Examination of Witnesses (Questions 200
- 219)
MONDAY 22 JANUARY 2007
MR KARL
TUPLING AND
MR PETER
MORTON
Q200 Emily Thornberry:
I would like to know about your bidding process. With a huge,
great contract like this, how do you go about getting certain
contractors? Is it called "preferred contractors" or
"preferred bidders?". Do you have a system of that or
not?
Mr Morton: Yes, we advertised
the contracts through the OJUC (Official Journal of the European
Council, and we got a lot of interest. We then had a selection
process which involved tenants working with us to assess quality
and the value for money of all the tenders. That involved a professional
evaluation but also going round to visit other places where they
were working and showed quality. Out of that, we originally got
five preferred partners and because of the scale of the programme
in Sheffield, we just brought on another two and they have gone
through a similar process of tenant evaluation as well, so we
have now got a partnership of seven contractors.
Q201 Emily Thornberry:
As the work comes up, you give the work to one of those seven?
Mr Morton: Yes, based on performance.
Q202 Emily Thornberry:
It is a standard price for a new kitchen or a new bathroom, is
it?
Mr Morton: It depends on the contractor,
because they bid in terms of price and quality, so the price for
each of the seven is slightly different.
Q203 Emily Thornberry:
How do you know when you are getting value for money? Could you
help me a bit more with that?
Mr Morton: We tested that through
the original contractual process and the ratio between quality
and price. For the first five it was a 70% quality and 30% price
ratio. For the recent procurement of the 6th and 7th partners
it was 50% quality and 50% price ratio because we wanted to make
sure we did not just get a low price, that the quality came through
as well, and out of that we are confident that we have got value
for money, but also a product of the right quality and standard.
Q204 Sir Paul Beresford:
Does the Government peer over your shoulder while all this is
going on or do they leave you alone to get on with it?
Mr Morton: We are accountable
to Government, the City Council and tenants. There is a whole
raft of agencies and customers looking over our shoulder making
sure we are delivering quality and value for money.
Q205 Sir Paul Beresford:
So the bureaucracy is phenomenal?
Mr Morton: It is significant,
but when you consider that we are spending about £498 million
of government money, plus council money to a total of £669
million, then it is reasonable, I think, to be accountable for
that and to be accountable to central government and local government
for that.
Q206 Sir Paul Beresford:
Could it be thinned?
Mr Morton: It could, yes. We had
a meeting this morning with Professor Cave, who has been commissioned
by the DCLG to look at the regulation of the whole housing sector,
housing associations and ALMOs.
Q207 Martin Horwood:
You said it is part of the bidding process that quality is important.
Is tenant feedback or tenant evaluation of contractors part of
that, explicitly?
Mr Morton: Yes, before the contracts
were let the tenants explored the quality of work by visiting
other places—really their method was checking out the quality—but
also, as the programme has been running on and in answer to the
previous question, we move the work around dependent on performance.
Q208 Martin Horwood:
Just to be clear, performance explicitly includes tenants' own
perception of how well the work is being done?
Mr Morton: Yes, we have got Area
Investment Working Groups which involve tenants; they monitor
the work on the ground; they feed back to us; and if the quality
is not as it should be, then that contractor will get less work.
Emily Thornberry: Is the question though
not this: that leaseholders, therefore, do not get a choice in
which of your contractors are going to get the work and they cannot
have an input into how much the work is going to be on Decent
Homes?
Q209 Chair: How
many leaseholders have you got in Sheffield?
Mr Tupling: Can I clarify that
we do consult with leaseholders before contractors are appointed
or before contracts are let and when we benchmarked costs we have
looked across the country, benchmarking across the UK, looked
at what costs leaseholders are experiencing in other places. I
think one change that has been quite fundamental is the extent
to which Sheffield Homes has involved leaseholders through consultation
and given an opportunity for investment to be carried out in their
homes, where previously they would not have had that opportunity.
Chair: Roughly, what proportion of leaseholders
would you have amongst the properties? If you do not know, perhaps
you could let us know, just to give us an idea of the scope of
the issue.
Q210 Mr Olner:
Mr Morton, you talked in your answer to a colleague of mine about
the future. What do you think the future is for ALMOs when 2010
comes along and the Decent Homes programme has been completed?
Mr Morton: Essentially, there
are three things that ALMOs do: excellent housing management services;
neighbourhood management; and we manage the fabric. The first
two of those are ongoing: the excellent housing management and
neighbourhood management. With the management of the fabric that
too will go beyond 2010. Elements of things like heating systems
will need replacing. I think one of the pieces of the work that
we are doing with DCLG is around the self-financing housing revenue
account and the idea there is to make sure that after 2011 the
stock does not deteriorate and we have got the resources to maintain
the standards that we have achieved.
Q211 Mr Olner:
What sort of money would you be looking for to do that after 2010?
Would you expect the new investment to come down substantially
or would you want the same investment to ensure that the neighbourhoods
stay all right?
Mr Morton: We are doing a piece
of work now with DCLG to work out the business needs of the stock
from 2011 through the following 30 years. I would like to give
you that evidence later, I have not got that to hand. We have
done a modelling exercise to establish the needs of the stock
beyond 2011.
