VALUE FOR MONEY THE ORBIT FRAMEWORK
ORBIT VALUE FOR MONEY FRAMEWORK 1.0
Introduction
1.1
The Orbit Value for Money Framework is a simple statement to guide people at Orbit in obtaining the maximum benefit from the products and services we acquire or provide, with the resources available.
1.2
It not only measures the cost of products and services but also takes account of the mix of quality, cost, resource use, fitness for purpose, timeliness and convenience, to judge whether or not, when taken together, they constitute good value.
1.3
To deliver value for money is an integral part of our corporate ethos and values. The Orbit ambition is to run an efficient and effective organisation, providing value for money services to our customers. To do this we need to ensure that everybody at Orbit has the understanding and opportunity to make this a reality.
1.4
Providing value for money will improve our services and release resources to provide more houses, improve our existing homes and enable us to invest in our products and services and the communities where we work.
2.0
What does value for money mean at Orbit and why is it important?
2.1
Our Customer First framework makes the commitment to “fully satisfy agreed customer requirements, at the lowest internal cost”. In the very simplest terms this means making the best use of the resources available for the provision of homes and services, whilst achieving quality standards agreed with customers.
2.2
It is important to embed value for money in the way we do things for three main reasons:
2.3
as an organisation that receives public funds we are under scrutiny to show that we use those funds efficiently we can ultimately pass on savings and efficiencies in the way we work as a benefit to our customers with improved products and services we can generate a better financial return that enables us to lever into Orbit resources to build more homes and invest in local communities.
The main value for money gains will be in big procurement and expenditure areas, such as maintenance contracts, associated supplies, energy supplies, the purchase of high value items such as information technology, and development and construction costs. However, we can all do our bit and ensure we make the best use of the resources available to us.
3.0
Outputs from value for money
3.1
The outputs we are seeking by systematically applying this framework and
Reducing our costs to get the same outputs. Examples of this might include: o
Reducing other resources and inputs for the same outputs. Examples of this might include: o o
improving processes so that less staff time is taken to deliver the same level of service reducing overhead costs such as lighting and heating by switching off lights and computers when not in use
Getting greater outputs with improved quality for the same inputs. Examples of this might include: o o
using an alternative supplier who can provide the same quality of materials or service for less money
delivering a service to more customers with the same number or proportionately fewer staff finding better quality or a greater quantity of products for the same price
Getting proportionately more outputs or improved quality in return for an increase in resources. Examples of this might include: o
o
spending on specific people or projects that result in increased income, or improved productivity at a level greater than the cost of the people or project working in partnership with another organisation to bring additional resources or skills resulting in better results for the project
4.2 To deliver value for money Orbit will adopt a four part process organisation comprising:
across the
information and research setting targets and measuring the impact of this framework embedding value for money in Orbit’s culture promoting value for money with Orbit
5.0
Information and Research
5.1
Value for money must be rooted in a full understanding of what our various services and products cost us to produce and deliver.
5.2
An ‘activity-based’ cost framework will be adopted enabling us to plot costs of delivering specific services.
5.3
This ‘activity-based costing’ research will enable Orbit to plot the various costs that are incurred in delivering a product or service where we incur a high ‘cost of quality’ and where value for money could be improved.
5.4
The ‘activity-based costing’ research will also involve comparing Orbit’s costs to other providers of similar services.
6.0
Setting targets and measuring impact
6.1
We will introduce a range of value for money performance indicators. These indicators will be of three types:
direct financial gains achieved through value for money activity key ratios such as proportion of rents spent on specific activities within Orbit key productivity ratios such as staff to property in management, administrative costs per unit in management, and surplus per property in management.
6.2
We will compare value for money performance through effective benchmarking both with Orbit and with other housing agencies.
7.0
Embedding value for money in Orbit’s culture
7.1
To embed a value for money mindset throughout Orbit, all staff will need to develop appropriate skills and behaviours. Therefore Orbit will:
promote and explain our value for money strategy at induction ensure value for money is a key part of our training programme and in particular is an essential part of Customer First deliver value for money in plain terms and promote it continuously and consistently throughout Orbit performance manage value for money by making it a key part of individual objectives and performance reviews ensure that all continuous improvement projects have value for money as a key measurable outcome
8.0
Promoting value for money within Orbit
8.1
Not only should we deliver value for money, but we should be seen to be delivering it. Our stakeholders – residents, regulators and funders – make critical judgements about our effectiveness based on, amongst other things, whether we deliver value for money. Accordingly we need to actively communicate that Orbit delivers value for money.
