Examination of Witnesses (Questions 289
- 298)
MONDAY 22 JANUARY 2007
MR MARK
DAVIES
Chair: Mr Davies, welcome. I am sorry
that you have had to wait longer than you expected but I hope
you found the previous session interesting. Clive.
Q289 Mr Betts:
Can you give us a flavour of the sort of relationship you have
in undertaking Decent Homes work. Is it very different from that
which you have experienced before in just contracting for local
authorities? Do you find much difference in the way things work
between councils, ALMOs and housing associations?
Mr Davies: We have over 100 partnership
contracts across a range of different housing and estate maintenance
repair services and have been in the social housing market for
about 25 years. I suppose the major difference with the Decent
Homes initiative is really the scale of some of the programmes
that in certain situations are significantly larger than the typical
projects that would have been awarded historically. I think there
are a lot of benefits that come out of that, particularly in terms
of driving efficiency and planning the programme ahead. In terms
of the procurement process, it has been very rigorous, very thorough
and very professional and not particularly different from what
we have been experiencing, probably since the introduction of
best value procurement as opposed to CCT six or seven years ago.
I think the other aspect that has been enormously beneficial from
the Decent Homes programme is the way in which the whole partnering
ethos has really established itself in social housing and partnering
between, not just the owner or manager of the stock, be it local
authority, ALMO or housing association, with the contractors,
but with the tenants at large, supply chain partners and a lot
of the people in the local communities in which the work is being
carried out.
Q290 Mr Betts:
The difference between councils, ALMOs and RSLs, is there any
difference from your perspective?
Mr Davies: From our perspective
in terms of the programmes of work not particularly, although,
because of the way the whole Decent Homes programme has been structured,
you tend to find larger programmes in ALMOs than you would typically
in local authorities because, obviously, local authorities have
to sell finance. If they can do that generally it means they have
got less of a decent homes issue than those that would be looking
at alternative funding routes. The ALMO programmes tend to be
larger in scale but, having said that, some of the housing association
programmes are pretty large as well where stock has been transferred
into a housing association. The only material difference I would
say, would be in terms of scale between local authority programmes
and ALMO and housing association programmes.
Q291 Mr Betts:
So, if I went to one of my constituents in Sheffield telling them
they would have the Decent Homes programme on their home, would
they see you as a partner or just another contractor with the
same sort of problems they have always had?
Mr Davies: That is a good question.
I think the team from Sheffield mentioned earlier that on all
the programmes tenant satisfaction is measured very carefully.
On any programme of this nature there will be issues, but most
of the programmes are pretty well run, the tenants are heavily
involved in the whole development of the programme itself, in
the timetable of the programme and in choices that they are able
to make on kitchens, bathrooms and the like. Tenant liaison and
tenant liaison officers are a fundamental part of most of these
programmes and those tenant liaison officers are responsible for
working with the local communities and tenants to ensure there
is minimum disruption during the programme itself. Largely speaking,
the programmes have been fairly successful in that respect.
Q292 Chair: When
you said at the beginning that the Decent Homes programme was
beneficial, did you mean beneficial to tenants or to contractors?
Mr Davies: I would say it has
certainly been beneficial to tenants because obviously a lot of
the properties have suffered from two or three decades of relative
neglect in terms of investment, so bringing those properties up
to what is called the decent standard has been a tremendously
good initiative. There are wider benefits to the communities as
a whole in terms of creating jobs in local communities, helping
local businesses develop their activities and grow, and we have
seen quite a few examples of that in all the areas where these
programmes have been initiated. As far as contractors are concerned,
there are clearly some large programmes of work available and
contractors have benefited from that, no question.
Q293 David Wright:
You mentioned local labour initiatives. Do you go out and sell
best practice to organisations you are working with or do you
just respond to what they want? How do you increase the number
of local people employed in carrying out contracts or estates
or in communities? How do you do it?
Mr Davies: I think there are various
models. There is the traditional subcontractor model, which is
quite heavily used on a programme of this nature which is essentially
capital refurbishment type work as opposed to ongoing day-to-day
maintenance activity. Some of the contractors in the market are
looking to do more self-delivery than subcontract. That happens
to be our model. Where you self-deliver you have more control
over the labour than when you are subcontracting and you are able
to build apprenticeship schemes into the programme, training and
development programmes to get long-term unemployed back into the
workforce, and so on. There are a number of opportunities of that
nature. In terms of sharing best practice, I think you will find
that most of the contracted partners who are working either on
a pan-regional basis or a national basis, and therefore working
on a number of different schemes, will bring a number of best
practices into pretty much every programme they are working on.
It is a key theme that our client partners expect us to bring
to the programme.
Q294 Mr Betts:
Can I ask how far you try and target the recruitment of apprentices
and other people in the industry at the very particular local
area where you are working, bearing in mind that the estates that
are being worked on for Decent Homes are often some of the poorer
areas, probably areas where levels of unemployment are higher,
there are less skills than there might be in other areas. Do you
try and target that level to leave behind a legacy for those particular
areas in terms of skills and training and future employment?
Mr Davies: We do our utmost. What
we tend to do is run a recruitment fair at the start of the programme
and advertise in local newspapers and on local radio, on the backs
of buses and so on. Depending upon the size of the programme we
will get 300 or 400 people attending those recruitment fairs and
we will try to recruit from that pool of people to start with
and in parallel with that use subcontracting partners and as the
programme develops look to try and employ more people from the
very specific local areas in which we are working, but initially
the pool of people we tend to work with are those people who will
respond to those recruitment fairs.
