Despite its vital importance in the value for money environment, procurement still isn't getting the attention it deserves from the housing sector. PfH is moving the boundaries of what procurement professionals within social housing organisations expect of themselves and is looking at the benefits within the sector of improved spend visibility, internal positioning, external influence and power, outside sector benchmarking, market knowledge and other areas that will be of immense benefit. These steps will enable procurement to become more commercial and help the social housing sector widen their scope of influence. The ultimate goal being that procurement will soon sit at the top table and be recognised as a function which can shape change and truly add value.

1. Giving Procurement a voice
Steve Malone
Managing Director – Procurement for Housing

2. What is the opportunity?
Recent research by Accenture identified that
organisations with high performing procurement
functions achieve procurement savings that are 30%
higher than low performers yet cost about half as much
to run. They identified that a relationship exists between
procurement ‘excellence’ and superior financial
performance. The disappointment though is that most
organisations fall short of ‘excellence’ for strategic and
process reasons.

3. £millions Decreasing
external spend
by 10%
Increasing
revenues by
10%
Decreasing
labour by 10%
Revenues £14,860 £14,860 £16,346 £14,860
Non addressable costs £3,994 £3,994 £4,397 £3,682
External costs £7,017 £6,315 £7,683 £7,017
Operating surplus £3,850 £4,551 £4,266 £4,161
Change in net surplus (£) £701 £416 £311
Change in net surplus (%) 18.2% 10% 8%

4. Market
Challenges
Revenue pressure – welfare reform etc
EU regulatory changes
Funding & borrowing challenges
End of decent homes
Skills & materials shortages
Projected construction inflation – C.18%

5. Sector
Challenges

6. Functional
Challenges
40%
Sourcing &
Category
Management
30%
Compliance
20%
Aggregation
10%
Other
Efficiencies
Average Performance Range
Sector Leading Performance Range

7. Let’s take a detailed look at asset
management…

8. Client
Consultants
Professional
Services
Main contractor
Sub-
contractor
1
Sub-
contractor
2
Sub-
contractor
3
Sub-
contractor
4
Sub-
contractor
5
Sub-
contractor
6
Sub-sub
contractor
Materials
supplier
Materials
supplier
Materials
supplier
NEEDS: Low cost, good
quality
NEEDS: High fees, acceptable
quality
NEEDS: High final price to
maximise profit
NEEDS:
Payment
on time
Potential for conflict & additional costs at each interface
Structure re-assembled for each project
Conflict
Conflict
Conflict
Conflict
Conflict

9. Inappropriate
allocation of risk
Lack of
information &
data
Adversarial
culture
Poor
management /
project
management
Little investment
in innovation
Low and
discontinuous
demand
Inappropriate
selection criteria
Frequent changes
in specification

10. And the outcome is…..
At the point of contract award? 65% of contracts
unravelling before their
full term
Costs out of sync with
other sectors i.e. new
build
Significantly more re-
specifying than other
sectors
Over specifications
Typical over-runs
Fluctuating satisfaction
levels
Increased lifetime
maintenance costs
Value Leakage

11. What is procurements sphere on influence?
People
Funding / legal / insurance
Development
Asset Management
Energy
Indirect

12. Procurements transformation

13. The fundamental building blocks
Savings
Efficiency
Compliance
Leading
procurement
organisations
achieve 1.7
times the
profit growth
Leaders have
30% additional
savings
compared to
lowest
performers
Leaders
procurement
function costs
50% less
compared to
lowest
performers
The average
additional cost
for non
compliant
spend is 22%

14. Frameworks Service
Offering

15. Identify
What WhyHow
Achieve control
Leverage the organisations
potential
Understand where to prioritise
Understand where value can be
created
Visibility & forward planning
34% increase in spend under
management
5 – 12% increase in savings on
total spend
Spend analysis
Procurement, compliance &
VfM analysis
Supplier appraisal
Health check
Strategy, policy & procedure
review
Technology review
Capability appraisal
Risk analysis

16. What WhyHow
Delivering short & medium term
savings
Optimising the procurement
process
Ability to measure performance
Prioritisation – savings, risk &
compliance
Transparency
Average achievement of 15%+ in
savings
Reduction in supply base
Development of strategic
relationships
Spend transformation, VfM
statements & benchmarking
Lean process transformation
Strategic sourcing & contract re-
negotiation
Frameworks
Contract alignment
Category planning
Risk strategy
Technology & data efficiencies
Realise

17. What WhyHow
Increase savings
Cost avoidance
Mitigate savings leakage
Leverage strategic supplier
relationships to redesign
services & products
Drive efficiencies through
embedded technology &
process transformation
3 – 12 x RoI
22% improvement through
compliance on cost
maintenance
15-40% reduced procurement
operating cost through the use
of technology
Spend under management
greater than 90%
Cost avoidance
Supplier management
Contract management
Sourcing & renewals
Category management
Demand management /
innovation / process
improvement
Market analysis
External benchmarking
Risk management
Technology implementation
Maintain

18. Final thoughts…..
To achieve a voice you need to overcome
the challenges, gain control and deliver
results.
Procurement for Housing can help you to:
• Drive savings
• Create efficiencies
• Deliver compliance & mitigate risk