CHIC’s Managing Director John Fisher recently contributed to Housing 24’s October edition. Writing on page 12 John argues that post-Grenfell, we need to think longer term when it comes to sourcing materials. We have reproduced John’s article in full below.
The housing sector spends 40% of its income on maintaining and investing in its housing assets. The rest goes roughly in equal parts on providing services to its customers (the overheads and running costs of a landlord) and servicing debt.
Of this 40% (about £2k per home per year) a quarter is spent on building materials. And much of this is left to contractors to source and provide – the ‘supply and fit’ model. Those landlords with in-house contractors are a bit more savvy – they buy their own materials (often through merchants) but they are still really small buyers in a huge market.
So how does this market work? It is highly complex, with all sorts of discounts, rebates, special offers and mark-ups. In simple terms, the clients specify a ‘performance standard’, the contractor then has to spot buy that product for each scheme or programme – a micro purchase in market terms – and the client gets whatever is provided by the contractor.
If it is a repairs contract that’s fine – but what if it breaks after a few years? Another repair and another cost.
So it is time the sector focussed on whole life costs, separated materials purchasing from the ‘fit part’ (labour) and delivered better value and certainty of product quality.
Whatever the product – taps, boilers, cladding, roofing materials, kitchens and so on, we must agree performance specifications with whole life costs in mind. After all, it costs more to replace something every 5 years than to fit a product that will last 20 years in the first place.
So how do we do this? We use established consortia, like Central Housing Investment Consortium Ltd, Efficiency North and Procure Plus Holdings, now working together as Re:allies, to transact directly with the manufacturers and suppliers. This has multiple benefits:
- It gets suppliers talking directly to the landlords/end users – they appreciate that
- It typically saves 15% to 20% of the ‘cost’ of materials for the landlord, because it de-risks the ‘supply’ for the contractor – they simply order what is specified and once delivered, they fit it.
So how might we learn a lesson post-Grenfell? It’s simple really – do our research, specify what materials we want and need, procure them at volume (where consortia add huge value) and just get contractors to fit what we ask them to.
Do landlords take more risk I hear you ask? Well yes – if you want to pass risk to others, but I call it taking responsibility. Decide what you want, source it efficiently and simply ask your contractors (internal or external) to fit what you have decided is the right product.
More leadership and ownership and less buck passing. And financial savings too!
John Fisher, managing director of CHIC