Best Value vs Gershon

Published: 9th October 2007

If you mention Gershon to a private sector supplier most will give a slight grimace in reply. Many within the sector hold Gershon responsible for igniting a new drive towards increasingly competitive pricing, if not a return to CCT. And this has been all the more a bitter pill for suppliers to swallow because the social housing sector continues to expect its private sector partners to meet not just new targets for efficiency but also for resident and community involvement, transparency and sustainability under Best Value.

Critics, and there are plenty, argue efficiency as preached by Gershon and Best Value are contradictory, that there is an inherent conflict between price and service. And they suggest that the social housing sector in demanding a higher standard of service at lower cost is both having its cake and eating it with major implications for the relationship between social housing providers and their suppliers. Whether based on misconception or merely the harsh reality of economics, many suppliers have responded to the award of a growing number of contracts on price by distancing themselves from Best Value. The equation for many companies has been simple – deliver less for less. And there is clear evidence that there are those suppliers who are already making the switch, cutting back on services and support to come in with quotes at lower prices.

Partnering, from Egan and Latham through to Best Value the beating heart of the social housing sector, is as a consequence being undermined. Moreover, unless checked this could lead to a near return to Compulsory Competitive Tendering (CCT) – something the Government has already decided doesn’t work. Why then are parts of the social housing sector risking the integrity of their projects and are the critics right, does Gershon run against Best Value and partnering? In fact far from pulling in opposite directions efficiency targets set by Gershon compliment Best Value and partnering. The proviso is that Gershon’s recommendations are interpreted correctly and that efficiency is not seen as synonymous with lower prices.

Efficiency as argued by Gershon is in fact a theme common to Government policy in the past decade embodied in not only Best Value but in subsequent policy. What is different is that in increasing pressure on price, it sets suppliers a new challenge at a time when they are delivering increasingly sophisticated products and services and when raw material and energy prices are spiralling and dramatically increasing overheads. Best Value places huge emphasis on continuous improvement, not just of products but of services and operation. Secondly, it champions sustainability. Together they are both drivers for greater efficiency.

Effiiciency is again a theme central to the thought of Latham and Egan. Amid a raft of targets to cut costs and construction time, what both were saying was that there was too much time and money was being wasted and through early consultation, projects could be delivered more efficiently. These efficiencies could then be shared between partners. When Gershon came to the table in 2004, he was simply arguing that these and continuing efficiencies should be exploited to lower costs further. He was not arguing that contracts should be awarded simply on the basis of price – to do so runs completely against principles of Best Value. This is recognised by many responsible RSLs, ALMOs, local authorities and buying consortia. For its part responsible members of the private sector have become more competitive, making the balance between service and price just about sustainable.

Permadoor has, for example, spent the last decade not only investing in its service but in its operation, in its plant, equipment, machinery and in its relationship with its suppliers to drive down our own costs. We are delivering a better product but we are doing it more efficiently, reducing energy consumption and waste and by implication our overheads. The social housing sector must, however, also be realistic and understand that costs can not be absorbed by their suppliers indefinitely. Best Value and partnering have driven huge efficiencies, delivered better designed and fitted products and played a critical part in giving residents new involvement and opportunity to contribute to the design and maintenance of their homes.

Gershon has renewed emphasis on efficiency but this should not be interpreted as an opportunity to lower prices but to eliminate wastage and to add value, in this way the successes delivered under partnering and Best Value can be improved upon still further in the future.