Presentation to the Subcommittee

1
The agenda
The Business Case for Joint Procurement- by Dr
Neil Jarrett

• The London ALMO Experience
• by
• Gordon Perry

2
Regional Collaboration Objectives

• Improve value for money of Housing programmes
  through
• Combining the buying power of clients
• Put sustained pressure on contractors and
  suppliers to change and provide training to
  help them do it
• Streamline the tendering processes
• Increase skills of ALMO clients to procure and
  manage programmes later round ALMOs learn from
  early experiences
• Work together to understand and reduce cost

3
Pressure is on ALMOs to change in line with
Gershon 2.5 efficiency pathrough the
principles promoted Egan

• Long term alliances between client, designers,
  contractors and key suppliers.
• Collaborative contracts - that accept at the
  start that contractors and suppliers should make
  a reasonable profit.
• Early involvement of suppliers in design,
  costing, planning - often with contractors taking
  the lead.
• A detailed understanding of cost and other
  aspects of performance and targets set for
  improvement from project to project.
• Collaborative behaviour with everyone
  incentivised to deliver for the client

4
Collaborative Cost Control Target Cost Model
COST
Initial Budget
100 Predictability
Target Cost Achieved
Out turn cost


Pain/Gain Share or added value
AMP Strategic Brief
Final Account
GMP
Implementation
Detailed brief design
PROJECT STAGES
5
Heating Planned Maintenance
In depth evaluation of labour performance

• Overhead Profit 200
• Labour Hrs 991
• Labour Overhead 200
• Materials 1200
• Prelims 100
• Plant 20
• Contingency 50
• Total cost / dwelling 2761

• Labour Hrs - 991
• 60 Defects
• 126 Access
• 154 Waiting
• 392 Travel
• 35 Paperwork
• 224 Added Value

6
The Immediate Implications

• Preferred supplier status depend on value for
  money and improvement
• And, for all this to happen, ALMOs must provide a
  continuing substantial workstream which will
  enable the selected supply chain to invest in the
  business processes that underpin collaborative
  procurement and to give certainty of work to the
  selected suppliers through a framework contract
• ALMOs must understand suppliers performance and
  set ongoing targets for improvement

7
Our work with clients has showed - progress has
been made but.

• No single client has sufficient sustained
  workload to make change happen
• Variable standards of scheme project management
  and limited understanding of costs
• Inefficient contract structure and letting
  process
• No supplier partnerships lowest price
  predominates
• Limited partner performance management
• Traditional contracts with no share of risk or
  reward or pressure to improve

8
Client Alliance
Partner Contractors
Gdwks Supplier Cluster
ME Supplier Cluster
Frame Supplier Cluster
Partner Suppliers
9
Efficiency opportunities through collaboration

• Collaborate to
• Understand cost and benchmark to demonstrate VFM
  from supply chain without re-tendering
• Effectively integrate the supply chain under one
  strategic umbrella
• Cut procurement costs, bidding costs and
  timescales
• Drive cost reductions in construction made
  possible by scale of programme through,
• more efficient purchasing arrangements
• streamlined construction processes, and
• new construction methods
• Achieve continuous improvement,

10
Options for governing alliances?

• Example options are
• Continue to contract separately, but procure a
  joint pool of suppliers and collaborate to drive
  improvement
• One Client provides services to others
• One Client undertakes development on behalf of a
  consortia
• Form regional development vehicle to undertake
  development on behalf of consortia

11
Client Alliance
LAPN Company CLG
Partner Contractors
Supplier Cluster
Supplier Cluster
Supplier Cluster
Partner Suppliers
PROCUREMENT MODEL Client Led Alliance
12
The London ALMO Procurement Network

• Gordons Diary

13
June 2004

• Lunch with Sir Michael at the Carlton Club year
  begins in style !
• Lecture on business case for partnering and
  collaborative procurement
• ALMOs cautious but some keen
• TMO is small fish so.

14
December 2004

• Housemark and Procurement for Housing offer help
  and support
• Met ODPM ( Anne Kirkham ) to discuss progress
• More links with Gershon and ODPMs own efficiency
  targets
• Announcement of 33m loan fund
• Got agreement from 8 ALMOs to fund the
  development of the business plan, increase
  training and work up loan fund bid for LAPN - via
  CWC

15
June 2005

• Working Groups in full flow producing
• LAPN company structure options
• Standard procurement documentation forms of
  contract and specification
• Establishing databases of historical costs to
  help set future targets

16
Where we are now

• Company established
• ALMO boards on board
• Draft Business Plan prepared
• Bid being prepared to submit to ODPM for loan
• OJEU for contractor and supplier partners to
  be published this month
• But we have lots more work to do

17
Next months

• LAPN is to support each ALMO member to develop
  commercial processes
• Target costing
• Open book cost reporting
• And process improvement to reduce cost and drive
  out waste
• Target 10 efficiency cost reduction from
  tendered rates by the introduction of frameworks

18
One good reason to keep on pushing the boundaries
beyond the safety zone..