In-house contracting offers clients the best of both worlds, as it allows them to pursue a private sector commercial focus alongside a not-for-profit sector focus on service delivery standards.
On average, housing organisations spend 40 per cent of their annual rental income on repairs and maintenance. Many are now thinking differently about the in-sourced route in response to their medium and long term investment needs and increased focus on efficiencies.
In-house contracting brings a number of benefits, including:
- Reduced procurement costs and risk
- Direct control of customer services
- Client-side financial savings due to reduced contractor management costs
- Focus on productivity
- Profit can be recycled
- Order book efficiency
- VAT savings on labour for registered providers
- Direct investment in skills training and employment
- Local social value.
Making the change
Managing the changeover to a more commercially-run subsidiary can be challenging, both practically and in riding the cultural shift. But these challenges are also present when procuring an external service provider and developing a new contractual relationship. If you want to explore the many benefits of establishing a more commercial model, our consultants will draw on their experience to support your change process.
Making it work
There are many benefits to in-house contracting, but the thought of a direct labour organisation (DLO) can often be off-putting for many organisations. DLOs have, in the past, had a reputation for being unproductive and poorly managed, with in-house staff that are relatively expensive and lack the focus and commerciality of private sector equivalents.
Successful DLOs are run as commercial entities, with motivated, driven managers, and staff terms and conditions matching the private sector. At ARK Consultancy, we prefer to describe these as in-house contractors.
In-house contracting options include wholly-owned subsidiaries, joint ventures with one or more contractors, and cost sharing vehicles (CSVs). We work with clients to deliver all of these models and understand the associated risks and rewards.
ARK has considerable practical experience in developing and supporting in-house contractors. Our services include:
- Service delivery option appraisals
- Performance reviews and improvement project management
- Cost benchmarking
- Interim management
- Feasibility studies
- Business plans
- Structures and governance
- Market appraisal
- Commercial negotiations
- Contractor acquisition project management
- Implementation support
- Commercial advice and “part-time commercial director” support
- Consortium merchant and national suppliers
- Supply chain servicing.