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01 Apr 2009

A journey in change management: Housing NSW's New Maintenance Services Contract

by Joanne Teagle

Housing NSW's New Maintenance Services Contract aims to defy traditional housing maintenance model deficiencies.

Outsourcing the maintenance of public housing is an area which presents unique challenges. Maintaining a large amount of properties (the majority of which were built in the 1970s) to a lettable standard and avoiding constant maintenance demands while meeting the requirements of relevant tenancy legislation and affording tenancy satisfaction are priorities which do not always neatly align.

In 2008, Housing NSW (Housing) implemented its Maintenance Reform Program - a $1.6 billion Project aiming to fundamentally change the way maintenance services are delivered to its 140,000 properties. The Project employed a number of initiatives to overcome difficulties commonly experienced in large facilities management (FM) (and public housing) projects - this article will touch on a few of these.

Competitive tension

Housing has engaged six individual contractors (under six separate New Maintenance Services Contracts) who share 22 Contract areas in which they deliver maintenance services. This provides Housing with the benefits of a competitive contractor environment, not only through the tender process, but throughout the term of the Contract. This principle is reinforced by:

  • a detailed Performance Management Framework (PMF) under which the Contractors' performance is carefully monitored to ensure delivery of quality maintenance services. If a contractor underperforms, it may be subject to a "Profit at Risk Rebate" which becomes payable by the contractor. The contractor has the opportunity to repayment of a substantial portion of the rebate, depending on how it improves its performance in the ensuing periods. The PMF also drives contractors to identify and implement innovations and improvements in the way the maintenance services are performed (including those that are offered by the contractors in subsequent tenders); and
  • real power to correct any substandard performance. For example, the term of the Contract is conditional on Housing's satisfaction with the steps taken by a contractor to address performance concerns and Housing has the power to remove Contract areas or sites from a contractor and award them to benchmark contractors.

In this way, Housing is driving contractor behaviour which meets expectations and offers real innovation and value for money in service delivery.

Collaboration

Fundamental to the Contract are Collaborative Contracting Principles and clearly defined Contract Objectives which aim to foster a "one team" approach right from the beginning - but not at the expense of enforcing the risk allocation in the Contract. The Collaborative Contracting Principles stress the importance of value for money to Housing and place positive obligations on the contractor to be proactive in its approach to meeting the requirements of Housing, its tenants and the sites. Further to the flexible nature of the Contract, Housing, in consultation with the contractor, may adjust the Contract Objectives and Collaborative Contracting Principles during the term.

Planning

Formerly, the ratio of planned maintenance to reactive maintenance was approximately 30:70. Now, for the first time, Housing is requiring planned, preventative maintenance to all of its properties. This will decrease the need for urgent repairs and prevent more serious problems developing. To this end, each contractor is required to submit a Business Plan which must be continually updated and improved throughout the term. Each contractor must also prepare a Service Delivery Program every six months and record their compliance with that Program.

Key to the preventative maintenance approach is the Asset Dwelling Service (ADS), an annual maintenance service addressing 13 key items (such as smoke alarm servicing, taps, doors and windows). Unique to the ADS is the requirement that the contractor warrant the performance outcomes of 7 of the items for 12 months, irrespective of whether they have performed actual "work" on the item or not, thus bringing a performance contracting element to the delivery of public housing maintenance.

Ecologically Sustainable Development (ESD) and Whole of Life (WOL)

The Contract requires the contractor to abide by:

  • ESD principles, including increased energy conservation and efficiency and increased use of renewable energy resources; and
  • WOL principles, including maximising the useful life of sites or new works and the value for money achieved by Housing from the design, construction, operation and maintenance of the sites or works.

In a change from traditional thinking, WOL and ESD principles are specifically identified as factors to be considered in determining the overall 'value for money' of a contractor proposal for innovation or a purchasing and productivity enhancement in addition to the more standard considerations regarding pricing.

Change management - internal and external training

In order to implement real change across all levels in the approach to the provision of maintenance services, Housing invested heavily in training, including:

  • delivering a package to approximately 500 contract management personnel across NSW;
  • preparing a Contract Manual including pro forma notices and ready reference sheets to assist contract management personnel; and
  • running training workshops for all contractors over two days, with very positive outcomes and at which all contractors were provided with contract training presentations to facilitate their own in-house staff training.

Concluding remarks

There is no standard service delivery model in the market to outsource the maintenance of public housing. Housing's Maintenance Reform Program implemented a number of initiatives to overcome difficulties commonly experienced on large FM projects - it will be interesting to chart the progress of the Contract to see whether the Program achieves its aspirations.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.