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RESOLVED:
 
The Cabinet
Procurement and Insourcing Committee approved:
 
The procurement of a
specialist contractor for Void Works for each of the Building
Maintenance and Regeneration Voids as follows:
 
1. 
Voids Lot 1, Regeneration Voids of a value of
approximately £1.97m per year, and over the whole contract
term, a value of approximately £7.87m.
2. 
Voids Lot 2, Building Maintenance Voids of a value of
approximately £1.85m per year and, over the whole contract
term, a value of approximately £7.39m
 
REASONS FOR DECISION
 
The recommendation is to undertake a Public
Contracts Regulations 2015 compliant tender procedure to procure
the specialist contractor for Voids work for Lot 1 and Lot 2. A
medium term contract arrangement to undertake the void works
brought about by expiration of the previous contract. There has
been a rise in demand for void works, the procurement of this
contract will support the in-house service to deliver this
provision and provide continuity for delivery of works in the
service area.
 
This procurement aims to continue the delivery
of works by specialist contractors, with support provided to the
DLO in completing the tasks. These works are completed by both the
in-house repairs team and external contractors, the DLO also
undertake these works. This mixed economy of repairs resource has
worked well achieving good value, maintaining a competitive
tension, a flexible resource to meet varying workloads and
occasional need for more specialist trades not included in the
in-house capacity.
 
The quality of repair services is crucial to
the operations of council services and the improvement of the key
performance indicators. Therefore, the council commercial team
wishes to continue working with a specialist contractor to support
the works and the DLO.
 
Approach:
 
The proposed strategy is a Public Contract
Regulation 2015 above threshold restricted procedure. This will
comprise a pre-selection (SQ) stage, a tender (ITT) stage.
 
The two highest scoring bids would be awarded
a contract, provided they meet the minimum standard set for the
specific quality assessment method statement questions. We believe
this approach will demonstrate the greatest value for money.
 
The recommended procurement pricing model will
be based on National Housing Federations version 7.2: Schedule of
Rates. As this is standard used across the industry.
 
The tenders will be evaluated based on 70%
price and 30% quality.
 
Benefits of the
Approach:
1. Provide backup when quality may become an
issue with the internal DLO.
2. Additional resource capacity if needed to
support the housing emergency plan.
3. Ability to work through a larger number of
Voids by distributing the voids internally and externally.
4. Manage fluctuations in DLO workload by
ensuring the inhouse workforce are
employed at all times.
5. Splitting the contract into two separate
lots will mitigate the risk of supplier failure.
 
Benefits Realisation and Lessons Learnt
 
Regeneration void works are funded from an
existing approved budget and as detailed in the Estate Regeneration
Service review report 2018, demonstrate an overall cost benefit to
the Council by reducing the expenses associated with temporary
accommodation and increasing recovered rental income.
 
The former procurement exercises did not
require contractors to have ISO certification (or an equivalent
standard); it only requested that they adhere to the regulations
after the contract commences to avoid shortage competition.
However, not all works were delivered to a consistent standard. The
re-procurement will have explicit requirements for the bidders to
hold ISO certification to have a compliant bid.
 
Strategic
Context
 
LOT 1
The Regeneration Voids Team undertakes the
refurbishment of approximately 150 properties each year. They also
carry out additional minor works to a number of other properties
that are approaching demolition and therefore don’t require
full refurbishment works. This number varies yearly depending on
how many properties are approaching demolition at that time. In
busier periods this can be anything up to an extra 250
properties.
 
The Regeneration Voids programme plays a
crucial role in aligning with the Mayor’s priorities for a
fairer, safer and more sustainable borough. Within these priorities
lies the Mayor’s vision for ensuring that every resident in
Hackney has access to a good quality and stable home. There is a
steadfast commitment to ensuring that the Council continues to
invest in and optimise its housing stock, thereby providing
much-needed homes to alleviate homelessness and mitigate the
current strain on temporary accommodation.
 
Properties on regeneration estates offer more
satisfactory temporary accommodation than hostels and B&B
accommodation. It embraces the Mayor’s key manifesto pledge
to return empty homes to use and alleviates the pressure placed on
the Council’s waiting list; there are currently over 12,000
people waiting for secure tenancies. It supports the
Council’s strategic plan to support those in housing
need.
 
LOT 2
The DLO Housing Repairs Team undertakes the
refurbishment of approximately 400 properties each year. Works are
completed to tight timescales to minimise loss of rental income,
meet council Key Performance indicators and provide much needed
social housing back into the borough. Works need to be completed to
the councils fit to let standard and offer good value to sustain
budget constraints.
 
This contract supports the Councils insourcing
strategy as it supports the in house service by providing extra
capacity as the in house repairs operation completes most minor
void work refurbishments but lacks the capacity to undertake all
the larger voids works. A competitively priced, efficient and
effective major/minor voids repairs contractor is critical to the
performance of the voids team.
 
Recruiting the specialist contractors to
support the DLO will enable continued service delivery in the Voids
section, this will enable the operational team to keep on top of
the voids.
 
