BSA Buying Group

Housing Association Case Study

How do you go from a critical Short Notice Inspection to a £400k improvement and a 'value for money' culture?

The challenge.

It was a critical Short Notice Inspection report by the Audit Commission on behalf of the housing regulator in 2010 that started Severn Vale Housing Society (SVHS) on a journey that resulted in not only cost savings due to implementation of the recommendations of a review of procurement but improvements in cultural and community relationships too.

Tim Knight, Finance Director of SVHS explains: "Nobody likes negative feedback, but we took the regulator's findings on board and decided to not only meet the required standards, but try to exceed them and develop a roadmap for future improvements. The bigger challenge was that we didn't have the skills or experience within SVHS to do this alone."

The solution came in the form of Buying Support Agency (BSA). Set up in 2002 by Managing Director Matt Roper, BSA has worked with many organisations in both the commercial and not-for-profit sectors to audit and implement procurement strategies that reduce costs and create efficiencies. BSA also has a Buying Group that enables clients to reduce overhead costs.

"When Tim explained that the findings of the Commission's audit pointed at poor value for money, a weak procurement approach, plus a lack of customer involvement, the challenges didn't sound unlike those of other businesses that we have helped," recalls Matt.

The approach.

Matt introduced Andrew Newman, one of BSA's strategic consultants, who conducted an in-depth audit of SVHS's procurement processes. With input from Tim and his team, Andrew produced a report that was the foundation of a procurement strategy. He outlined specific tasks that, if implemented, would help SVHS develop procurement effectiveness.

But this was just the start. Once Tim received Board approval a Procurement Improvement Working Group was set up to develop and implement an action plan. The group, chaired by Andrew and led by Tim, comprised a broad range of stakeholders including some SVHS managers with budget responsibility plus customers of SVHS's services. Together they developed a set of purchasing procedures to guide all future buying activity.

Tony Merrill, a leading procurement practitioner from BSA also joined the group to lead, advise and train key SVHS managers on tendering and contract negotiation. To test that the new procedures worked in practice he ran a pilot scheme that reviewed SVHS's procurement of legal services. A number of departments bought these services from different suppliers. The pilot is now demonstrating the benefits of rationalizing suppliers, agreeing better terms and keener prices, and allowing suppliers to enable SVHS to make better use of them.

Another small but effective change was the introduction of 'procurement cards' for small ticket items - which means that staff no longer need to spend time raising a purchase order for low value purchases, saving time whilst giving some flexibility over which suppliers they buy from.

The results.

Now, two years into the initiative, there is evidence of the level of potential financial improvements available by adopting and pursuing a "value for money" culture and taking a strategic approach to external expenditure including (i) implementing a procurement strategy with clearly documented procedures and supporting training (ii) reviewing and renegotiating supply contracts and (iii) making use of BSA Buying Group's supply contracts. In 2012 SVHS, with a total spend of £12m, netted a £400k benefit. Examples of the savings made include procurement of cleaning services (£20k), asbestos removal services (£25k), vehicles (£19k), and lift contracts (£40k).

"All of the changes have been about doing things properly and cleverly. It has taken 3 years of hard work to get us here, but we are now better informed and have robust procurement practices. People now treat the money that they spend at work as carefully as their own, and actively look for 'value for money'. But we wouldn't have achieved any of this without the expertise of the BSA guys - they worked collaboratively with us and I see them as part of my team," concludes Tim.

What next?

It's more than noteworthy that the Audit Commission's criticisms led to SVHS being well under way with its procurement and value for money plans when the Homes and Communities Agency (HCA) took overall responsibility for housing regulation in April 2012 and introduced a new Value for Money standard at that time. Since the Procurement Improvement Group had worked so well, SVHS widened its remit to include overall responsibility for Value for Money. This VFM Improvement Group is going very well with the 2013 VFM plan set to deliver exciting results. It has also enabled the Society to meet one of the key requirements of the VFM standard when it published its VFM Self-assessment Statement on its website together with activity dashboards for all areas of the business which link costs, income, staff usage, KPIs, and customer/social outcomes to the corporate strategy.

Housing Association Case Study

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