Residents play a leading role in selecting new grounds maintenance contractors

When Dorset based Signpost Housing Association needed to tender its grounds maintenance service saving money was not its only consideration; getting a standard of service that met residents’ needs was also of great importance.  Working with specialist social housing consultant Peter Bird from Primary Business Support the association formed a project working group from staff and residents who were already members of the Association’s Planned and Responsive Repairs Review group (PARRR).

The contracts were let at the higher standard, which, following the tendering exercise, could be afforded within existing budgets

The working group comprised three members of staff and 18 residents and its first task was to agree the tender specification.  Working with a draft the group had real and meaningful input and introduced a number of new elements as well as adjusting the specification to meet their own needs.  There was a desire to improve the standard of specification and the group identified two key areas where it wanted to see improvements.  Grass cutting had long been an area where improvement was wanted, in particular those who lived in communal schemes wanted to see the grass cuttings collected up and taken away.  The group also wanted to see the maintenance of hedges improved.  It wasn’t clear whether improved services were affordable and so the group decided on a three standard specification where the standards on grass cutting and hedge maintenance varied between a reduced, middle and enhanced standard.

Having established the standard the group delegated responsibility for tendering to a sub-group that comprised three staff and six residents.  Because of the size of the contract – the Association has stock in Dorset, Devon and Somerset – the tendering had to be undertaken through the EU tendering route as a ‘Part B’ service and the work was split into three lots each covering different geographic areas.  The restricted tendering procedure was followed which meant that a pre-qualification questionnaire (PQQ) was sent out to potential suppliers.  The sub-group agreed the content of the PQQ including the project specific questions to be included and it also agreed the PQQ evaluation model.  The group went on to undertake the PQQ evaluation and decide which potential providers to invite to bid at the Invitation to Tender (ITT) stage.

Again, the working group agreed elements of the ITT requirement, including the subject areas for method statements that would be used to evaluate the tenders under the ‘most economically advantageous tender’ (MEAT) model employed and also, again, the evaluation model to be used.   The method statements decided by the group covered working methods, staff training, customer service and adding value to the contract.

The procurement process was complicated because the grounds maintenance service is recharged to many residents under variable service charge arrangements.  Alongside the tendering arrangements around 4000 residents were also consulted under a mixture of S20 Consultation for variable charge payers and general consultation with other residents who benefited from the service.  The working group also considered the representations made by residents under these consultation arrangements.

Having completed the tender stage the working group evaluated the tenders for the three contract areas and, based on the evaluation model, selected the preferred suppliers for each contract based on price but also the content of the method statements, and references.

The contracts were let at the higher standard, which, following the tendering exercise, could be afforded within existing budgets.  Residents will see grass maintained at a shorter standard than previously and those in communal schemes will have grass cut using box mowers and clippings will be taken off site for disposal.  Hedge cutting will also be provided at an enhanced standard.

The residents involved have found the process stimulating and enjoyable.  John Pearson, a resident from Winterbourne Whitechurch, said ‘I have found the whole process interesting and I feel that the residents have had a very real role to play in determining the standards to be agreed and the selection of the best contractors for the work.’

Residents continue to be involved and attend joint client/contractor meetings monitoring the delivery of the service in the three contract areas.

Further details about the process can be obtained from Julie-Ann Foster, Divisional Manager for Signpost Housing Association, on 01258 484829 or from Peter Bird, at Primary Business Support, on 01264 324403.

A full case study that includes greater detail and learning points from the project is also available from Peter.

VAT payable on service charges?

I recently came across this article about VAT on service charges that was considered by the European Courts of Justice.

The ECJ ruling may have an effect on the charging of VAT on some service charges.  A good summary of the case can be found here

The jist of what is being said seems to be that if an element of the service charge can be ‘opted in’ or ‘opted out’ then it no longer becomes an integral part of the ‘rent package’ for VAT purposes, and VAT may become payable on that element. This has yet to be interpreted by HMRC for the UK but some lawyers are encouraging Registered Providers to consider what the impact may be for them.

This seems similar to the treatment of garages and telecare services, where, if there is an element of choice in the charge it will be VATable and where the provision is integral with the letting of the property there is no VAT payable.

Service Charges: Part 2

There’s been coverage recently in the social housing media about the cost of service charges and the increases applied by some housing associations.  I don’t think this is particularly surprising since I think that a number of associations are beginning to realise how much they are loosing through poorly maintained service charge administration.  And when you think about it, any deficit is met out of rental income from the general rental stock and this results in less income to go towards development and so on.  As associations find themselves having to bear a reduced income from rentals next year (due to an anticipated negative September RPI figure) getting the service charge income in order will be one way to address the losses in 2010 and beyond.

I believe a large number of social housing organisations do not have robust service charge systems in place.  For them to work effectively there needs to be a general understanding of the way that these charges operate throughout the organisation.  I have come across situations where properties have been let and the description of the charges is left blank; situations where maintenance staff have failed to undertake the required consultation before letting contracts for works; situations where staff do not understand the difference between fixed and variable charges and many cases where there are simply no procedures in place (documented or otherwise) for calculating the variable service charges even when tenancies and leases have provision for these to be charged.  I’ve talked to staff about S20 consultation and whilst they undertake some consultation it has been clear from what they have said that they do not understand the legal requirement for variable service charge consultation for works or services over their respective thresholds, and they don’t understand the consequences of failing to undertake this consultation.   I spoke to someone only last week who appeared to think formal consultation was only required for leaseholders and not tenants.

Service charge legislation is complex and appears to have been drafted without due recognition of the real world!  To get to grips properly with the requirements you need to understand the statute, case law and administrative requirements required to put a robust administrative system in place.  You also need ‘buy-in’ from senior staff and a good understanding amongst the staff who have an input to the system (many of whom will likely not even realise their relevance).  Service charges is not something that can be delegated to one person, or one section, to take care of – an understanding needs to permeate the organisation.

As charges get higher the acceptance from tenants and leaseholders that has allowed poor practice to go unchallenged will diminish and more associations will find themselves being taken to tribunals.

Earlier this year I presented an overview of service charges with Robert Wassall from Blake Lapthorn.  The seminar was well received and feedback indicated a desire for a more detailed seminar.  Well, Robert and I are planning a second seminar looking at the requirements for S20 consultation and the practical issues to be considered when undertaking this work.  Robert will also be looking at recent changes to the legislation on service charges and cases from tribunal hearings.  The seminar is planned for Wednesday 21st October and the venue will be Southampton.  If you are interested in attending please get in touch.