This procurement will support the Mayor's
priorities and achieve sustainability throughout the borough.
 
Preferred
Option
 
The preferred option is to procure two
specialist contractors via restricted procedure. The proposed
contract route is to select the two highest scoring bidders to
carry out works for each lot in accordance with the relevant
procurement regulations.
 
The current interim arrangements are in place
but will last until the end of the current financial year.
 
Bids are to be invited against the National
Housing Federation Schedule of rates current Version 7.2 (NHFv7.2).
This is a nationally recognised pre-priced schedule of rates used
by many Local authorities and housing associations. It is a long
established schedule well understood by the construction market and
is expected to encourage confidence from potential bidders and
competitive bids.
 
General Building Contract 1 & 2 were
tendered on these schedule rates. Comparison of tender returns on
contracts 1&2 together with feedback from other contracting
authorities will facilitate assessing value for money of tender
returns.
This strategy will backfill an identified
shortfall in capacity within the voids programme. This will allow
the repairs team to maintain councils
performance and reduce and prevent a backlog of projects.
 
DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND
REJECTED
 
Option 1: Open Procedure -
Consideration was given to follow the open tender process. The
process is open to all bidders on the market and we can receive
bids from more than 30 suppliers which will be tedious and extend
the duration of the procurement. We are not equipped to evaluate
the quantum of bids we are likely to receive if we were to go down
this route. Currently, the services are provided through single
tender actions and will be available until the end of this
financial year. The General Build contract 1 is in the mobilisation
phase which will provide some resilience. This gives a limited
timeframe to adopt this route to the market. The service continuity
needs to be delivered. The regeneration voids have a single tender
action which will expire at the end of the year, this will result
in no contractor capacity at the end of the year which will halt
the delivery of works.
 
Option 2: Carry out the works
in-house / Insourcing - The idea of using the DLO to perform
this is an option which was considered and rejected. The DLO does
not have the capacity to perform such works from small to large
scale. Using the internal workforce, which has not expanded within
the targeted parameters will reduce the number of operatives in
other trades within the business. The service area is being
reviewed to be concluded in April 2025. This includes the expansion
plan which is being carried out by senior management to increase
insourcing.
 
Currently, the in-house resources are
stretched to undertake other workstreams. These contractors will be supporting
the in-house service to deliver effective housing repairs. This is
in line with the insourcing strategy.
 
The plan is to grow the DLO capacity
incrementally allowing time for recruitment and training of
supervisors and operatives. The inhouse
team offers good value and provides quality, flexibility and secure
resources. However, expanding this team will require a long term
commitment to the planned workload to ensure full employment of
operatives at a time when budgets are likely to be under
review.
 
Option 3: Utilising a
framework - The route to market of a framework is a viable
option, however this has been considered and rejected as it does
not demonstrate the best value for money. Due to the value of the
contract and the percentage which will be contributed to the
framework, this can vary between £187,500 to £312,500.
This is dependent on the percentage fee from the framework which
can range typically from 1.5% to 2.5%. The percentage will only be
at the lower end if we go through a direct award or mini tender via
the framework on this value of procurement however, there is a 2%
fee for partnership. To ensure the best value for money, we are
more likely to achieve better rates on the schedule of works
through a competitive procedure with negotiations without the
additional percentage fees.
 
Option 4: Utilise existing
contracts - To incorporate within the general build 2 contract.
The option was to vary the terms of the general build 2 contract so
that the works required in respect of this procurement are to be
provided under that contract (due to the similarity in works
between the two projects and in order to require only 1
procurement). However, this was decided against because the size
and value of this project prevents the proposed variation being
permissible under Regulation 72 of the Public Contracts Regulations
2015. It would also be easier to monitor the two projects
separately as the works in this procurement and the general build 2
procurement are managed by different teams.
 
Option 5: Do Nothing - The
option to do nothing was considered and rejected. The requirement
of delivering the works through an external contractor is required
as the Regeneration Voids cannot be carried out as there is no
internal workforce to cover this area. As for Building Maintenance
Voids, the smaller works are carried out in house, however the
larger voids are carried out externally. The in-house DLO are
unable to carry out all the works and require support to ensure
there is no loss of income for the Council.
 
Success Criteria / Key Drivers /
Indicators
 
A reduction in the turn
around time of repairs to voids will increase rent revenue
to the council. Minor voids KPIs have a turn
around of 15 days and major voids have a turn around time of 30 days.
 
Works will be measured against the KPIs and
other contractors' performance to ensure that our residents obtain
good quality of service. The reason why we will benchmark against
other contractors is to identify if there are global or localised
issues to prevent the contractor being penalised for issues out of
their control.
 
The ability of the DLO to undertake larger
works including those where minor elements were outside of its
skill base. This will help reduce the length of time voids are
vacant.
 
Ensuring compliance with the Council Standing
Orders, Regulatory Procedures, and the Council’s Corporate
Policy.
 
The recruitment of a Voids contractor who can
deliver good value and a high quality service in accordance with
our KPI criteria as listed below.
 
