Question

Granite Housing Association Granite Housing Association (GHA), a charitable organisation, is a Registered Social Landlord (RSL). Its operations are part funded by the Government. GHA is based in the South East of England and manages 30,000 properties. It was created from 7 other RSLs with portfolios ranging from 1,800 to 14,600 properties. Five of the original RSLs had their own maintenance workforce while the other two used external contractors. 30% of the inhouse workforces are also tenants. Each workforce has remained on its own terms and conditions of employment and operates independently of each other. Activities associated with the workforce fell into three main areas: 1. Reactive maintenance 2. Void management and refurbishment 3. Programmed capital works Reactive maintenance requests are initiated by the tenant requesting repairs for damage to property, broken locks, leaking windows, etc. Void management is triggered when a tenant leaves. Typically, the property needs to be made secure, which may involve boarding windows and doors and/or installation of alarms. While the property is vacant prior to a new tenant arriving and dependent upon the condition of the premises, they may need full or partial refurbishment which may include central heating upgrades, kitchen and bathroom replacements. Programmed capital works includes the significant upgrading of a number of properties in a locality which may, for example, include replacement double-glazed windows. Two years remain on the framework agreements for the supply only of plumbing materials and supply only of building supplies, and four years remain on framework contracts for the supply and fitting of alarms, the supply only of kitchen units and the supply only of glazing products. The accountant, James Andrews, has undertaken an analysis of a new government scheme to encourage renewable forms of energy and has proposed that a major capital programme can be undertaken to install solar panels on properties with a south facing roof. For 8,000 properties the scheme is financially viable, for a further 7,000 properties the cases further work would require additional investigation to determine economic viability. The programme will be beneficial both to the tenant and to Granite. However, the in-house workforce does not have the capacity to undertake this activity.

Tasks

You are the Procurement Manager for GSA and you have been asked to consider:

(a) Initiating the procurement of an externally managed programme of installation of solar panels

(b) Outsourcing the three categories of activities undertaken by the in-house workforce.

1. What would you need to consider in relation to both the above initiatives?

2. What contractual matters would need consideration in the relation to the outsourcing initiative and the existing frameworks?

Answer 1

GHA manages 30,000 properties which were part of 7 other RSLs earlier. 5 RSLs have in house work force, while the other two use external contractors to carry out three types of activities - namely;

1. Reactive maintenance

2. Void management and refurbishment

3. Programmed capital works

2 years remain on the framework agreements for the supply only of plumbing and building supplies & 4 years remain on the framework agreements for the supply and fitting of alarms, the supply only of kitchen units and the supply only of glazing products.

Installing solar panels:

For 8,000 properties the scheme is financially viable and for a further 7,000 properties the cases would require additional investigation to determine economic viability.

The in-house workforce does not have the capacity to undertake this activity.

1. Considerations to be made with regard to the two options:

· Though the properties belonged to the previous 5 RSLs had in house work force, specific information with regard to how many properties out of the total 30,000 are managed that way is required.

· The cost of outsourcing the three categories of activities undertaken by the in-house workforce for the units in the 5 RSLs is to be estimated.

· The cost of carrying out three categories of work by the external contractors in the remaining 2 RSLs needs to be estimated.

· The cost of procuring of an externally managed programme of installation of solar panels is to be estimated.

· Duration of the installation work for either options

2. Consideration on Contractual Matters

o Existing contracts last for 2 more years in the case of plumbing and building supplies and 4 years for glazing products.

o Since the procurement of vital components like solar panels and fixing accessories can be done through existing contracts, it would be advantageous not to exceed the project duration beyond those dates. Hence due consideration is to be given to the option (using in house work force or outsourcing the work) which ensures this aspect.