Procurements role in delivering Value for Money

Ian TaylorHead of Operations

Value for money…….what does it mean?

Residents satisfaction and the bottom line (anon).The cheapest way of achieving a desired quality of service or outcomes (HouseMark).Each RSL has to produce an annual “ robust self assessment that sets out in a way which is transparent and accessible to stakeholders how they are achieving values for money” (HCA).Business effectiveness is how we describe VfM embedded in the organisation rather than something separate (Riverside).In Scotland VfM is seen from the tenants perspective.

Interestingly:More than half of English social landlords are still uncertain about what they need to do to meet the Homes and Communities Agency’s (HCA) value for money rules.Only 28% of English Landlords are currently measuring the social impact of their activitiesThe latest regulator tenant survey in Scotland didn’t list VfM in their top 6 priorities6% of respondents cited cost as important

Sector challenges remain as tough as ever

The Opportunity

Procurement is more than saving costs; it is about creating value from the money that is spent to use assets to maximum benefit, provide quality services and deliver high tenant satisfaction at an optimal price.

Good procurement practice has the potential to contribute to the achievement of VfM more than it has in the past where the focus on implementing reform and managing compliance has sometimes ‘got in the way.’

We can learn from those organisations that are delivering best procurement practice by looking at the principles that underpin their success.

3 Steps to best practise VfM Delivery

2. Develop VfM Strategy

1. Identify the Opportunity

3. Deliver and Improve

Step 1 – Identify the contribution best practise procurement can make.

1. Understand how you spend, who you spend it with and what you get for your money

2. Evaluate procurement and suppliers performance in delivering VfM3. Identify potential areas of improvement in procurement that could deliver

better VfM4. Put in place measures to monitor performance5. Assess regulatory compliance – now and readiness for the future (EU,

Social and Procurement Reform)

Step 2 - Develop an effective procurement VfM strategy

Focusing resources on the actions most likely to deliver results:1. Quantifying the opportunities identified in step 1 through benchmarking2. Sharing the burden where possible - saving money, time and effort by

working with others and using collaborative frameworks3. Changing the approach to delivery – VfM might best be delivered if the

landlord focuses on their strengths: this might mean working with others (shared services), bringing services back in house as well as out-sourcing. It requires self-awareness and honest assessment.

4. Investing in developing procurement skills and processes5. Use of technology to simplify the business and reduces indirect costs

Step 3 - continuously improving the contribution procurement makes to VfM

Ensure that the procurement VfM strategy delivers year-on-year improvement in tenant satisfaction yet at the same time delivering savings for future investment:

1. Work with suppliers to deliver outstanding service and tenant experience2. Continue to benchmark to ensure that costs and service offerings remain

competitive3. Ensure effective cost and contract management. Monitor maverick spend.4. Monitor procurement and supplier performance5. Regularly revisit procurement/suppliers achievement of the VfM strategy.

Summary

1. Whatever the VfM definition Procurement has a vital role to play in creating value

2. Sector challenges are greater than ever and delivery of social value/community benefits are becoming increasingly important

3. The RSL’s that deliver best recognise Procurement Strategy as key to their success

4. Those that demonstrate best procurement practise adopt a 3 step approach (or something similar), look across the entire organisation, work well with suppliers and place the tenants/customers at the heart of their VfM process.

5. They generally operate from a lower cost base and have more satisfied tenants

Questions