Price Per Property – Managing the risk

1. Price per Property
Managing the Risk
14.06.12
Passion for... People Performance Procurement Partnering

2. •Mathew Baxter – Managing Director
echelon consultancy
•Sue Cooper – Director of Property Services
Affinity Sutton Group

3. ASG Objectives Identified
•Rationalise the geography
•Refresh the cost
•Benchmark the DLO
•Simplify the management
•Revise the incentives

4. ASG Process
•Development of bespoke PPP Model
•Draw out risk elements through process
•Focus on incentivisation through model
•Flexibility for different delivery models
•(i.e. isolation of labour/overhead/profit)
•Detailed Term Brief - full stakeholder input
•CD process to hone the delivery model and PPP

5. Is it the right model for you?
Considerations……

6. Heading Ov v
er iew Impact
Reduces Administ aion
rt Significa r ion in pa w k a t numberofcomponent in t inv ae r
nt educt per or s he s he oices r educed Costsa ings forCl a Ser ice Pr ider
v ient nd v ov
M na
a gementbyE ion
xcept M na
a gementis focussed on except lit
iona ems. Impr es t pr bil yofbeterout
ov he oba it t comes w h mor
it e
St ndad cost ae cov ed byt PPP.
a r s r er he focus on t issues t tmat
he ha ter
V it ofBudget a Cost
isibil y s nd s Ser ice Pr ider ae a e t pl n a decl r t budget w h costcera y.
v ov s r bl o a nd ae heir s it t int Impr ed l ihood ofsuccessfulSer ice Pr ider
ov ikel v ov
R ces ae ma ged t a e t pr ectgoas.
esour r na o chiev he oj l del er a budgetcont ol
iv y nd r
Cl s obt in beterv it ofpl nned a a ua r cing
ient a t isibil y a nd ct l esour E ryw r ofdev nce fr pl n
al aning ia om a
Incent e t Per m
iv o for Ser ice Pr ider ae incent ised t impr e efficiencyw hin t fr mew k ofKey
v ov s r iv o ov it he a or Costsa ings t Cl a Ser ice Pr ider
v o ient nd v ov
Per ma Indicaor (KPI’s)
for nce ts Impr ed focus on exceedingKPIs
ov
Aoids div sions t ma
v er o ximise costr er underSoR
ecov y s.
R Ca Be M na
isk n a ged R ca be defined a shaed (e.g. T )
isk n nd r UPE Shaed benefit
r
M na equit bl posit
a ged a e ion
Benchmaking
r Benchmakingca be used w h ot Cl s
r n it her ient Confir per ma a instpeer
m for nce ga s
SoRr t ae obt ined a t
aes r a t ender SoRr t ae used forexcept lit out oft PPP.
aes r iona ems side he Cont
ingencypr ementpl n forCl
ocur a ient
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hese n r o bor om he
M r T ed
aket est R t s showconv gence ofpr (w hin 2%)
ecent ender er icing it Cr t t r env onmentforsuccess
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aket est it ient nd v ov s

7. • New model – market sophistication developing
• Reliant on accurate data from Client
• Service Provider risk of Client taking calls
• Service Provider taking more commercial stance on repairs
responsibility (i.e. saying ‘No’)
• Service Provider IT capability of capturing cost & repairs
data
• Changes in processes within Client
• Service Provider underestimates risk
• Cultural shift in ‘control’ of repairs ordering (i.e. currently
dictated by Client orders)

8. Defining the PPP/PPV Model

9. Price Per Property (PPP) Concept
Wide range
of costs
brought
within single
average

10. Development of Model - Concept
•Reviewed what’s out there – mixed bag
•Drew on our combined experience of PPP
•Emphasis on comprehensive Inclusion/
Exclusions List
•Clear process for managing exceptions
•Understanding risk is critical factor
•Strip back to basics!

11. Inclusions/ Exclusions – Key!
• What’s ‘in’ and what’s ‘out’
• Comprehensive list of both
• Referrals system
• All comes down to risk?

