In-house and proud: The business of repairs and maintenance
The collapse of a number of household names and changing market conditions have seen many housing providers turn their backs on outsourcing repairs and maintenance in favour of a new breed of direct labour organisations fit for the 21st century. By Michelle Gordon
THERE was a time not too long ago when the direct labour organisation (DLO) had rather fallen out of fashion with the social housing sector, in favour of outsourcing repairs and maintenance to external contractors.
The contractor, it seemed, was king but when a number of household names collapsed in 2010/2011 the repercussions were felt across the sector. The knock in confidence combined with increasingly challenging market conditions and pressure to provide more value for money saw many housing providers going back to the drawing board on their repairs and maintenance models.
“I think it was around 2010/11 that several large contractors went into administration and I think that really put a shiver through the whole sector, it caused a lot of pain,” said Greg Lakin director of Property Care – the DLO of Birmingham-based Midland Heart.
Many housing providers began to look at how they could potentially manage those risks and a DLO was part of that formula explains Lakin, although he points out “that is not the whole picture”.
Fast forward a few years and in-house repairs and maintenance teams are making something of a comeback bringing the concept of the DLO firmly into the 21st century.
“I never liked the word DLO – it has connotations with the 1980s,”said Lakin. “At the end of the day we are a commercial maintenance team within the business and we are set up as a contractor.”
Property Care was set up in 2014 following a successful pilot scheme involving 3,500 properties. It now employs around 80 operatives delivering a responsive maintenance service to 11,000 properties.
“For us it was about control and consistency in the way we delivered the service and culture, which I think is massively under rated,” said Lakin.
Midland Heart has put an “immense” amount of time into the culture of its DLO, ensuring there is a sense of ownership among employees, he said: “There is a really high expectation in terms of behaviours that we expect of our team, and we have put that line in the sand and they have risen to it fantastically.”
The ability to have more control over services was a key driver for Viridian Housing which bucked the trend when it set up its DLO back in 2000; a time when many other organisations were closing theirs down.
“The reason for setting up the DLO at the time was that we had several maintenance contracts where we were struggling to find the level of service required in terms of quality and customer offering,” explained Neal Ackcral, director of property services at Viridian.
“The most important aim for us was quality of service, efficiency and tailoring our services to meet the needs of our customers.”
Having an in-house team has enabled Viridian to provide a more flexible service. “We have benefitted from improved control and agility,” said Ackcral.
“We never know what is going to happen from one day to the next and quite often we might be asked to do things for our customers and we are able to analyse that. If we think it is the right thing to do we are able to change our appointments to make sure that we deliver that. With contractors that’s not always possible because we might not be their sole client, they might be working for others and might not be able to redirect their resources in that way.”
The majority of the housing association’s 16,000 homes are in London but it also has stock in the Midlands and Sussex. It employs around 75 operatives in its DLO, which has grown over the years to cover 90% of all day-to-day maintenance and about 55% of all planned maintenance, including gas servicing and electrical maintenance services.
Salix Homes in Salford is the new kid on the block. The housing association was created in March 2015, when stock was transferred from Salford Council, although Salix had been around as an ALMO since 2007.
It brought its maintenance service in-house last October and the team now deliver repairs and maintenance, voids work and emergency call out work to its stock of 8,500 properties, which includes 17 tower blocks. Customer service was a big reason for Salix Homes’ decision to set up a DLO said its chief executive Lee Sugden. “Whenever we ask our customers what is important to them the first thing on the list is the repairs service.
So it just seems to be the right thing to do, to be able to take direct control and responsibility for the most important service that your organisation delivers, rather than it being delivered by a third party.
“By bringing it in-house we have more influence and control over the service, and the quality of the service that we are delivering. We wanted to deliver a more contemporary and modern service to our customers – not just an 8-till-4 type of service but one that reflected a modern way of living.
“We felt that we would be able to better shape that service working directly with our own employees, rather than through a third party, so that was one of the main drivers for bringing it in-house: all of that future service delivery.”
But there is another more “hardnosed” reason behind the decision, says Sugden, and that is saving money. From the very beginning Salix was determined that it could deliver the service cheaper in-house through VAT savings and no longer having to pay profit margins to third parties, but since the DLO was set up there have also been significant savings as a result of increased productivity.
“We have seen improved productivity and performance from the team so all told all of the business case propositions are bearing fruit and delivering as we expected and perhaps actually delivering beyond what we expected,” explained Sugden.