Q212 Mr Olner:
Is there any sort of filtering down through the ALMO, any worries
about the uncertainty of the future funding after 2010?
Mr Morton: There is a real fear
that we will go back to pre-ALMO spending. In Sheffield we were
spending around £50 million a year capital investment prior
to ALMO, it is presently around £125 million. If we go back
to the £50 million level then the quality of stock will deteriorate
quite rapidly.
Q213 Mr Olner:
What limitations are there on ALMOs that restrict their ability
to trade? Do you think those restrictions should be lifted? I
am thinking about new build.
Mr Morton: There are restrictions
around the management agreement. In Sheffield we have a management
agreement that is 10 years; that is insufficient to raise capital
to build new properties and you will have seen from our evidence
that there is a huge demand for council houses in Sheffield. We
are not able to borrow because of the 10-year management agreement
and because of our status. Also, we have not got assets to borrow
against—the properties are owned by the council—and
we cannot borrow on the assets. What we are looking to do, through
the self-financing housing revenue account piece of work, is to
borrow on the revenue stream.
Q214 Mr Olner:
Finally, on this point, I have not got any first-hand knowledge
of the working of an ALMO—we have not got any in my authority—but
is there any tension between the city council and the ALMO? Is
there any at all or are you all best bosom buddies?
Mr Tupling: I think it would be
fair to say that there are some healthy tensions there and, bearing
in mind that the ALMO was established after extensive consultation
and extensive support by tenants for change, whatever change happens
there are bound to be some issues around which there will be differences
of opinion. What I have to say is that two years or more on, the
debate that is now taking place between Sheffield Homes and the
city council is fundamentally around the sustainability of the
housing stock; and we are both engaging tenants in that debate
and in that process. If you asked tenants what was the most important
thing to them, they would not tell you that it was management
staying with the ALMO or moving back to the local authority, they
would tell you—and we know this through consultation—that
they are interested in their homes being repaired, investment
being sustained and investment being put back into housing and
estate services, so that is where our focus has been.
Q215 Mr Olner:
Can you fill the last little gap in for me. Who manages the lettings
and who determines the rent levels?
Mr Tupling: The lettings process
is undertaken by Sheffield Homes to a policy set by the council
and managed at rents, you could say, determined by the city council,
but in reality determined by the Government's rent restructuring
policy, so actually there is very little determination by the
local authority in terms of the rent set.
Chair: David, I forgot in the private
session to ask you to declare your interest, so could you do that
first?
Q216 David Wright:
I think the Committee have got a copy of my registered declaration.
I think I ought to also say I am a member of the Chartered Institute
of Housing, given the scope of the inquiry, but I pay them rather
than them pay me to be a member, so perhaps I am getting it wrong
somewhere. I wanted to focus on this housing revenue account element
and you talked about rent restructuring and affordability. How
would you see that potential model changing what you do? I think
you are one of six looking at this at the moment. Do you think
that will potentially allow you to step outside of rent restructuring
and give you more independence? What kind of other services do
you think you would be scoping out as part of this separate independent
structure? Do you think it might draw the ALMO back more closely
to the strategic role of the local authority or do you think it
will float off completely?
Mr Tupling: To be frank, it is
early days yet.
Q217 David Wright:
You do not know, which is understandable.
Mr Tupling: We will try and give
you the answers once we finish the exemplifications around a number
of case studies. Bear in mind this has to be something that works
for authorities that are being asked to take on more debt and
work for authorities like ourselves that have a huge level of
debt, so we would be looking to redeem that. It is about a business
plan that, looking forward 30 years, can at the very least sustain
the stock at the level achieved through the Decent Homes investment.
We are looking forward to testing out a number of policy options
that would allow them the value in that stock, the value of the
rental stream to be used to develop a range of different services,
a range of different permutations around enhancing the model of
provision within council housing, as well as potentially looking
at building new housing.
Q218 David Wright:
How will tenants be able to evaluate whether they want those services
or not because, clearly, some tenants will want a very baseline
level of service, others will want a series of add-ons, regeneration
and social add-ons as part of the structure? How are you going
to get the balance right?
Mr Tupling: I think there are
a couple of points. First of all, there is a round maintaining
a basic level of service and investment which is required to keep
the stock sustainable over a long period of time. The second round
is providing a rental, and eventually a service charge system
which is flexible enough to allow individuals to make individual
informed choices. A couple of examples might be in an estate where
perhaps people want a high level of CCTV or a higher level of
concierge service, or perhaps in another part of the world where
people would want some sort of garden service. At the moment the
system is not flexible enough to allow those differences.
Q219 David Wright:
Just to press this momentarily. For tenants who live on perhaps
more difficult estates with more challenging problems of anti-social
behaviour or whatever, they may well want an additional service,
but you are not expecting them to pay for that because they have
problems on their estate, are you? There has to be some sharing
of cost across the housing organisation.
Mr Tupling: There does and, importantly,
it is worth noting that there is no such thing as a council estate
anymore.
David Wright: Indeed.
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