12. Inclusions/ Exclusions – Sample
No. Component Exclusions Incl
usions Not L aions
es/imit t
Sect I -Int na
ion er ls
W e t SPconfir t kit is beyond
her he ms he chen
economica r iritw lbe r r t Cl foraful
l epa il efered o ient l
r a
epl cement Ift r r lis a ed t SPw only
. he efera ccept he ill
I.1 Kit
chen T ntOw A nces
ena ned pplia Kit Unit (t include door hinges, ha es a shelv
chen s o s, ndl nd es)
be responsible forma a forafurher2 yeas if
int ining t r
notr a (a erw pointSPw lbe r
epl ced ft hich il eimbursed
forr ir
epa s)
Capetorot t ntfited floorcov ing
r her ena t er W kt
or ops
W eG
hit oods M st seaa t w kt a floorcov ing
a ic l nt o or ops nd er
Sink Cha a Plugs
ins nd E Pa s
nd nel

13. The Tender Model…..
EementofCost
l Per a ofCost
cent ge
_____%
L bour
a
_____%
M t ias
aer l
_____%
Sit Ov hea
e er d
_____%
Hea Office Ov hea &Pr (F
d er d ofit ixed)
_____%
V r bl Pr
aia e ofit
_____%
Risk
10 %
0
T a PPP
ot l

14. Labour
•Pricing Matrix for net labour costs
•Detailed breakdown of resource requirements
in Method Statement
•Focus on productivity
•Sub-contractors quantified and named

15. Materials
•Fully priced schedule of components
•Schedule will be volumised based on history
(Note – indicative only volume is SP risk)
•Focus on high demand items
•Qualitative assessment on integration of Supply
Chain

16. Site Overheads
•Fully priced overhead schedule
•Template provided in model
•Clear breakdown on what’s included
•Some prescribed items (Call Centre/
Mobilisation Workshops etc.)
•Cross-referenced with MS
•One-off mobilisation costs

17. Central Office Overheads & Profit
•Contribution to Head Office
•Fixed (guaranteed) Profit
•Expressed as percentage of PPP
•Ring fenced as % of PPP
•Clear definition

18. Incentivisation
•Incentivised Profit – Variable Profit
•Ring-fenced against PPP
•Paid monthly – key driver will be Resident
Satisfaction
•Targets will be defined in KPI Handbook
•Focus on 2 KPIs (more later!!)
•Potential shared savings mechanism(s)

19. Voids
•Inclusions/Exclusions
•Single PPV (AR over and above)
•Capped by volume
•Based on existing volumes
•Performance on key to key

20. Risk – Critical Factor in PPP
• Provision of accurate data
• Understanding what Contractor’s Risks are
• Tenderers price Risk
• High Risk items isolated (within PPP)
• and ‘risk pots’ with draw-down or cap
•Risk will be reviewed at the end of the 1st year
•Risk is capped for subsequent years

21. Risk Strategy

22. Risk – Areas identified
• Data gaps (defined)
• TUPE x3
• Stock familiarity
• Specific work-types – Capped by annual spend
(not per item)- Aids and Adaptations, Fencing,
Drain Clearance, Asbestos Works

23. Risk – Sample
Description of Quant Unit Rate Risk % Allocation Residual Scope Definition Mitigation Strategy Measures Reporting/Update Process
Risk Allowance Allowance Prob to Year 1 Allocation to
Total Tender Year 1
PPP
We will capture the
information as part of our
monthly report. We will
report to Origin on a
quarterly basis on the
4851 Properties x 1 extra repair
number of jobs compared to
at £112 x 5% probability. We
the cap. In the event that the
have assumed an average of
number of jobs is over the
Increase in the 2.2 jobs per property i.e.
Weather is the main reason and we will seek cap or indeed close to it, we
volume of jobs Volume increase caused by 10,672 per year. If, at the end
the most cost effective repair solutions, will present a detailed
caused by £ £ £ £ Residents or unforeseen of the year, the number of jobs
4851 Props 5% including batching repairs where possible. We analysis to Origin of which
Residents or 112.00 543,312 27,165.60 27,165.60 circumstances requiring was 25% or more higher than
will involve Origin's officers in cases where the properties are causing the
unforeseen more repairs that, we would request that
resident is over-using the service. breach of the cap with our
circumstances Origin pay for the jobs over the
suggestions of the number of
cap i.e. any jobs above 13,340
jobs can be reduced. This
in a year at an average cost of
may mean looking at the
£112 per job
need for planned works in
some properties or the more
active management of a
resident and their use of the
service

24. Performance Incentives
•Variable fee linked to 2 KPIs
•Customer Satisfaction – Repairs – Target 8.5
•Average number of Days – Void – Target 9 Days
If hit….
•Equates to £18k month (£10 PPP) on Repairs PPP
•Equates to £43 per void

25. Performance Incentives – Exceptional Performance
•Extra payment of 3.57% if exceed score of 9
•Between 8.5 and 9 paid incrementally
•Extra payment of £15/day for each void <9 days

26. Thank you – Questions?

27. Contacts
Sue Cooper – sue.cooper@affinitysutton.com
www.affinitysutton.com
Mathew Baxter – mathew@echelonconsultancy.co.uk
www.echelonconsultancy.co.uk