Making opportunities more accessible to
smaller SME and local businesses.
 
Whole Life Costing/Budgets
 
The contract value is assessed with the table
shown below, with an initial term of 2 years with an option to
extend the term up to 2 years (1+1). Total contract value 4 years =
£15.26M excl. VAT.
 
These works will be funded from existing
client budgets, for the Lot 1 contract, the cost centre is X7003.
As for the Lot 2 contract, the cost centre is H2555 for minor voids
and major voids cost code to use X5995.
 
Lot 1 - Regeneration Voids

Contractor

Proportion

Value per year (£)

Total Value (£)

Contractor 1

100%

1.97M/year

Circa 7.97M

 
Lot 2 - DLO Voids

Contractor

Proportion

Value per year (£)

Total Value (£)

Contractor 1

100%

1.85M/year

Circa 7.39M

 
Policy Context
 
Housing Services seeks to maintain a flexible
and robust supply chain in order to provide a high quality and good
value repairs service. Specifically with
this award we propose to recruit a general building contractor to
backfill an identified shortfall in capacity within the voids
programmes. This additional capacity should enable us to avoid
extended void turnaround times, to maintain council void key
performance indicators and reduce rental loss.
 
Further to this, the Regen void programme
provides much needed housing units to alleviate homelessness and
relieve the current stress on temporary accommodation. It assists
the council’s strategic plan to support those in housing
need.
 
The proposed procedure will test sustainable
procurement issues including environmental, economic and equality
issues and has a 70% price element and 25% quality element and 5%
social value to obtain value for money from the bidder/s.
 
Consultation/Stakeholders
 
The proposed procurement plan has been
discussed with all the contract managers who lead on these works
programmes and with the Housing repairs commercial team. All agree
on this proposal.
 
TUPE consultation - This is procurement of
existing service with no exit TUPE implications for existing
council employees. As such no consultation with trade union and
staff groups has taken place.
 
Risk Assessment/Management
 
As shown below, the risk assessment in
accordance with the Risk Assessment Tool (RAT) with reviewed and
re-assessed risks. The Risk Assessment Tool (RAT) has identified
this procurement to qualify as medium risk, this has been
overridden under the discretion of the Category Lead to high risk
as it affects more than one ward and the project cost is above
£2m.
 

Risk

Likelihood

Impact

Overall

Action to avoid or mitigate risk

L
– Low; M – Medium; H - High

The
risk of not receiving any bids.

L

L

L

During the SQ stage which will
last
30 days procurement will monitor and report on the
number of suppliers that register an interest. In the unlikely
event that there is no interest at SQ stage procurement will
suggest calling off from an existing external framework.

Risk of
financial
Proposals exceeding
available budget

L

M

L

The financial proposals will be
assessed against National Housing
Federations version 7.2:
Schedule of Rates. The financial aspect of this
tender will account for 70% of
the
entire evaluation. This will
help
stimulate
competition.

Risk of
awarding the contracts to bidders who do not meet our quality
requirements

L

H

M

There will be minimum
standards
applied to the ITT. The
evaluation
process will ensure that the
minimum standards we require under the contract can be met by
suppliers. This will be done by assessing bidders previous
experiences with similar contracts.

Risk of
suppliers not having the capacity to deliver the quantum of works
under the contract.

L

M

M

The quality assessment of bids
will
address capacity issues. Within
the
DLO we have established
standardised questions to evaluate
bidders resources. Suppliers that
fail to give assurances that they can
meet our needs will fail to
meet the
minimum quality standards set
within the ITT.

 
Insurance
 
Liabilities of the contractor will be covered
by the required insurances as below: Employers' Liability - as
required by law Public Liability - £10m minimum each and
every claim Professional Indemnity - £5m minimum
 
* This can be removed if there is no
advice/design element of the work delivered under that
contract.
 
Market Testing (Lessons
Learnt/Benchmarking)
 
The recruitment of general building work
contractors is a very well developed market with multiple service
providers and a high level of competition. In considering
options the regen void team has
consulted with other areas in housing repairs who have previously
tendered these types of works.
 
The recommendation proposal is to re-procure
these services with a revised specification that takes into
consideration lessons learnt for the previous contract and awarding
two contracts to external Service Providers. The alternative option
to carry out these works using direct employees has been reviewed
but considered not a practical option. The in-house team offers
good value and provides a quality, flexible and secure resource.
Expanding this team may well be a beneficial arrangement.
However it would require a long term
commitment at a time when budgets are likely to be under review. In
addition expanding the in-house team is
better undertaken incrementally allowing time for recruitment and
training of supervisors and operatives. Any solution must include a
significant element of externally contracted work to manage
fluctuations in workload and ensure full utilisation of in-house
operatives.
 
Savings
 
Whilst there are no direct savings to be
achieved from the tendering of this contract, the works will be
funded from an existing approved budget and will also demonstrate
an overall cost benefit to the Council by reducing the expenses
associated with temporary accommodation and increasing recovered
rental income.