8.2
A communication process will include:
the publication of our Value for Money Framework and actions plans resident communications will be used to promote the value for money of our homes and services staff communications – newsletters, team briefs, posters, internet and intranet – will be deployed to promote this Value for Money Framework and our successes in improving value for money value for money will be a key category in our staff recognition and reward process
VALUE FOR MONEY - MAKING IT HAPPEN
1.
INTRODUCTION
1.1
This document supports the Orbit VFM framework in which Orbit aims to deliver its vision for Value for Money [VFM] for 2010 – 2015 running alongside the delivery of the Group Business Plan. Orbit’s VFM Statement Orbit has made a commitment to “ fully satisfy agreed customer requirements at the lowest internal cost”. VFM must become an integral part of our organisational culture and our Group values. We must all do our bit and ensure that we make the best use of the resources available to us.
1.2
Our VFM Framework supports our ambition to Build Brighter Futures and will help us to deliver our key objectives more effectively:
1.3
This document:
1.4
To provide a range of quality services and homes for our customers that meet their needs To support the creation of places in which people can live and thrive by investing in our neighbourhoods To help us develop and invest in our colleagues, where Orbit is recognised as a great organisation to work for.
Provides context by explaining how VFM links to the delivery of our business plan objectives Outlines our VFM objectives and the outcomes we want to achieve Describes how this strategy links to operational business plans, improvement plans and team/individual targets Details the key actions and targets needed to deliver VFM Describes how the framework will be delivered and monitored
VFM does not exist in isolation from other Group activities. As a minimum we should be using existing strategies to determine our activities and in agreeing how we will involve our residents. Our existing standards or strategies which directly impact on VFM include:
Service standards Resident involvement strategy Performance Management framework Continuous Improvement framework Procurement Strategy Benchmarking Strategy Treasury Management Strategy Asset management strategy
2
VFM
- MAKING IT HAPPEN
2.1
The following outcomes have been agreed as critical for success in delivering VFM. Information and Research Outcomes To have a full understanding of what our various services and products cost us to produce and deliver To compare Orbit’s costs against those of other businesses and RSLs Setting Targets and measuring impact Outcomes To understand the direct financial gains achieved through VFM activity To agree and monitor a range of productivity ratios To deliver a number of key performance targets which improve our overall VFM Embedding VFM in Orbit’s culture Outcomes All staff receive induction training about the VFM framework VFM recognised as a key part of Customer First VFM a key part of every employees individual objectives and performance reviews all continuous improvement projects have VFM as a key measurable outcome Promoting VFM in Orbit Outcomes stakeholders have a clear understanding about Orbits VFM framework and results staff understand their role in delivering VFM
2.2
Key tasks to deliver the above outcomes have been assigned to specific individuals within the group and milestones agreed for delivery. Progress against these is monitored regularly at the Executive Team
2.3
Our business plan for 2010 – 2013 includes a number of efficiencies which we need to achieve if we are to deliver all our objectives. The impact of these, when run through our plans, is an additional £16m of resource which we will use to meet our key objectives, Great Customer Services, Great Places to Live and a Great organisation to work for.
2.4
In addition, our Group financial strategy requires the following objectives:
2.5
That the Group delivers an increase in reserves annually That a minimum headroom of £6m is achieved against Group loan covenants That management costs should reduce as a % of turnover annually That all operating associations to achieve a minimum surplus before interest : interest of 1.15 each year
We will set targets to deliver annual improvements in the following key performance indicators and these will be monitored by boards regularly. As part of the annual budget and planning process these will be reviewed and reset as appropriate.
