Smooth operators

Derby Homes

Everyone’s an accountant at Derby Homes. The arm’s-length manager’s philosophy is simple: all staff members are trained by their line managers to understand every detail of the budget. This has helped it to become one of only five ALMOs, out of 52, to be awarded three stars and it is hoping to become the first to sell its services to other housing providers.

From the staff who answer the customer repair calls to the board, everyone knows how and why the budget works. Finance director Lorraine Watson makes sure the monthly accounts are presented as clearly as possible so staff can see what’s going on. Where possible, she keeps data down to one A4 sheet, including what the ALMO’s spent this month, what it spent in the same period last year, what it’s spent so far that year and what’s left for the year. Each employee has a senior accounts “buddy” who can break down anything they don’t understand. “We make budgets real so people understand them,” says Phil Davies, Derby’s chief executive.

He believes enforcing budget cutbacks from above without finding out what your staff think is “clearly unproductive” and that employees must be involved in analysing why departments overspend. With the clear financial picture this produces, it’s easy for his team to spot areas of the business that are swallowing more than their fair share of funds.

“You can start asking questions and deal with problems before they get out of hand. If you’re overspending, you can take early action,” he says. For example, when the ALMO realised one of its 15 housing offices was overspending on repairs, it ruled that Watson had to approve all ordering of materials worth more than £100. This saved £20,000 in one year. “It might sound petty,” says Davies, “but it is very effective.”

Southern Housing Group

Dawn Smart keeps development costs down by cutting out the biggest drain on the budget – professional fees. As head of development at 12,500-unit Southern Housing Group, she has a mantra of self-sufficiency: her 15-strong team does all its own preliminary work when considering sites. It works out a framework for costs and materials before bringing in consultants, which avoids having to fork out for “failed work and dying schemes”, says Smart.

The Housing Corporation commends Southern for always delivering what it promises and sticking to low unit costs. The RSL made it onto the corporation’s development partner list with ease and will be given £56.2m to build 1078 homes in the next two years – Southern’s spend of £52,179 per home will be well below the average of £57,115 spent by its colleagues in the top 10.

When Southern does use consultants, Smart prefers to stick to tried and trusted companies. She uses a limited number of firms for all its developments. One of its notable successes is driving down the cost of employing planning supervisors, who are legally required to oversee health and safety and risk factors on site.

Rather than striking a deal for each scheme, Southern commissions only two firms to do all this work. They operate in different geographical areas and, although there is no guaranteed volume of work, the likely amount is sufficient to get them to reduce their fees. Based on last year’s budget of £70m, Smart estimates that Southern paid £250,000 for planning supervisor costs – half what deals agreed on a one-off basis would have cost.

Southern also insists on fixed pricing wherever possible. It will not enter into a contract based on provisional sums. This guarantees that money won’t be lost if the work goes over budget.

When she does employ outside help, Smart follows one very simple piece of advice: “Don’t ever rush.”

Leicester Council

Leicester council has a cast-iron case for a diverse workforce: having a high number of women in its three-star repairs service increases efficiency by reducing wasted visits. “Some women don’t feel comfortable on their own in a house with a male electrician or joiner,” explains Bob Mundell, head of the council’s housing repairs service. If repairs staff can’t get into tenants’ homes the first time they are called out, this means extra visits, adding cost and causing a backlog. Out of 400 hundred maintenance employees 50 are female – far above the national average of less than two per organisation for the repairs industry.

Last year the council spent just £27.6m on repairs to its 24,500 homes, with an average cost of £21.13 per job and £22.30 per property per week, and its female workforce is largely responsible for keeping maintenance costs so low.

Mundell prides himself on the fact that the council does all its repairs in-house and believes this is also key to its efficiency. Staff are based at five depots but information on repairs – and the out-of-hours service the council provides to several local housing associations – is processed in a call centre where staff know the whereabouts of all staff and can arrange for the right people to visit tenants, such as a woman plumber for a lone female tenant.

The current average response time for all repairs is within five working days of the tenant calling to report a repair. According to Audit Commission performance data, Leicester makes and keeps appointments for nine out of 10 of its non-emergency repairs. That’s top quartile performance and an outstanding record for a diverse city council. Mundell adds: “We are able to make the changes very quickly and easily ourselves and this cuts down time and costs.”

Fusion 21

Fusion 21 in Merseyside is a partnership between Knowsley council and seven local housing associations. It brokers joint purchasing deals to get the best prices for necessary construction items such as boilers, doors and windows.

Fusion 21’s procurement model is now being rolled out nationwide through the Procurement for Housing initiative, which claims it can save associations £1.5bn on their annual £5bn repairs and maintenance costs, which alone would meet the Treasury’s efficiency target. Anyone still not convinced should look at the savings Fusion 21’s members are expected to make – £24.38m over the seven years of the project. It is already saving an average of £300 per boiler. The partnership estimates it will have saved a total of £8.4m on boilers alone by the time all current contracts are complete.

Essentially, Fusion 21 acts as a middleman between landlords and manufacturers, cutting out the network of small wholesalers and getting cheaper deals because it can guarantee large orders. Its landlord members will build 85,000 homes in the next seven years and its preferred suppliers of doors, windows, boilers, kitchens and bathrooms will each supply 10% of the products needed.

Mike Brogan, Fusion 21’s chief executive, says the secret of cutting costs is keeping the relationship as simple as possible.

“If you have a standard model with standardised products offered at the best value, people know exactly what they’re getting and know they’re getting a good deal,” he explains.

Sunderland Housing Group

Dave Piggett’s team at Sunderland Housing Group has been so efficient that the association is on target to meet the decent homes standard by Christmas – six years before the 2010 deadline and three years ahead of its self-imposed schedule.

As group director of design and build at England’s largest transfer landlord, Piggett revolutionised the way building services were contracted, making it one of the most efficient associations in the country.

“We recognised there were big problems with the formal tendering process – we didn’t want to become beholden to one particular contractor, because if things start to go wrong you’re left with no alternative,” Piggett says.

So he did things very differently. Instead of traditional tendering, dominated by price concerns, Sunderland set up partnering forums for contractors and consultants that wanted to work on its mammoth £340m building and repairs programme. In the middle of 2001 it set out a model contract and asked contractors to apply to join a
five-year works programme.

Out of 13 candidates, seven contractors were picked, including an in-house team, judged formally on both quality and cost.

Piggett says: “We knew from day one, with the transfer, we had £340m to spend. The competition allowed us to distribute this work between the seven – so the contractors would have continuity of work, and we would get continuity on site.

“This gives economies of scale. All of our contractors know which job they’re finishing, and which job they’re starting in a year’s time – maximising efficiency and minimising downtime. There’s also no lengthy tendering process.”

Since then, the forum has been meeting regularly to deal with any problems that arise and share experiences. Sunderland’s surveys of its 35,000 tenants found that 85% were satisfied with the work. The cost savings are even more impressive. The initial contracts fixed prices for two years.

On renegotiation the partnering arrangement had been so successful that five of the contractors came back with a price saving – despite construction industry cost rises of more than 20% over the period.

Piggett estimates this alone saved Sunderland £10m to £20m over the life of the programme. A further £1m has been saved by bulk-buying of construction materials. However the other saving is in time: what was originally a 10-year programme of works will now be completed in as little as seven or eight.

This means Sunderland will save £13m in inflation costs for the final three years, and will earn an extra £6m in rents because it can charge higher rates on refurbished homes.