Q295 Mr Betts:
Can you give us any specific examples of where you have gone out
and recruited people from local areas for training, for apprenticeships,
that has made a difference in terms of a lasting legacy?
Mr Davies: There are quite a number
of examples of that. We have 200 apprentices on our books at the
moment and that number is rising. They all go through our academy
programme. They tend to work alongside an experienced electrician,
heating and plumbing engineer or tradesman, as well as doing non-workplace
training as well. Those apprentices will quite often be from the
estates in which we are working. In terms of leaving a lasting
legacy, that is something where, hopefully, we are building a
lasting legacy through that process. The other area is working
with local supply chain partners. I think there were some examples
the Sunderland team mentioned. Those are quite common in this
sort of programme. Often the scale of these programmes is quite
large and also of a reasonable timescale with typically five-year,
sometimes seven-year timescales, so you can make those sorts of
investments and plan quite a long way in advance with the scale
of the programme. It does give you opportunities to employ local
people and take a slightly longer-term view than perhaps a more
traditional contract by contract tender approach to doing that
sort of work.
Q296 Emily Thornberry:
The Decent Homes programme is, I suppose, as you have already
said, a massive investment in social housing in Britain and a
huge glut of work for your industry. What I would really like
to know is how you are going to manage that because presumably
it has a knock-on effect in terms of price and getting the resources
that you need, partly employing the right people, partly getting
the right things. What are you going to do after all this work
is finished?
Mr Davies: One of the advantages
of the Decent Homes programme is that it has brought a different
approach to maintaining and refurbishing social housing stock.
Some of the efficiencies that have been brought to the party is
by having fewer contracting partners compared with, perhaps a
more traditional approach, where we have a number of clients who
historically might have had 200, 300, 400 different supply chain
partners providing a whole range of different services; the Decent
Homes programme has acted as a bit of a catalyst in consolidating
that supply base and, therefore, delivering quite significant
efficiencies. Our clients are challenging us and the other partners
working on these programmes consistently, right the way through
the life of the programme, to continue to deliver further efficiencies.
That has been a catalyst to deliver Gershon and beyond in many
ways in efficiency benefits. In terms of supply chain and labour,
one of the other advantages is because the programmes are of a
reasonably long and predictable timescale you can recruit people
and offer them a job where they are going to be working in a locality
for a fairly long period of time and a lot of the people who come
into this industry do not realise how itinerant the construction
and building industry can be: you might have a six-month project
here on one side of the city and it takes you an hour and a half
to get there, and the next job is the other side of the city and
it takes you an hour and a half to get to your next job. To actually
have a five-year programme of work where you are working within
a fairly defined area is quite an attractive proposition for people
and it is often more secure employment than they might otherwise
get which enables them to plan their finances, and so on. It has
benefited in that respect. In terms of it being a peak, the Decent
Homes programme, no question, is a significant investment but
if you look at the number of social housing units in the UK, the
statistics vary, by five million, plus or minus, in the UK as
a whole; those properties need to be maintained on an ongoing
basis in terms of ongoing reactive repairs, managing the void
programme, managing and maintaining the estates, cleaning the
estates and doing the grounds maintenance, as well as the ongoing
capital refurbishment work. Decent Homes has accelerated into
a 10-year period effectively of probably two decades of work,
but those properties still have to have, on a cyclical basis,
their kitchens, bathrooms, windows, doors and roofs replaced;
so that work will carry on. Of the five million social housing
units in the UK, I think the number is between 35% and 40% did
not meet the Decent Homes standard; so 55-60% or so are still
in that normal cyclical refurbishment cycle. The social housing
market is not going to drop off a cliff in 2010 when Decent Homes
come to an end; there will be a number of major programmes that
will come to an end but it is still a significant market.
Q297 Mr Hands:
Does Connaught only provide services within the social housing
sector or have you just chosen to specialise in social housing?
If so, why?
Mr Davies: 85% of our business
is social housing and the other 15% is a gas servicing business
that services primarily private businesses, SMEs and larger private
businesses. Connaught has worked for local authorities and in
the social housing space for many years and has just found its
niche, really. We are sticking to this niche because we believe
that is the right thing to do for Connaught.
Q298 Mr Hands:
It sounds like it is a very diverse and unconsolidated market.
I think I was reading that you account for less than 5% of the
total market providing these kinds of services in the social housing
sector. Do you foresee a lot of consolidation in the market or
do you think it is part of the services that are delivered that
will be inevitably delivered by local companies?
Mr Davies: I think there is quite
an interesting dynamic in the market in that, of the total market,
we estimate about a quarter of the total repair services are provided
by DLOs—direct labour organisations—and of the remaining
three-quarters of the market as a whole, the largest proportion
is local companies. I think there will continue to be what I would
call a natural consolidation of the market as local authorities,
ALMOs and housing associations look at ways of delivering further
efficiencies. It is not necessarily a particularly efficient method
of managing your property maintenance programme if you are dealing
with a very large number of subcontractors but consolidating that
into larger-bundled service partnerships can deliver significant
efficiencies. I think that is a trend that will continue. The
other trend is that there are 2,000 housing associations and you
will see housing associations beginning to merge and create some
quite large groupings, managing quite large numbers of stock and
they will be using that as a catalyst, again, to look at more
efficient ways of procuring.
Chair: Thank you very much indeed, Mr
Davies.
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