The UK has a £19BN backlog of repairs and renovations in its social housing. Wilby Meadows, Wolseley director for local authorities, argues that the supply chain must deliver the greatest possible value to meet this challenge, and not just the cheapest upfront price.

SOCIAL HOUSING reached its peak in the late 1970s when the sector provided accommodation for 30% of the UK population.

Since then, the era of “Right to Buy” led to investment in social housing diminishing in importance. Today only 14% of UK homes are provided by social landlords.

However, the sector is still vital to the overall housing mix. At a time when house prices in many areas are over five times the average salary, the provision of affordable housing is crucial in ensuring that there is suitable accommodation to meet the needs of every sector of society.

If local authorities, arms length management organisations and housing associations are to meet the government’s target of delivering decent homes by 2010 and satisfy the increasing aspirations of tenants then a massive investment in housing is required. The former Housing Minister Keith Hill suggested that the backlog of repairs and renovations could cost £19bn.

No amount of investment will be sufficient, however, if it is not used appropriately. When attempting to improve the standard of social housing, landlords and outsourced contractors alike must make the very best use of the resources available to them.

In order to encourage social housing providers to improve their procurement, the Office of Government Commerce (OGC) has recently introduced a procurement methodology called the “reverse e-auction”. This is where all suppliers register their prices for a given product or service electronically and the supplier that can deliver at the lowest price is awarded the contract. This system has been in operation within the social housing sector for some time and is now being rolled out to encompass health and education.

It is highly commendable that the OGC is working hard to support public sector procurement and increase efficiency. However, as the reverse e-auction mechanism is being expanded major doubts exist about whether it places too great an emphasis upon price, overlooking issues of service and long term value.

Delivering products that meet the necessary criteria and are fit for purpose at a competitive price is extremely important as no organisation, least of all public institutions, can afford to construct and renovate buildings at noncompetitive rates. However, up front price must be balanced against a range of other criteria including the quality of service offered, the logistical support available and the after-sales maintenance provided. There is no virtue in saving on the nominal cost of a product to then incur costs due to poor delivery, lack of availability and warranty maintenance.

Efficient procurement must be focused upon delivering value, which entails considering the supply of materials in its totality, or the whole life cycle of the building. The most effective supply chains involve the manufacturer, distributor and contractor working together to deliver a quality service package. Reverse e-auctions risk becoming an artificial blockage in this process, preventing integration, potentially stifling innovation and focusing attention upon short-term price rather than long-term delivery of outstanding service.

One of the particular concerns about focussing solely upon cost is it does not place enough emphasis on using the expertise of established suppliers and does not benefit from working in partnership.

Many social landlords currently manage a long list of suppliers and tender separately for every piece of work, which results in complicated administration that overshadows any cost savings. In contrast, through partnering it is possible for social housing contractors and landlords to develop the most efficient supply chain. This entails streamlining the list of suppliers to a small number of companies who crucially have the logistical expertise required to ensure that the right products are always in the right place when needed.

The development of strong, ongoing relationships with suppliers also enables social landlords and their contractors to pass on responsibility for specialist tasks such as the management of delivery, storage and distribution
of materials.

What is clear is that social housing plays a vital part in the UK’s housing market. No matter how successful the private sector is at delivering new homes, there will always be a need for a buoyant, diverse social sector, offering high quality homes.

Large strides have been made in recent years to ensure that all social homes are refurbished when necessary and are well maintained. However, there is still a very long way to go – both in upgrading existing properties and providing the new homes that are needed.

Partnership working has been something of a buzzword in construction industry circles in recent years. However, it is only by developing strong, ongoing relationships with leading companies that social housing providers will receive the full benefit of supplier’s expertise and be able to pass on real value to all tenants.