Archive for September, 2002

REALLY Partnering the ADP!

Tuesday, September 24th, 2002

As the Development teams get to grips with the recently issued Bidding guidance from the Housing Corporation, staff and members of the Associations will be wondering if this the last time they will be playing this game.  After the Corporation’s discussion paper “Partnering Through the ADP”, should come a Consultation paper, and then a decision.  But there seems to be a momentum about the Housing Corporation’s desire to significantly reduce the number of developing RSLs. Witness the invitation-only nature of the Challenge Fund.

Is slashing the number of developing RSLs the best way to improve the value for money of the Approved Development Programme (ADP)?  What about this idea of Partnering the ADP?  The trouble is, the discussion paper wasn’t actually about Partnering.  To me it reads as a paper where the starting point is simply to reduce the number of developing RSLs, justified by the hope that this would enable greater economies of scale through volume procurement by RSLs.  Perhaps so, but then why call it “Partnering”?  Partnering and volume procurement are quite different.

So let’s develop the idea; what would Partnering the ADP really involve? Some of the issues are:

  1. It would involve the client (the Housing Corporation) setting clear objectives to be achieved by the supply teams (the RSLs) – well the current situation could be improved, but it’s not bad.
  2. The client would expect to provide a sufficient and (reasonably) constant stream of work to the selected supply team for several years without wasteful bidding processes – assuming performance targets were met.  That would involve the Housing Corporation being able to make reasonably firm funding promises for 3 – 5 years.  A major change from current practice, but not too much of a change from the Housing Corporation’s own proposals in ‘A New Approach to Investment – Feb01’ and it ties in with Comprehensive Spending Review timescales.
  3. The geographic distribution of the ADP would also need to be reasonably firmly settled for the same timescale.  This too looks different from current practice, but significant changes to ADP distribution usually occur over quite a few years anyway.
  4. Having determined the likely quantum of work to be commissioned in each area, the client would then select their supply teams taking on – say – 3 teams per area.  The supply team might consist of a lead developing RSL and a number of specialist sub-contracting RSLs offering specialist management services. This may well mean fewer developing RSLs.
  5. The client wouldn’t expect the suppliers to take on risks that are beyond their control – so the amount of grant paid would be more flexible than it currently is.  Better news for RSLs.
  6. The client would want their suppliers to make enough financial return that they stay financially healthy.  The equivalent to agreeing the constructor’s overheads and profit margin would be to agree when the project finances have to break even.  After 25 / 30 years as the current grant rate model assumes?  Perhaps for some supplier RSLs it ought to be 10 years; perhaps for others, more financially robust, it should be 40 years.  In short, different grant rates for different supply teams. Another major policy change, but better for RSLs. This “price” issue would, of course be part of the Housing Corporation’s supplier selection process as would quality issues, in a value-based selection process.
  7. The client would use an amended version of the amended long-standing benchmarking club (TCIs) to set challenging targets for their suppliers to meet in the drive for continuous improvement.  But remember, this is at the same time as ensuring that the supply teams make their required financial return, so it’s not “screwing the supplier”.  Now that’s VERY different from current practice!

This approach might well yield the increased value that the Housing Corporation is looking for.  The problem for them is that it requires major policy changes to be implemented. The Client Charter is all about encouraging RSLs to change our ways of working to be better clients, so as to be able to get the benefits of Partnering.  Is the Housing Corporation (and Government, behind them) willing and able to make the changes needed for them to access the benefits of Partnering?  It might be worth it.  Not only would they get better value for the public pound, they might get a Charter as well!