Rethinking Repairs. A New Approach to Gas Procurement. Jerry Austin Executive Director for Property Sutton Housing Partnership
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1 Rethinking Repairs A New Approach to Gas Procurement Jerry Austin Executive Director for Property Sutton Housing Partnership
2 Agenda Guide to today s presentation 1. Traditional approach has been the 3 star model 2. Issues with the 3 star model 3. Network Model: How it works: 4. What efficiencies have been made as a result of the procurement model 5. Efficiencies for the Customer and the Contractor 6. How has the Network Model helped to deliver more for less?
3 Gas safety certificate Risk Capital Programme Traditional approach has been the 3 star model Annual Boiler Service Breakdown & Repairs Boiler Replacement 20% - 40% 60% 80% Typical 3 Star Contract Separate Replacement Contract 3
4 Issues with the 3 star model» Multiple maintenance visits to older boilers rather than boiler replacement» Risk for call outs carried by contractor and pushes up the annual cost» Boiler replacements completed under separate capital budgets and risk not transferred to boiler manufacturers in most efficient way» High efficiency boilers usually last for 12 years, but many capital replacement cycles based on 15 years» Pressure to extend boiler life beyond the most economical efficient replacement cycle
5 Network Model: How it works:» This model builds on the current 3 star model with the inclusion of boiler replacements over the contract term backed up by the manufacturers guarantee that covers the cost associated component failure.» Smoothed out route and servicing program to maximises operative efficiency» Ten year boiler replacement programme accompanied with a 10 warranty from the boiler manufacture.» Installation bonuses, warranty call payments are factored into the pricing model in order to offer the most economically advantageous bid package» Payment based on single annual price per property over the term of the contract Do you homework!» Know the key attributes of your stock» Know the maximum price per property you are willing to accept to justify the extended contract.» Know the minimum price per property where you will question deliverability
6 Gas safety certificate Covered by Warranty 100% Programme Network Model Contract Annual Boiler Service Breakdown & Repairs Boiler Replacement 15% - 25% 10% - 20% 60% - 70% 6
7 What efficiencies have been made as a result of the procurement model?» This procurement combines the annual safety inspection and servicing, breakdown repairs and boiler replacement programme.» Over a period of 10 years, each property is guaranteed to receive a new boiler, which reduces future repair and maintenance costs.» As a result we will save a total of 13m over the duration of the contract, helping redefine standards in the service and repair market using:» A long term partnership approach» A complete end to end procurement model for the provision of service and installations over the 10 year period» Interaction with the manufacturers and contractors is significantly more in depth and relies on a period of market testing to ensure the model remains robust.
8 Efficiencies achieved The costs more clearly defined with servicing, repairs and replacements budgeted into an annual price per property over the course of a 10 year contract. This provides budget certainty by removing any hidden costs. And will save 1.3m per year by:» Recycling the service margin back into the cost of the boiler minimising additional boiler replacement costs» Maximising the warranty from the manufacturer reducing the risk cost carried by the contractor» Significantly reducing the cost of new boilers by engaging with the supply chain as part of the procurement» Standardising the boilers across the stock. 8
9 Efficiencies for the Customer and the Contractor» The approach provides the contractor with more flexibility on how to plan the installation programme and enables them to make the most out of every engineer visit.» Should the contractor believe the repair cost will increase, then the decision to replace the boiler under the installation programme is within their budget control.» There is no debate over repair cost recovery and the residents do not suffer delays whilst costs are agreed that may be experienced under previous contract structures.» As faulty boilers are replaced with newer, more reliable ones (as opposed to attempting to fix the faulty ones) fewer customers are contacting call centres for maintenance issues.» Contractors can plan to minimise visits on a boiler which is nearing the end of its lifecycle and replace it immediately with a new boiler» This will have a positive impact on energy efficiency that is realised - energy sustainability and addressing fuel poverty» The energy efficiency of the heating systems across the stock is improved.
10 How has the Network Model helped to deliver more for less?» Understanding the boiler manufacturers requirements is integral to the success of the contract.» The procurement model extends beyond just your maintenance contractor as the provider which is why it is important to work hard to create strong procurement relationships with a number of boiler manufacturers.» For a fixed fee, the boiler manufacturers have extended their standard boiler warranties (typically 4 to 6 years) to 10 years» Extended warranty terms also allow the contractor to recover investment in replacement boilers and offset some of the service costs throughout the life of the contract.» This risk is now managed between maintenance contractor and the boiler manufacturer, offering NHG long term certainty over its costs and offering residents complete peace of mind that any issues will be resolved straight away.
11 How has the Network Model helped to deliver more for less?» This model is naturally incentivises the contractor and the manufacturers to ensure a right first time service is always provided for our customers.» The payment mechanism within the contract means PH Jones will receive payment on the completion of a valid Landlord's Gas Safety Record (CP12). Thus providing an incentive to keep the servicing programme fully compliant and ensuring the safety of the resident within their homes.» In the previous model our team would manage and coordinate two separate contracting organisations (one providing the servicing and the other the installations). The new model helps the internal team to focus on service delivery to residents.» By standardising boilers and providing clear operating instructions for residents, demand for basic instruction on operation is reduced.» Finally, The approach take by this model potentially has much wider applicability in the sector such as kitchen and bathroom renewals using extended warranties to reduce day-to-day.
12 Questions? 12
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