The Retrofitting Challenge
Developing carbon efficient homes is essential to meeting the Governments net zero carbon targets. Arguably though the greater challenge lies with decarbonisation of existing homes to ensure they are fit for the future. Compliantly commissioning retrofit programmes is critical to ensure works are delivered in the right way not only to meet the net zero targets but also to contractually protect contracting authorities and ensure a positive customer experience.
Government research shows that 40% of UK Carbon emissions is generated in the home and to sufficiently reduce this retrofit works would cost on average £9k per property. However, further independent research concludes the cost may be significantly higher than Government estimates and could cost between £19k to £25k per property. Whatever the final cost the contracting authorities must find a way to navigate the complexities associated with delivering these multifaceted programmes of work.
The Challenges
This rapidly evolving market is experiencing a flood of new entrants, new technologies and new ways of working with the introduction of PAS2035. Procuring these services compliantly presents a unique challenge for procurement professionals. Specifications are under developed, new entrants have no track record or may not meet minimum financial thresholds, operating models are untested in the sector and new technologies need to be futureproof and not limited to today’s technology.
Furthermore, procurement professionals need to select and operate the correct contractual arrangements to manage liabilities, insurance levels and length of warranties that protect the contracting authority and ultimately the customer. All this whilst demonstrating value for money under current PCR2015 regulations and best practice guidance.
Available Routes to Market
There are several routes to market contracting authorities can choose, each having their individual benefits and drawbacks.
A single source one stop shop contract to deliver the whole retrofit agenda can offer benefits to contracting authorities. It removes the risk around liability and insurance levels and can encourage partnering arrangements between authorities and the contracting market. However, this route to market can be time consuming to develop, especially given the uncertainty in the current retrofit market and limited competition in contractors who can deliver this one stop shop service.
Developing a service model that not only meets an authority’s immediate requirement but is flexible enough to adopt future best practice and technologies as the market matures and still remain PCR2015 compliant represents a significant challenge under a one stop shop approach.
A framework allows for multiple contractors to be awarded and called off over a four-year period. Frameworks can be split into specific workstream lots and specifications can be more universal to encompass multiple scenarios that can be tested through further competitions as specific works are commissioned. However, the initial evaluation process and the requirement for further competitions can be time consuming under current regulations and once developed a framework is fixed for its duration. This prevents new entrants from joining and bidding for work. Contractual terms need to be defined upfront and are also fixed for the duration of the framework.
The flexibility of frameworks to adapt as market forces change is limited and could restrict authorities from achieving best value in the future.
Dynamic Purchasing Systems (DPS) may offer a solution to the sector to meet both current and future procurement needs. As with frameworks a DPS can be split into lots enabling specific works to be commissioned as required, or a one stop shop solution procured. Unlike a framework a DPS is much more flexible, allowing contractors and suppliers to join at any time, for free, with no maximum duration on how long a DPS is in place for. It is a completely electronic process, cutting down on the paper and ‘red tape’ that comes with a typical procurement exercise, fitting in with the emerging greener themes. Authorities can utilise the DPS at any time, as much or as little as required.
Contracting arrangements are executed through PCR2015 compliant further competitions, including the ability to satisfy Section 20 requirements, giving authorities flexibility to tailor their requirements as necessary and ensure they account for market changes, best practice guidance and demonstrate ongoing value for money. A DPS provides a very cost-efficient solution through economies of scale and due to the nature of a DPS, progressively approving new providers, it drives further competition and a more competitive price point.
Role of Consortium
Contracting authorities are not alone on their journey to achieving net zero and do not have to work in isolation to navigate the complexities of procuring retrofit programmes. Partnering with a consortium offers many benefits not least of which is access to preestablished routes to market which can be tailored to meet the specific needs of the authority.
CHIC offers a unique service to support the retrofit zero carbon agenda. The team at CHIC are not just procurement professionals but also asset management professionals enabling CHIC to offer not only compliant routes to market but also critical advice on the best operating and contracting structure to procure under.
Along with our extensive range of traditional frameworks CHIC is also establishing a new innovative DPS solution structured to deliver all retrofit services, whether commissioned individually, bundled together or under a one stop shop solution.
Working across the contracting and supply market gives CHIC invaluable insight into how the sector is evolving and how best practice, both in terms of delivery models and technology, is being applied both now and for the future protection of our planet.
Written by
Luke Hurd, Chief Operating Officer
CHIC (Communities & Housing Investment Consortium)
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