Decision Maker: Cabinet Procurement and Insourcing Committee

Outcome: For Determination

Is Key Decision?: Yes

Is Callable In?: No

Date of Decision: November 4, 2024

Purpose:

Content: 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.