Procurement usually gets the blame when innovation is blocked in social housing. Public-sector buying teams, with all their perceived rules and regulations, are branded as spend controllers, not disruption enablers.
I’ve worked in housing procurement for nearly ten years so I recognise this label only too well. Sometimes it is justified (rigid public procurement laws don’t make it easy to source the latest solutions from proptech SMEs and IT start-ups) but I’ve never met anyone in housing procurement who went into it for the bureaucracy and red tape.
Day-to-day procurement
Apart from larger housing providers, most procurement teams are underfunded and overworked with day-to-day sourcing. There just isn’t the headroom or expertise to proactively scan emerging markets and buy things that have never been bought before.
And that’s where the problem lies. Public-sector procurement is predicated on the contracting authorities knowing the type of product or service they want to buy. But with cutting edge technology, that’s not usually the case.
Bureaucratic barriers
Instead, it’s largely entrepreneurs who identify a problem and create a solution. However, they find it hard to enter the market. Extensive tender documentation puts them off and they can’t scale their solutions because housing organisations don’t know how to procure them compliantly.
I’ve heard this story countless times and it’s why we set up Social Housing Emerging Disruptors (SHED) in 2021, a framework that helps housing providers to procure non-traditional solutions from fledgling firms compliantly. We designed a light-touch, SME-friendly tender and awards process so smaller enterprises aren’t scared off and housing providers remain compliant.
So far so good. We’re now on the third generation of SHED with over 60 suppliers offering pioneering solutions. Every year the number of suppliers and housing providers involved increases significantly.
Sector-wide changes
But in all honesty, we’ve not seen the demand we expected, particularly now the procurement barriers are gone. Over recent months, I’ve reflected on why that is and what we can do to change it. I’ve realised that procurement isn’t to blame; it’s the wider social housing sector that needs to change.
There is a high barrier to entry if you want to supply products to local authorities and housing providers. You need public, product and employers’ liability insurance in the millions, along with ISO-14001, ISO-9001 and ISO/IEC 27001.
These standards and cover levels are routine because they’re thought to mitigate organisational risk. What isn’t considered is that in most instances, innovators are small businesses with fewer than 10 employees. They don’t always have three years of accounts, a fully-fledged DR plan and a long list of certifications.
Balanced decisions
In contrast, when a supplier applies to join the SHED, we don’t insist that they already have these. Instead, if they don’t, we highlight this to the housing providers so they can make their own balanced decisions based on a specific supplier’s risk profile.
And that’s the crunch point. We’re finding that housing providers aren’t prepared to accept risk outside their standard tolerances. They might have identified the perfect supplier with the perfect solution but they can’t bring themselves to press ‘go’ due to increased risk.
It’s now no longer procurement saying ‘no’; it’s the people responsible for an organisation’s risk profile. When tolerance levels are set, extensions for innovation procurement aren’t built in.
Of course, I don’t advocate a ‘carte blanche’ attitude to risk. But there are questions to ask and decisions to make in individual cases – it can’t be a one size fits all approach. Here are three points to consider:
- Standards and certifications: Do you really need every box ticked? For example, if you want to procure from a service-based organisation, is £2 million product liability insurance necessary? Do you really need ISO-9001 if a solution doesn’t access personal or confidential data? Could you instead ask for other controls to provide assurance? Take time to engage with a supplier in order to understand their business proposition and develop a more nuanced risk profile this way.
- Responsibility for innovation: Housing providers, particularly smaller ones, don’t normally employ someone who looks after innovation. Instead, cutting-edge solutions are assessed on an ad-hoc basis and this approach doesn’t lend itself to developing an effective procedure for evaluating risk. We need brave people to make informed decisions based on what they believe to be right. One answer is to have someone at board level who is accountable for innovation. They won’t necessarily identify emerging solutions but they will at least understand the market, be able to make sound decisions and be a contact point in the business.
- Educate the innovators: Over the past three years, I’ve learned the value of supporting proptech SMEs and IT start-ups. We’ve tried to simplify the tendering and onboarding process but there are still queries and obstacles that innovators need help with. They may need pointing out, for example, that if you’re going to supply a public-sector body, your data can’t be hosted anywhere else other than England. Housing providers must be good customers here, helping micro-firms to navigate the complexities and vagaries of working with local authorities and housing providers.
With housing providers facing ever-increasing scrutiny as they tackle challenges around building safety, net zero and development, the best-performing organisations will be those looking to innovate.
I don’t think there is anyone who hasn’t bought into the power of innovation; it’s more the practicality of adopting it that is the problem. Now that we’ve created an environment where procurement says ‘yes’, I hope the lingering systemic blockers can also be overcome.
Neil Butters is the head of procurement at Procurement for Housing (PfH).
