Decision - Housing Management Repairs, Refurbishment and Improvement Strategic Partnership Procurement Recommendations Report

1.     That Cabinet:

(a)       Approve the selection of Mears Limited for the Repairs, Refurbishment and Improvement Strategic Partnership contract covering the whole city.

(b)       Authorise the Director of Adult Social Care & Housing in consultation with the Director of Finance & Resources and Cabinet Member for Housing to develop and implement a partnering contract over time to deliver the target pricing framework as outlined in 3.11.4-3.11.9 of this report.

(c)       Authorise the Director of Adult Social Care & Housing in consultation with the Cabinet Member for Housing to take all steps necessary or incidental to the implementation of recommendations 2.1 and 2.2 including those necessary to effect the commencement of this contract on 1 April 2010, to run for up to ten years, and any staffing issues associated with the proposals.

The award of this contract will enable Housing Management to meet the key objectives of the Procurement Strategy which was agreed in April 2008.  The new contract is key to enabling the council to have a sustainable 30 year Business Plan for the housing stock and bring the maximum number of homes to the Brighton & Hove Standard (exceeding the Decent Homes standard).

Alternative options including frameworks, consortia and supply chain clubs were considered as part of the development of the Procurement Strategy.  The outcome of the procurement process has been assessed against the costs of keeping contracting arrangements as they are now (i.e. doing nothing) and establishing an in-house Direct Labour Organisation.

       Do nothing

Continuation of current contracting arrangements will not enable the HRA to have a sustainable Business Plan and meet Decent Homes requirements.  Current repairs and maintenance procurement arrangements include:

§       annual tendering of capital contracts with specified supply chains; 

§       two responsive and empty properties revenue repairs partnering contracts of 5 years with an option to extend for a two further years;

§       two gas install and maintenance contracts for 5 years with optional extension; 

§       with the exception of gas servicing and repair, repairs to services such as lightning conductors and water tanks are on an ad hoc basis.

Annual re-tendering of capital contracts is relatively costly and inefficient and gives service providers no incentive to invest in additional benefits. Supply chains specified by the council do not allow access to service providers’ own supply chains, which can be of the same standard but more cost effective. This also leads to inconsistent customer service, materials and levels quality.

       Direct Labour Organisation (DLO)

An analysis of the costs of setting up and running a DLO have been produced by independent consultants in order to provide a comparison with the bidders proposals. A direct comparison of the economic cost over 10 years shows that the DLO option would significantly more expensive than the preferred bid.  The following factors make it difficult for the DLO to be competitive:

§       The salaries for council staff are generally higher due to employer’s pension contributions.

§       The DLO has the disadvantage compared to the established bidders, of incurring set up costs for establishing a new organisation, as well as the mobilisation of the contract.

§       Programmed works, which represent approximately 60% of the contract, materials costs are generally higher due to the council not achieving economies of scale for purchasing that national companies can achieve.

These factors are partly offset by savings from:

§       The DLO option does not include an allowance for profit. Any under-spend is automatically reinvested within the HRA Budget.

§       The DLO seeks to maximise directly employed staff and therefore reduce costs for specialist sub contractors.