MANAGEMENT COSTS
Total management costs Orbit Services costs as % of OA turnover CSC costs per call Group costs as % of group turnover Total management costs as % of rents
Current rent arrears Void turnaround
MAINTENANCE COSTS
Total Maintenance costs Proprtion Routine:Planned expenditure
DEVELOPMENT COSTS Delivery of financial plan surpluses (Orbit Homes) Savings from direct procurement Homes built for sale - margin New property sales - time to complete PROCUREMENT Contracted savings 2.6
In addition the Group has in place a number of other Frameworks and strategies as mentioned in para 1.4 above. These include other tasks which contribute to our VFM objectives including:
Budget Holders are required to work within approved budgets only and highlight any efficiencies to senior management for review Where internal maintenance teams are used, we will benchmark their costs annually against other parts of the group to ensure cost effective delivery We will work closely with our maintenance partners to ensure cost effective processes and delivery, at all times aiming to improve our Customer satisfaction Quality of our maintenance products remains a key priority as does the ongoing cost in use to our residents Interest costs will be regularly reviewed to maintain an appropriate balance of fixed and variable rates - average rates will be below the average for our peers Investment of surplus funds will aim to maximise returns without incurring risk of repayment – a minimum of Base Rate minus 0.5% will be achieved Service budgets will be considered annually with estimates/tenders being arranged as necessary We will consult with residents on all changes to their costs and pass on any savings identified in service costs All major contracts will be subject to external tender exercises at least every 5 years to ensure that costs remain competitive and quality is not reduced Residents will be involved in all procurement reviews which affect them directly
3.0
HOW WE WILL DELIVER
3.1
Each part of the business will comply with this framework and will devise their own delivery structure in consideration of their own circumstances. Each part of the business will be responsible for its own outcome focussed, local delivery which will be supported by Senior Management Teams in respective parts of the business. This will include, but will not be restricted to;
Benchmarking of costs – both against other parts of the group, our peers and other bodies where appropriate Effective budget monitoring and control including annual zero based budgeting Performance monitoring – either weekly, monthly or annually including trend analysis and reporting against variances
The completion of VFM maps – annual plans setting out how each part of the business will deliver the Group’s objectives cost effectively The completion of VFM forms to identify both cashable and non-cashable savings for all new projects and changes Delivery of annual procurement plans as agreed by GET Identification of where resources identified have been utilised towards meeting the Groups key objectives
3.2
Delivering VFM is not simply the responsibility of staff who have been allocated specific tasks. All employees need to recognise the need for a VFM strategy and to understand their role in the delivery of the objectives. All Managers will therefore be required to ensure that staff understand and work to VFM principles and are encouraged to challenge costs and to bring forward proposals for change where they have identified potential inefficiencies. The achievement of the Group’s vision will only be possible as a result of a shared commitment to do so and by the adoption of the principles by everyone in the Group.
4.0
MONITORING OUR DELIVERY OF VFM
4.1
Each SMT will monitor achievement of their VFM outcomes on a quarterly basis, receiving reports from each area of their business highlighting efficiencies identified including comparisons of major tenders against forecasts.
4.2
Given the materiality of Procurement to delivery of the outcomes, GET will receive a quarterly Procurement report highlighting performance against the annual plan.
4.3
Each SMT will provide a half yearly progress update to GET of performance against the VFM targets.
4.4
Where cashable efficiencies are over and above the Group required targets, monies may be retained by SMTs and used to further their business objectives of Customer, Place or Organisation. Any monies used in this way must be recorded to enable an annual report to be compiled by the Divisional Finance Director
4.5
The Group Board will also receive a consolidated Group level performance report half yearly in June and December. Each Managing Director / Orbit Services Director will ensure that the Strategic Board / Group Services Committee will receive their VFM report annually in May. The report will highlight performance against outcomes as well as explanations and actions identified where targets have not been achieved.
THE ROLES Orbit Group Board and Board members Strategic leadership of the agenda linking operational and strategic issues for VFM. Group level scrutiny and challenge of the VFM agenda. Considering the Group’s VFM strategy and its promotion throughout the business. Ensuring compliance with this framework and challenging the executive to demonstrate the Group’s commitment to VFM across all areas of our business. To share good practice in terms of VFM gained outside of Orbit. Role of Group Executive Team Leadership of the VFM agenda and to demonstrate a personal commitment to VFM. To devise, promote and ensure compliance and progress with local VFM frameworks. To scrutinise and challenge progress being made against the local VFM frameworks. Offer consistent and positive messages about VFM and the business benefits. Invest in a culture of VFM and make it part of Orbit’s core business. Share good practice in terms of VFM gained outside of Orbit. Role of Group Leadership Team Provide both a strategic and operational focus / consideration of VFM Provide report to Boards / SMTs on progress against ‘local VFM frameworks’ Invest in the Group’s commitment to VFM – identify areas within our business plans that require a consideration of VFM. Ensure board reports provide appropriate and adequate reference to VFM. Acts as a communication link and share VFM good practice throughout the Group Make VFM part of our core business. Seek to grow your own understanding of VFM in terms of good practice / legislation / regulation in both employment and the provision of services. Role of all Budget Holders Contribute to the zero based review of all budgets annually At all times work within approved budgets, if necessary seeking approval to overspend from managers (who will need to identify compensating reductions elsewhere) Ensure that all major purchases are cost effective and deliver value for money Complete VFM forms for all major changes and pass to the DFD Provide information to managers on a quarterly basis of efficiencies (one-off or ongoing) achieved Role of all staff Regularly challenge expenditure and processes Where you see them, identify inefficiencies to management making proposals for change Consider VFM in every aspect of your role – thinking of the Group’s money in the same way as your own personal budgets Report to managers in quarterly 121s of efficiencies achieved