Agenda item

Cabinet considered proposals for the Tenant and Leaseholder Services procurement of a responsive repairs, voids, compliance and planned maintenance and cyclical works contract. And was asked to “the letting of a 10 year contract, with provision to extend for a further 5 year period to enable a true alliance between contractors and client. This contract is for the provision of responsive repairs, voids, compliance, cyclical and planned works. It will also include an element of works for corporate properties.”

This contract would cover the following:

?  Responsive repairs, voids, compliance, cyclical and planned works; 

?  Provide an element of service for the council's corporate properties; 

?  Provide an out of hours service for emergency repairs; 

?  Maintain a customer contact centre for tenants and leaseholders of the council to call to report repairs.

In developing this contract the Council placed a strong focus on local delivery, directly employed local operatives and the use of local material suppliers. This was in order to add social value to the area through job creation and material supplies. This would also provide the most efficient and responsive delivery through local supply, ensuring that Thanet’s service is given priority, through area buy-in and local knowledge. This approach would also minimise carbon emissions by reducing travel time for operatives and material delivery. The level of work that went into procurement and organisation of a housing service of this scale was extraordinary; as was the progress that had been made within Housing since we brought it back in house. 

This contract was last extended in 2020; it cannot be extended further, which means that coming in this May as an administration gives little to no lead time to produce an extended in house service across all areas; much as, as evidenced by my determination to bring Housing back and produce in house temporary housing, and our first in house rough sleeping accommodation, my general inclination is to create and promote in house services wherever possible.

Ideals have to be considered in relation to realities in order to deliver results, and the security of service, especially when what is at stake is the quality of delivered service to a very large number of our residents; and as such focusing on areas that we can deliver in house, such as minor works, and ensuring that our complex and specialist areas function and deliver without interruption is essential. As referenced in the report, we are now choosing to focus heavily on the local economy in housing procurement; our contracts prioritise local jobs, local call centres, and include the requirement for local apprenticeships, to build not only the local economy, but also build skills and employment opportunities. 

This combined with our proposed in house expansion of minor works, to explore our delivery of direct services, allows us to deliver not only many highly complex workstreams, but also build our own resilience; and the sheer scale of the number of new strategies being implemented, and the considerable growth of our portfolio means that ensuring reliability of provision at a time when we are still a Council with disproportionately low staffing for the scale of what we deliver means that considering the long term future of all projects is essential and testing the water in terms of in house provision is a vital part of this. The service that now requires procurement is currently being delivered by Mears through a 9 year Partnering Term Contract. This contract is due to expire on 31/3/2025, and due to the complexity of this contract officers have started this exercise now to ensure the right  partnering contractor is found, ensuring that we source a contractor that fits the council’s ethos and culture. 

Since the tenant and leaseholder service was brought in house, officers have ensured strong contractor management and have worked in true partnership with Mears. This has reaped rewards of improved customer satisfaction and performance that can be seen in the number of responsive repairs that are completed on time and the driving down of the void turnaround times. With only five years left on the Mears contract at the point of transition, the stability of the service and the issue of noncompliance with regulatory and legislative factors took logical priority over the exploration of potential options to replace the services of a partnering contractor. 

In preparing for this procurement guidance had been sought from a consultant that has a wealth of experience in this area. They conducted a series of stakeholder workshops to assess what was needed and valued within the service; their report recommends continuing with the same model of service delivery. In moving forward officers would apply lessons learnt from the current contract, keep a strong focus on local delivery and the employment and training of local operatives. It was proposed to continue the service in this way because this approach supports:

• The management of the peaks and troughs of workload through seasonal demand;
• Management of the risk of subcontractors going into liquidation;
• Management of TUPE obligations and in addition

• This is a model that is supported by residents;
• We can use this contract to tap into specialist areas without carrying out lengthy procurement exercises;
• A partnering contractor can on board smaller local contractors that local authority procurement regulations make difficult for smaller companies to compete for.

This model worked well with the right contract management and willingness to nurture the partnership to the benefit of both parties. This could be evidenced through the increases in the levels of customer satisfaction. When asked in 2021 and then again in 2023 for residents satisfaction with the way TDC dealt with repairs and maintenance residents gave us the following statistics:

In 2021, residents expressed 63.4% satisfaction with the service.

In 2023, residents expressed 77.75% satisfaction with the service.