There have been substantial cost savings for Midland Heart too. “The initial saving that we aimed for with Property Care in 2014 was to save over £4 million and we are well on our way to achieving that in the first two years,” said Lakin.
Having total control over its budget has helped Viridian to deliver better value for money. “It has enabled us to understand the metrics behind our budget so our teams now know the average number of visits we carry out to our homes,” said Ackcral.
“If there are any homes with a high number of visits we need to understand why and we can take corrective action and we wouldn’t have necessarily known that before.
“We understand how much it costs every time we send someone out and the importance of getting it right first time because by knowing the cost per visit we know how much it costs us if we don’t get it right first time.”
But while the benefits of setting up a DLO are plentiful Lakin warns that it is not a task to take lightly. “There has been a dramatic shift,” he said “but there was a dramatic effort to make that.”
Setting up a DLO requires a high level of capital investment, not to mention the challenges of TUPE transferring over staff, and implementing a new working culture.
Getting Property Care off the ground was not without its challenges Lakin says, and there was a massive shift in terms of technology and infrastructure during that first year but having a proper plan in place helped to make the process smoother.
“It wasn’t a snap decision, there was a lot of thought and consideration that went into how we were going to do it and the level of investment that was going to be needed,” he says. “We had a specialist team lined up to do the transfer, and in the first year we were pump primed to really make sure we had the resources to do what we needed to do.”
The challenges of setting up a DLO are two-fold. On the one hand there is the TUPE transfer of staff and getting the culture right while maintaining continuity of service.
“The other side is practical issues around making sure you have got a suitable van fleet; making sure the technology works and whatever systems you want to deploy work and are tested in advance of bringing people inhouse; making sure you have got a supply chain for your materials and building a relationship with the supplier,” said Sugden.
“All of those things are critical to go live date and making sure that the work still gets done is no small order. You need to get them right because without materials and with no supply chain and without a system that works you can’t deliver a repair service, so all of those things can bring the whole thing to a halt – you have to have the checks and balances and project management in place to make sure it gets done.”
DLOs have traditionally been seen as completely separate entities, often tucked away in a yard somewhere but integration is at the heart of the modern model.
“It is interesting the differentiation between contractors and DLOs; we are a contractor within Midland Heart, we do all of the same things and have the same approaches,” said Lakin.
Salix Homes didn’t set up a separate company when it brought its repairs service inhouse explained Sugden. “It is just a team within Salix – the maintenance service – we just brought them in as a department within the business,” he said.
The way in which Viridian Housing’s DLO fits into the wider company has changed drastically over the past 16 years said Ackcral, and is much more integrated with other departments than it was in the early days.
“In 2000 we were quite an isolated team, we were a DLO, we were in our own yard and we never really mixed with any other teams,” he explained. “The big integration for us has been that we are now all one team and we are working across with all of the other teams and there are much closer links.”
As Viridian’s biggest frontline service its technicians are most likely to come into contact with vulnerable tenants and have been trained to identify specialist needs such as ASB, issues with hardship, and potential cases of domestic violence, and to inform the relevant departments of any issues.
Technicians also regularly carry out work for other departments, especially when visiting homes in rural areas, from dropping off letters to asking residents questions on behalf of other teams – saving time, resources and money as a result.
“We have got much more cross working and that is one of the biggest changes we have seen since we were set up,” said Ackcral. “The other thing is branding – we are visible on the estates and people can come up and speak to our technicians and can hopefully refer any issues to them and they can bring them back to the office within reason.”
The benefits of an in-house service have proven plentiful for all three organisations but they still believe that is there a role for external contractors working in partnership with housing associations.
“We still very much believe in a mixed economy,” said Lakin. “At the moment Property Care undertake all of the work in Midlands Central, where we maintain around 11,000 properties, but we have other national contractors who work for us within that mixed economy.
Even Property Care uses a mixed economy itself. It has a specialised supply chain that it uses for specialist work.”
Viridian also makes use of external contractors for delivering roofing repairs and window replacements. Ackral believes that a blended approach is the “way forward” and that there will continue to be opportunities for contractors who work in partnership with housing associations to meet their strategic objectives and to deliver value for money.
“Repairs and maintenance service, second to development it is probably the biggest area of investment for us, and if we are going to continue to provide our social impact agenda, if we are going to continue to drive our development agenda we need to maximise efficiency. If we do that through efficient DLOs, efficient contractors or a blend of both that is obviously a key objective for us and others,” he said.
This article first appeared in the August/September 2016 print edition of Housing magazine