Value for money in DLOs

Demonstrating Value for Money in Housing Direct Labour Organisations

Short of tendering everything on a regular basis, which demonstrates that you can win tenders by fair means or foul, how can a DLO demonstrate to its parent organisation and regulators that it is providing good value? There is no absolutely definitive answer but long experience suggest there are some key factors that affect how well DLOs are managed to provide good value.

They are careful about what kinds of work they do. Income stability is a major plus for any contracting organisation. It is doubly so for DLOs with relatively fixed costs. In most cases materials and sub-contracting are the only short-term variable costs of significance. Some DLOs have managed to be effective trading organisations but for everyone that is, I can cite dozens that get into difficulties. The most stable income is responsive repairs and void work. Good DLOs generally concentrate on this core work. Any external or short term contract work needs risk assessment and to answer the following questions:

* How is this advantaging your organisation?
* How do you deal with customer conflicts?
* What happens when the work comes to an end?

Good DLOs take a range of cost benchmarks. Average void costs will tell you nothing but void costs analysed by type of work, e.g. repair, improvement, safety checking, etc. and compared with others can be very useful. Average repair costs say something but the real comparator is a comparison of the average cost of the 85% or so of the lowest costs repairs. This benchmark excludes the distortions produced by the 5% or so of jobs that typically consume about 30% of the budget. At the 85% level we can be fairly sure that the same kinds of work are contained in the benchmark. Most importantly good DLOs go out and talk to benchmarking partners and are self-critical not self-justifying.

Good DLOs know their demand and how it sits against national norms. Responsive repairs average about 3.25 to 3.75 repairs per home per annum or 4 to 4.25 with gas breakdowns. It may be just fine if your demand is higher or lower than this but you need to know why. Traditionally deprived urban populations generate more demand than rural and better off households. Poor call handling can often generate low demand as people give up trying to order repairs and these people do not show up in most satisfaction polling.

Good DLOs

* Average less than 8 calendar days to complete all categories of repair
* Do 80% of work at the first visit
* Have less than 3% of jobs that take longer than 28 calendar days
* Offer appointments for most jobs at first contact – and keep them!
* Turn round voids at better than £250 per day plus 3 days, i.e. £2000 spend = 11 days
* Measure tenant feedback in more than one way and in ways that poll as many tenant groups as possible

Good managers concentrate on looking at dissatisfaction and complaints. You cannot do anything to improve your service by looking at satisfied customers. Go and look for the less than fully satisfied. Try to find out how many people do not report repairs because getting through to your repairs centre is too frustrating.

Good DLOs manage performance actively at every level and they do it regularly. For tradespeople that is daily and weekly.

Good DLOs have positive answers to the questions below:

* Why do we use a Schedule of Rates / open book or whatever to value work?
* Do we know our job history?
* Is our income secure for the next five years?
* Do operatives know what performance is expected of them?
* Can our supervisors supervise?

* Do we know where you are making surplus / loss?
* Has everyone a grasp of the basic statistics?
* How many jobs – day / week / month / year?
* How much?
* How we do things?
* Can we estimate our week’s performance accurately by Friday evening or Monday morning
* Have we got records that make show that this operation is managed?

There remains the problem that what DLOs do are specialist functions. Real skill is required, not just to confirm you are offering value but to convince the non-specialist. The Housing Quality Network are currently developing an accreditation scheme for DLOs. It should offer a genuine an expert assessment of the quality of a DLO but it will set a “high-bar”.

Rob McNaughton
HQN
0845 4747 004