This was nearly a 15% increase in satisfaction in two years and were currently heading toward upper quartile performance when comparing with other social housing landlords, which was something that officer should be hugely proud of as a department, and as a Council. In relation to the second lot included in this procurement, Officers had calculated the work required to decarbonise the council's housing stock would cost in the region of £40 million. Members therefore proposed to include procurement for a bid and delivery partner for grant funded works.

The rationale behind this proposal was due to experience gained from our tower block retrofit and refurbishment programme. When grant funding becomes available to the sector, we have to be ready to bid and deliver the works within very tight timeframes. There was £4m per year included for this element; but this would not be spent unless grant funding was available and a winning application was made. This level of spending has been included because our ambitions are to decarbonise the housing stock, provide warm and comfortable homes for residents and achieve this at the best possible value.

There was a desire to explore bringing this service in house. Over the next couple of years, further work would be carried out to see if a Direct Labour Organisation (DLO) was the right model for the Council, for the long-term future. It included extension of provision of some of the in-house services and this would include minor works, fencing and arborist works. The intention was to keep these services available to call off through this contract as well, to provide resilience to the service and to explore the potential for delivery in a safe and managed way.

The implementation of a DLO was a massive undertaking that would provide a very important front line service, therefore must not be rushed. The issue was not the creation of a DLO or otherwise; the issue was the management of whichever model was chosen, and the time and consideration put into its development. Exploring in-house work incrementally, and providing safety to explore options within a secure framework, provides the best of both worlds, informed by the knowledge of the housing stock and our needs as an area.

It was important to be sure that the chosen model fits the Council’s ethos, culture and was right for the tenants and leaseholders; tenants and leaseholders have expressed support for the chosen model. The Council had strong belief that it can implement a local focus linking to the Council’s priorities and strategy through this form of delivery.

The budget for this service comes from the Housing Revenue Account. The HRA was separate from the General Fund and was self-financing through rental and other income generated by HRA owned land and property, and therefore is not supported by tax income. It was important that VfM was obtained for the HRA. The value of this contract was £156 Million if it were to be spent in full and let for the full 15 year duration. This equated to £11m per year. £4m of this per year was set aside for grant funded opportunities and would only be spent if such opportunities arise and if bids are successful.

Once the corporate aspect of the contract had been removed and the £4M per year for grant funded capital works the contract value was nearer £6.7 Million per year. This was £2,200 per property per year (including void works, responsive repairs and allowances for planned and cyclical works). This value was based on the previous year's spend and the consultant has provided a cost model that shows that this value was within the industry norm.

There was a lengthy discussion of this procurement at the Overview and Scrutiny Panel (OSP), and a recommendation was made to:

“Explore performance related pay, and explore the ability to lock in a performance related element.”

Officers have carried out the recommendation to explore performance related pay and linked to research undertaken are proposing to not implement this within this contract. The reasons for not including this element in this contract were as follows:

• Financial incentives can skewer the contractor's performance toward certain areas of the contract at the expense of others;

• A contractor will focus on the areas they need to ensure they perform in to maximise income, and could neglect other areas;

• Contractors can spin KPI’s to support good performance to gain the incentive;

• The focus for the contractor becomes achieving the KPI to receive the incentive rather than consistent quality over the entire service;

• Disagreements can arise if both parties do not agree on if a payment should be awarded;

• It often does not lead to true partnership working; by taking the performance related incentive out of the discussion we can improve the quality of the service.

The success of the partnership relies on clear objectives, robust key performance indicators (KPIs), and a commitment to continuous improvement. Cabinet would be ensuring that the contract allowed robust performance management via the following:

• Producing a well defined scope and objectives of the contract, ensuring both parties have a mutual understanding of their responsibilities;
• Measurable KPIs that align with TDC’s strategic objectives;
• Regular performance reviews will be conducted that create a collaborative environment for feedback and improvement.

Where performance was poor and did not improve with these measures, there was the allowance through the contract to:

• Apply a service improvement plan;
• If performance does not improve, this can lead to a break clause for that service element. Meaning we can remove that element of work and procure our own contractor.

This in itself was a financial incentive because if the partnering contractor loses elements from the scope of work their income would be reduced. A huge amount of work has gone into the preparation of this procurement exercise, and The TLS team have worked incredibly commitment and expertise at Overview and Scrutiny meeting was exceptionally clear, and was recognised by all in Housing.

Councillor Whitehead proposed, Councillor Yates seconded and Cabinet agreed the following:

1.  The letting of a 10 year contract, with provision to extend for a further 5 year period to enable a true alliance between contractors and client. This is for the provision of responsive repairs, voids, compliance, cyclical and planned works. This contract will also include an element of works for corporate properties.