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Latest News
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Collaborative Working in Scotland
Gordon Smith has recently joined the CWC Team. Many of you will know Gordon from his days as Area Director in the Grampian Region for Communities Scotland. He brings with him a wealth of knowledge about the Social Housing Sector in Scotland and holds strong views on a number of key issues. We are delighted to have him on board.
Gordon said, “I am really pleased to have been given the opportunity of working with CWC. They are experts in their field of business improvement and change management, an agenda that was always close to my heart when I worked with Scottish Homes and Communities Scotland. From the Boardroom down they have a wealth of experience and expertise available that would seem to cater for all eventualities. The area that I have a particular interest in is procurement within the affordable housing sector. With Scottish Government now set to push on with their procurement reforms, and given my previous involvement in this area, I just felt that there may be some unfinished business for me to get involved in, and help with. We shall see.
“I had been involved in the business of affordable housing procurement in Scotland for almost two decades. Whilst I most certainly will not be involved for another ten years, I am hoping that my experience and input can prove of benefit to CWC and their Clients, as collectively they begin to chart their way ahead to more successful procurement in the future. It would be good to get the opportunity to talk through some of your concerns and or experiences sometime, and get the opportunity to offer input and help with any issues that you may have”.
Picking up on the agenda has been relatively easy. However what has become clear from Gordon’s discussions with the practitioners within the sector over the past few weeks is that the procurement of day-to-day, planned and cyclical maintenance programmes has equal, if not more, priority in some instances than the procurement of ‘new-build’ housing programmes. Both are important of course, but it is clear that there is major re-investment being planned for existing stock in Scotland, as the end date for compliance with the Scottish Housing Quality Standard draws closer.
Paul Kirby, Director of Building – CWC, has been working with the Devanha team over the past few years on their Scottish Minister approved four-year programme. Devanha was to be a test bed for the Scottish Government’s thinking on the future of procurement for affordable housing. All involved have learned a lot and, armed with these experiences, we would hope that there will be opportunities in the future to repeat the approach and model. However, there’s not long to wait now as Scottish Government will soon publish its final response to its planned reform to the procurement of affordable housing programmes.
The Scottish Government has taken time to listen to and learn from the consultation process. However, everyone involved will now be keen to get an outcome and clarity on the way forward. Whatever the outcome of that piece of work, it seems to have at least helped people to focus their attention on getting better value from their investment. The emphasis, it would appear, is not just on the scarcity of grants to build new affordable homes, but the need to procure in a manner that helps to reduce borrowing for the property repair and maintenance programmes of existing stock. It may therefore be that it will be the Housing and Maintenance Managers, and not the mainstream Programme Managers, who will actually begin to lead the change in procurement practices for the Scottish RSLs.
Paul has been impressed from the outset with the ‘Collaborative Working’ approach to procurement, using ‘Open Book’ techniques. It is used all over the world with successes being recorded for a whole range of commercial programmes. It does seem strange that a mainstream programme like affordable housing (worth in excess of £1bn annually to the Scottish economy) has not picked up on the opportunity before now. However, he did note a call from Construction Chiefs the other day for their members to get active and put in a major push to get involved in the ‘public sector’ contracts.
Combined with the recent reported 10% reduction in tender prices, there would seem to be no better time for Scottish RSLs to push home their immense buying power. With Scottish Government positioning themselves towards longer-term programmes, it would seem that the time is right for the introduction of a more collaborative approach to procurement. Properly adopted, resourced, managed and implemented, it really does work. It saves the Client cash, or increases their investment potential. Some have sought to use hybrids of ‘partnering ‘and ‘Open Book’; by and large these projects do not achieve nearly the same levels of efficiencies that can be achieved when the correct approach and techniques are adopted. Leadership, a commitment to change and the ability to learn and develop new skills are key factors to the success of efficient procurement. CWC have the tools, techniques and skill sets on hand to help those organisations who wish to improve the way they procure, or collaborate with other partners to procure more efficiently. As the saying goes … “those who do not learn from history are doomed to repeat it”.
