Procurement Efficiencies: Monitoring and Evaluation of Devanha Phase 2

2 Introduction

2.1 Devanha Phase 2 is a procurement initiative established by five RSLs in Grampian. Aberdeenshire Housing Partnership, Castlehill Housing Association, Grampian Housing Association, Langstane Housing Association and Tenants First Housing Co-operative formally came together in 2006 through signing a Formation and Members Agreement (Devanha, 2006). The member associations agreed to work together through Devanha but retain their individual identities while Devanha acts as their agent to deliver:

• 1563 new homes for rent and LCHO and associated environmental improvements from 2007/08 to 2010/11,
• quality improvements,
• efficiency savings.

2.2 The total number of units completed was revised to 1,383 primarily because inflation calculations carried out by procurement consultants the Collaborative Working Centre (CWC) and accepted by Scottish Government showed inflation to be above that allowed for in the Offer of Grant.

2.3 The Devanha programme consisted of rental and shared equity units including projects which were delivered through a framework agreement with three contractors: Bancon, Chap, and Robertsons and a through section 75 agreements with a variety of other developers.

2.4 All but one of the section 75 developments were Design & Build schemes, the other scheme consisting of completed units which were bought from the contractor. Non-framework, Moray Volume Procurement Initiative (MVPI) developments accounted for most of the Devanha activity in Moray, with Grampian Housing Association as lead developer working with Springfield Properties. While Devanha could influence the section 75 developers to some extent, it had considerably more control over the framework contractors. Nevertheless, a significant majority of s75 developments included substantial elements of RSL/Devanha specification.

2.5 Devanha Phase 2 built upon earlier experience of Devanha Phase 1, a procurement initiative developed under Communities Scotland's 'Building a Better Deal' (BABD) agenda, which was a response to the Egan and Latham reports. Through greater customer focus, improving procurement, shortening the supply chain and using people and resources efficiently, Communities Scotland encouraged RSLs to become "best practice clients" with what the Egan Report (1998) described as a change of style, culture and process, rather than just a series of mechanistic activities. This collaborative approach underpinned the objectives for Devanha Phase 2.

2.6 Heriot-Watt University and Anna Evans Housing Consultancy were commissioned by the Scottish Government^[1] to carry out a monitoring and evaluation study of Devanha Phase 2. The researchers established a monitoring system to track the progress of the Devanha initiative and three previous monitoring reports, Rounds 1, 2 and 3 were submitted to Scottish Government, highlighting progress, performance and governance issues.

2.7 Devanha Phase 2 was introduced in the context of the development of a National Procurement Strategy by Communities Scotland. As national policy developed, earlier monitoring rounds of the current evaluation fed into Scottish Government's Housing Investment Reform Project. This final report focuses on an overall evaluation of the Devanha initiative. In accordance with the research brief, this evaluation also draws out transferable lessons which may be learnt from the Devanha experience and shared across the housing sector.

Devanha Objectives and Evaluation

2.8 Communities Scotland's Offer of Grant set a large number of objectives for Devanha. However, the Communities Scotland research brief (2007) noted that the key objective of Devanha phase 2 was to secure improved 'programme procurement cost efficiencies' through the adoption of a revised procurement regime, embracing a consortium led, integrated procurement approach, the bulk of which was to be delivered through the use of Framework Agreements and 'open book cost management'. This evaluation analyses actual performance in relation to specific Offer of Grant targets on cost and grant. The analysis considers the processes which have been introduced to attempt to achieve these efficiencies.

2.9 The Devanha Offer of Grant contained specific cost and grant efficiency targets which can be summarised as:

• An average works cost saving of 7.3% over the duration of the 4 year programme.
• A target grant cost benchmark for a four person home at April 2006 of £73,000, which would equate to a 10% real grant cost saving over the four year period.

2.10 In addition to these headline objectives, the Offer of Grant includes objectives relating to:

• Housing & Quality Standards
• Devanha Train - a training and employment initiative
• Framework Agreement
• Gain Share / Pain Share Arrangements

2.11 Communities Scotland's Offer of Grant put in place a process for accounting for inflation but the extent of the massive economic changes which occurred could not have been predicted. While our brief does not permit us to analyse value for money beyond the Offer of Grant targets and inflation adjustments, we do make comment on the system of inflation monitoring and on issues of wider value for money assessment.

2.12 Analysis of outcomes against cost efficiencies and housing quality along with less central objectives such as training is therefore central to the evaluation of the Devanha Phase 2 Initiative^[2]. The evaluation also examines the delivery of the programme and, in particular, the impact which governance has had on management and delivery of Devanha's objectives.

2.13 Devanha was a ground breaking approach in Scotland, putting in place new structures and new methods of working. Many of the principles upon which Devanha was built were based on the innovations set out in Recommendations for a National Procurement Strategy for Social Housing in Scotland (CWC, 2007). Communities Scotland therefore encouraged the engagement of CWC as consultants to mentor and assist Devanha. The current evaluation also looks at the impact of this working relationship on Devanha.

2.14 Devanha operates over three local authority areas: Aberdeen City, Aberdeenshire and Moray. Local authorities' strategic and delivery roles have grown significantly over the period in which Devanha has operated, with the increasing importance of the Strategic Housing Investment Plan (SHIP). The relationship between Devanha and the three local authorities is therefore important to the success of the initiative.