Public Procurement in the Affordable Housing Sector

Monday May 9th, 2011

By Daradjeet Jagpal, Solicitor at Harper Macleod LLP

A recent study of the use of public procurement within the affordable housing sector in Scotland, commissioned by the Scottish Government, has found that there are varied levels of procurement maturity, awareness and approach in the sector. It is believed that this has resulted in public procurement costing housing associations in Scotland an extra £26 million to £42 million per year.

The study has attributed the differences in approach to a number of factors. It is believed that smaller housing associations are swayed towards local suppliers when awarding contracts on the basis that they are a known quantity, and smaller housing associations may therefore be prepared to pay more for what they perceive to be a higher service level. On the other hand, the study suggests that larger housing associations, who often have dedicated in-house procurement resources, are more likely to be price sensitive and use existing governance frameworks. In both cases, the study noted that the housing associations were very entrenched in their respective approaches and were reluctant to change.

The study found that more needs to be done to raise awareness of the benefits of procurement and the achievement of efficiency savings through, for example, the use of case studies. In particular, it was noted that the housing sector has had little involvement in the Scottish Government’s Procurement Reform Programme, which was set up in 2006 with a view to maximising efficiency, increasing collaboration and delivering savings in public procurement; nor is the sector represented on the Public Procurement Reform Board (the body associated with the Programme). The study encourages the sector to get more involved in the Programme and the Board with a view to engaging in more financially efficient procurement.

The study suggests there needs to be a central procurement service for the affordable housing sector which should, ideally, be part of Scotland Excel. If this is not possible, the Scottish Federation of Housing Associations or another sector body should establish the service in conjunction with a partner organisation. This should be coupled with a website outlining what procurement resources are currently available to the sector.

At a time of diminishing budgets and funding, it is important that housing associations look to save costs, wherever possible. As the study and the figures above suggest, public procurement activities are one area in which significant savings could be made. Key to making such savings is the need for education in the first instance so that housing associations are aware of how savings may be made. Education alone, however, is not enough in and of itself. It is imperative that this education is coupled with open minds, enthusiasm and a receptiveness to change on the part of Scottish housing associations. While the study relates to Scottish housing associations, its findings are also relevant in the wider context of UK housing associations, who should also seek to make savings wherever they can.

Daradjeet Jagpal can be contacted on [email protected]

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