If you feel that you would like to hear more on the services that CWC can offer, or chat through some of the issues you may have concerning procurement/business improvement, please contact either Paul, Gordon or their colleague David Brown:
Gordon Smith: gordon.smith@cwcbiz.ltd
David Brown: david.brown@cwcbiz.ltd
Paul Kirby: paul.kirby@cwcbiz.ltd
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Falling Construction Costs – Buyers Beware
The Public Sector is now under real pressure as a result of proposals to reduce budget allocations. Some may feel that this is manageable as a result of the recent fall in construction costs due to the recent economic downturn. As a result, many may be tempted to go to the market and accept low tender prices, but it is a case of ‘buyers beware’ as this does not mean that they will benefit from lower project costs.
Due to a downturn demand for work, almost all contractors are putting in lower and lower prices that are sub-optimal. The result will be adversarial as it is widely forecast that there will now be huge increase in litigation in one or two years’ time when the impact of current deals will be felt. Indeed, the growth in litigation Consultants is unprecedented. Previous CWC experience tells us that when this situation occurs, final costs are often more than tenders submitted in a relatively stable economic climate.
Customers are demanding more for their money but there are different approaches; for example Tesco has recently said to its Contractor partners, “We want a 20% across-the-board cost reduction to reflect current industry deflation”. It is an unreasonable demand if there isn’t a plan as to how it will be achieved. Again adversarial behavior will prevail; quality will suffer and don’t be surprised when the claims start to roll in.
CWC maintain that the best approach by far is to negotiate cost reduction through partnership, where quality is not compromised and costs are managed collectively to match the Client’s financial budgets. Within the Housing Association sector, Devanha (an RSL Consortium in the North East of Scotland) is re-negotiating labour and material rates to reflect current regional deflation. Profits remain the same but costs go down - and without expensive and painful litigation. This is done through Open Book Cost Management which provides transparency of tender costs, agrees levels of overhead and profit, and continuously monitors actual costs throughout the delivery cycle. At the end of the project there are no nasty surprises!
The Devanha approach is a win/win situation. The Client and Contractor benefits from savings but will share any unexpected increases which protect the project. It has the positive effect of reducing the risk of adversarial behaviour and the escalation of claims. This is a collaborative approach that is now tried and tested and is fast becoming the norm rather than the exception.
Implementation of Open Book Cost Management (OBCM) is a brave step by some but for those who do it, it is seen as a step in the right direction. It is not easy and many have failed, but that has not been because OBCM does not work, but mainly because the people managing it lack the experience to make it work. To make it a success the process must be accompanied by a culture of change within the Client organisation, which is then driven forward by close collaboration between them and their construction partners where ‘the spirit of true partnering’ becomes the ethos and not just a fashionable thing to say.
Constructing Excellence and CWC advocate this approach.
For advice on what to do, contact us for guidance on how to get obtain ‘best value, 0207 592 1152 or bronwyn.campbell@cwcltd.biz
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 The Driver for Change
Scottish Government Ministers see the supply of high quality, and well managed, affordable housing as one of the fundamentals to Scotland's success. Having been involved in advising Scottish Government on a review of procurement, and latterly having worked with the Scottish Housing Regulator, we at CWC endorse and support that commitment. However, we recognise that change can be daunting, full of complexities, and very often extremely challenging. As a result we feel that it would be helpful to offer up periodic updates on our approach and experience in change management that help Clients to pursue business excellence.
We want to offer our support and commitment by offering a range of services to our Scottish Clients that will help them to work alongside Scottish Government and their key partners to bring about these changes.
