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 SMEs 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 construction 2.£ 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 dont ? 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 HAs 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 HAs 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 22 nd October Procurement Capability Assessments – de rigeur for Local Authorities, suggestion will be required for all projects with government grant. Some HAs 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 view of participation