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

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

First of all since each workforce has remained on its own terms and conditions of employment and operates independently of each other there is standarization issue which prohibits the overall costing of GHA in terms of the activities done.

In order to properly fulfill the initiatives, it is required to create a bylaw system with properly documented and standardized processes each one of the workforce doesn't work on their own terms which will lead to redundancy in the system.

After that on an overall basis and based on calculations of the capacity of the existing workforce, we can propose the required number for outsourcing if the outsourced vendor will be able to do much below than the etimated capacity as per the cost benefit analysis.

Request for qoutations to be released in the market for the bidding. As pe the set requirements and parameters the screening of the potential vendors to be done. Then the background check need to happen on the credibility of the vendors in the market and after that the negotiation.

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

Outsourcing contracts need to be clear and effectively communicated, and they should always be adapted to the reality of the relationship, the project and the environment in which the objectives of the project are to be completed.

Few of the contractual matters that would need consideration are as follows:

a. Conditions related to exit

If we wish to transfer an outsourced service to another vendor or bring it back in-house mid-term or at the end of your agreement, it’s important that your exit clauses are in good order. Clauses relating to exit management should be clear, and they should be fair. It is equally important that the costs involved in an exit are discussed and agreed at the outset. You would not want to come to the end of your partnership and discover a surprisingly large fee request for service transfer in your final invoice from your vendor.

b. Conditions that exclude advice and representations

It has been known for vendors to quote for work based only on a client’s agreement to use their standard contract terms. Contracts should always be accompanied by a bundle of emails, meeting notes, brochures, web materials, and any other documents that passed between you containing information alligned to the project.

c. Conditions that limit a client’s remedial capabilities

Clauses are often included in outsourcing contracts that limit a client’s ability to withhold payments, even if the vendor is not meeting their agreed targets. There are many excuses for their inclusion, such as disruption to the work flow, but the freedom to sue your vendor at the end of an agreement does not take into account the disruption that is allowed to go unchecked if you have no right to employ financial penalties against a lacklustre service provider. Vendors have a right and a responsibility to their shareholders to limit their liability, but only so far as is fair to the client.

d. Conditions that do not limit suspension of service

The other side of the remedial capabilities coin provides us with terms that allow a vendor to temporarily suspend or permanently remove their services due to your non-payment. Such things should not be limited as it weakens your position in the relationship.

e. Conditions that exclude client’s costs should outcomes not be met

As with the limitation of a client’s remedial capabilities, exclusion of client costs should the project go wrong should be handled in a fair and reasonable way.

f. Conditions that lay properly the payment terms and timelines