quality considerations will be much higher, being prescriptive about what the HA wants and needs and asking the market to offer solutions. Given the appetite for change is really low in HAs it can be as frustrating for suppliers as it is for HAs. In reality, lots of work needs to be be put into specification and design by both the HA and the supplier for this to land well.

One really positive initiative I have seen in housing associations is Meet the Buyer events where suppliers can get to know the people they are targeting. The HA explains how they work, what they are looking for and offer an opportunity for questions. This helps suppliers with developing their products for the HA market, to meet and network with HA staff and to showcase their products. HAs want good products at the best price, just like everyone else.

With more trust and truthfulness both ways, it is possible to achieve this.