In Scotland, opportunities will soon exist for specialisation in the development and procurement functions. In addition, through our discussions with the Scottish Housing Regulator there appears to be a drive towards improving on current asset management practices of the RSL sector. As a result, we see potential for duplication of effort and for unnecessary expenditure of valuable resources amongst RSLs. Because so many operate similar development, procurement and housing management functions within the same geographic area, we see immense scope for there to be a more collaborative approach amongst neighbour RSLs, whereby they can address these changes jointly.
We believe that there is scope for many RSLs across Scotland to develop a more streamlined and efficient approach to procurement and management of their assets. Our support programmes have been designed to help implement and manage these changes, and we believe that they underpin Scottish Government's approach to investment reform.
Neil Jarret CEO
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 The Importance of Long Term Relationships
Sir Michael Latham recently chaired a Scottish Housing Regulator sponsored seminar on improving asset management in Glasgow.
Addressing an audience comprising of some of the key figures from the Registered Social landlord sector in Scotland, Sir Michael said that the collapse of the financial system in September 2008 marked the end of an era.
He suggested that the government intervention that now follows will herald a major overhaul of the capitalist system with potentially much greater control and centralised economic planning. Business confidence he said, is at its lowest level since the 1970's and is likely to get much worse. Business are between a rock and a hard place. Bank loans are near impossible to come by and consumer confidence is in free fall. And you can be sure - things will get a lot worse before they get better.
Describing some of the challenges that need to be faced, he stated that it was more important than ever that best practice be adopted to help the construction sector through these difficult times.
He reminded the audience on the time that his report 'Constructing the Team' was commissioned during the economic downturn of the early 90's. The downturn he said was not nearly of the scale of what we are about to experience... but the impact of recession led to the production of my report and findings that are totally relevant today.
The collapse of the Private sector market he suggested, would results in a greater role for the public sector, that would be as critical to the construction industry's future. We are likely to see an increase in capital spending whilst revenue budgets will be further reduced through high unemployment and a decline in local authority income. There are important drivers for the Registered Social Landlord sector through the crisis and actions that you can take to help lessen the misery. For the next few years, he highlighted four key issues:
Firstly - the recession will hit the construction industry harder than other sectors. Economic forecasts are continually worsening, and some are predicting that industry output will lower to some 50% of its recent peak. As a result, Governments importance to the sector and influence over the sector will grow.
Secondly - If the flow of work is less than the capacity available, there are a number of consequences: Fee bids by consultants and tender prices submitted by contractors will be uneconomically low with consequences such as an escalation of claims and a lack of investment in training and the environment. Public sector clients have a duty, through procurement, to ensure fair prices and that investment in education and training and the environment continues. The rise in public sector importance and control of the market gives you power to mandate change. But in many areas, the public sector remains poor at managing scheme briefing and delivery. You as leaders must work over the next five to ten years to set the industry's agenda and make sure it delivers best practice.
Thirdly - Whilst limited availability of finance and planning constraints will hinder the start of capital projects and PFI schemes in the short and medium term, long term investment in power stations, schools and regeneration schemes must increase. You may need to consider innovative models for public and private partnership to ensure speedy and effective delivery.
Fourth and finally - The pressure will remain on Registered Social landlords to cut costs and deliver high quality services. Local authority revenue shortages will force you to deliver major efficiency savings. He said that the work of the sector had done to date to deliver efficiency, whilst commendable, is only touching the surface. The sector he said will remain under severe pressure to make much greater cuts in revenue budgets. There has never been such an important time to fully commit to long term collaborative relationships with your supply chains.
In the boom years - that are now behind us - it was quite often an uphill struggle to engage a supply chain that would fully commit to the long term benefits of collaboration. Many companies couldn't see the point, there was plenty of work around and they could name their price and conditions. Profit margins were high and everybody though it would go on forever. But it didn't and now we are in this awful situation that few predicted.
It is now he said, those long term collaborative relationships that can help you address these key issues, and place your organisations in a position to tackle the challenges that lie ahead. There is a 'win win' situation for all involved if there is a diligent process of strategy planning and implementation.
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