THE EXTENSION of Gershon targets is set to impose much greater efficiency savings targets on the public sector.
Arms Length Management Organisations, (ALMOs) were given an extra £485m to help them meet the Government Decent Homes target, but are under pressure as they seek to spend this money in an accountable and efficient manner.

We anticipate that, in time, audit commission inspections will improve their assessment of Value For Money. The increased targets will mean that public sector clients will no longer be able to pay lip service to efficiency targets and will have to make significant changes to working practices. Collaboration is likely to be key to achieving improvements.

At the heart of collaborative working is a move away from the adversarial relationships that still beset the housing sector. While believing that they partner, ALMO clients are still operating on tendered schedules of rates and contractors and are compelled to play games with the rates, overheads and prelims to achieve a fair profit.
Variations are still used successfully to lever more money out of the client. This is not collaboration. Collaboration begins with an acknowledgement that all members of the supply chain are entitled to a fair deal and trading commences on that basis. Key principles for success are:

• Long term alliances between clients, contractors and key suppliers
• Collaborative contracts that accept at the start that contractors and suppliers should make a reasonable profit, share risk and reward and set targets and incentives for ongoing performance improvement
• Continuity of work to contractors and suppliers to reduce prelims, mobilisation and other costs and allow long term training and supplier development
• Early involvement of suppliers in design, costing, planning, often with contractors taking the lead
• A detailed understanding of cost and other aspects of performance shared between the client, contractors and suppliers and targets set for improvement from project to project.
• An open book costing process – the client and contractors receive feedback of actual costs and share information to drive future cost reduction activities
• Collaborative behaviour, with everyone working together to deliver improvements.

Currently most local authority client staff think they are partnering and that they understand costs through their tendered schedule of rates. They do not.

Comparisons between authorities show that most partnerships continue to conceal true costs. Low tendered rates are often compensated by high prelims or overheads. Clients continue to drive unrealistic reductions in prices in the belief that they are negotiating savings, but in reality they simply force contractors to add costs through games played in other cost areas.

Costs must remain muddied for the contractor to remain profitable. The same relationship and game is replicated with suppliers and subcontractors. Partners may get on well, but the lack of transparency of the cost base prevents true collaboration and limits improvement.

A major benefit of true transparency and collaborative working is the elimination of waste and cost through over specification, duplication of effort, cost of lack of continuity of work and inefficient ways of working.
When everyone knows what everyone else is doing and what difficulties they are facing, they can share expertise. If a contractor knows in advance that another contractor won’t have finished his part of the job for three weeks, he won’t tie up his workforce now. Suppliers can combine resources to take advantage of the savings resulting from bulk procurement.

Key benefits include:

• Price and cost reductions – up to 50% in client management, 40% in cost
• Safety improvements
• Productivity improvements of between 16 and 40%
• Reduction in project lead time up to 50%
• Reduction in maintenance cycle of between 30 and 50%
• Quality improvements 70%
• Improved client satisfaction, up to 90% - tenants, schools, public

CWC (www.cwcltd.biz) is the consultancy arm of Constructing Excellence. Unique training and support programmes cover all aspects of collaborative working in a way that everyone in the industry can understand. Clients are left with the skills, knowledge and confidence they require to lead their own teams and to continue reaping the enormous benefits of working collaboratively.