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

Project: Solar panel installation

No of properties for which the scheme is financially viable: 8,000

No of properties that require an economic viability assessment: 7,000

Problem: Since the total in house workforce is insufficient the procurement manager will need to procure an externally managed program for the installation of solar panels and outsourcing the three categories that are usually undertaken by GSA's inhouse workforce

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

We'll need to consider the following factors for the two initiatives

Initiative 1: Procure an externally managed program

• Determine the total capital and operational expenditure for the externally managed program

• Capital expenditure will include the cost of all raw materials, fixed billing

• Operational expenditure will include labor costs, permits, transportation costs, and miscellaneous costs

• Calculate the time taken for the installation if we procure an externally managed program

• Determine the total capital and operational expenditure is this project is handled by our in house workforce or GSA's programmed capital works for staff

• Calculate the time taken for the installation if use GSA's programmed capital works for staff

• Determine the total capital and operational expenditure is this project is handled by GSA's tenant workforce

• Calculate the time taken for the installation if used GSA's tenant workforce

• Determine the total workforce required for the existing 8000 financially viable properties and determine the same if the total number of financially viable properties are 15,000

• Conduct a cost-benefit analysis to determine which is more financially viable and faster ( Procure an externally managed program vs GSA's programmed capital works staff vs GSA's tenant workforce )

• Conduct a cost-benefit analysis to determine which is more financially viable and faster ( Having a stand-alone dedicated workforce from the three available options listed above or having a combination of all three types of the workforce)

Initiative 2: Outsourcing the three categories undertaken by the in house workforce

The three types of maintenance activities that need to be carried out at these properties are

• Reactive Maintenance

• Void Management & Refurbishment

• Programmed Capital Works

Before outsourcing these three categories undertaken by the in house workforce, we'll need to take the following factors into account

• Determine the total capital and operational expenditure of outsourcing

• Calculate the additional margins or additional costs incurred due to outsourcing. (Ideally, property management services charge a 30 - 35 % premium on hourly labor rates for managed programs)

• Identify the total number of pending projects for the next 2 - 4 years in the job roster

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

The contractual matters that would need to be taken into consideration are as follows

• ​What would the displaced workforce work on, specifically the tenant workforce which comprises of almost 30 % of workforce.f the tenant workforce are out of job this may effect their ability to pay their rent which will in turn have an adverse impact on GSA's properties. Which is why we'll need to clearly review the tenant workforce's employment contract along with their rental contracts and check whether or not their leases contain a lock in period or whether or not there's any link or conditions between their monthly rental payments and their employment agreement.

• ​Another contractual matter that would need to be taken into consideration is the subject of work place health and safety, employers insurance and incident or hazard liability. Since outsourcing will mean that the ew work force will be on a third party pay roll, it's important that the company or the business that undertakes the outsourcing initiative bears any and all liability that may or may not arise during the tenure of their contract

• The outsourcing partner or vendor will need to comply and be willing to be audited for fair employment, ethical sourcing practices.

• Payment terns will need to be inked out well before the outsourcing contract commences. We'll need to clearly determine deliverables, timeline, capital and operational expenditure along with payment schedules.