Social Housing: The causes and consequences of short-termism for outsourced maintenance. HARGREAVES, John R. Available from the Sheffield Hallam University Research Archive (SHURA) at: http://shura.shu.ac.uk/7576/ A Sheffield Hallam University thesis This thesis is protected by copyright which belongs to the author. The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the author. When referring to this work, full bibliographic details including the author, title, awarding institution and date of the thesis must be given. Please visit http://shura.shu.ac.uk/7576/ and http://shura.shu.ac.uk/information.html for further details about copyright and re-use permissions. Social Housing: The causes and consequences of short-termism for outsourced maintenance. John Richard Hargreaves A thesis submitted in partial fulfilment of Sheffield Hallam University for the Degree of Doctor of Business Administration December 2012 1 Abstract John Richard Hargreaves DBA Sheffield Business School Social Housing: The causes and consequences of short-termism in outsourced maintenance. The study sought to identify the possible impact of short-term duration contracts on stakeholders engaged in a sector of the FM market place. Its focus is on the trading relationships between private sector “Suppliers” and public sector “Buyers” providing Repairs and Maintenance (R&M) services to the Social housing market sector. Outsourcing is a feature of this market, with notices being published on OJEU. In 2010 the value of these contracted services was in excess of £10.0bn. The context of the study relates to my appointment as an Interim Operations Director for a FM service provider. Analysis of its contracts by duration identified a disparity in performance for all stakeholders. Contracts of less than 48 months were challenging in terms of service capacity, returned poorer gross and net margins, and had lower customer satisfaction and staff satisfaction survey results, particularly when TUPE was involved. The longer term contracts had differing problems but were on target for operational and financial budgets, which was also reflected within higher customer satisfaction scores. Given this dichotomy why were the R&M contracts for such short durations? Was this a feature of this market or outsourced FM contracts in general? The study focuses on the causes for short duration trading and the consequences for the stakeholders that potentially arise out of short-term contracts. A pragmatic approach to the research methodology was adopted that used both quantitative and qualitative methods within a triangulated process. Semi-structured interviews, Ethnography and document analysis were utilised to gather data. The findings from the research demonstrated that EU procurement regulations coupled with traditional working practices within the value network and supported by the standard forms of contract introduced excessive transaction costs, impeded innovation, investment and, inhibited service quality and the creation of value for all stakeholders. 2 Table of contents. Social Housing: The causes and consequences of short-termism for outsourced maintenance. ..................................................................................................................... 1 Abstract ............................................................................................................................. 2 John Richard Hargreaves .......................................................................................... 2 Table of contents. .............................................................................................................. 3 Candidates Statement ........................................................................................................ 7 1 Introduction .................................................................................................................... 8 Project background ....................................................................................................... 8 Context .................................................................................................................... 10 The Aims & objectives – who will benefit from the study ......................................... 12 Contribution and Practice ........................................................................................ 12 Contribution ............................................................................................................ 12 Practice .................................................................................................................... 13 Constraints and limitations .......................................................................................... 14 A priori knowledge ..................................................................................................... 14 Philosophical Foundations .......................................................................................... 14 Design ......................................................................................................................... 15 Thesis structure ........................................................................................................... 17 Glossary of terms & Table of Acronyms .................................................................... 19 2 Literature Review ......................................................................................................... 20 Measurement - context and practice ........................................................................... 20 The Value system – Organisations and the “Value network” – Inter organisational trading ......................................................................................................................... 21 Measurement - Provenance ......................................................................................... 23 Volumetric & Monetary measures .......................................................................... 25 Benchmarking ......................................................................................................... 25 Multi dimensional measurement systems ............................................................... 27 Performance Measurement - FM services provider .................................................... 28 Core Business strategy & operations ...................................................................... 28 Service people and their management..................................................................... 30 The customer relationship ........................................................................................... 32 The measurement of Quality & Value ........................................................................ 33 Service Quality ........................................................................................................ 34 Value ....................................................................................................................... 35 Opportunism & Agency - Outsourcing and its deadly sins......................................... 37 Opportunistic behaviour .............................................................................................. 38 Agency theory and the individual ........................................................................... 39 Organisations – Principal – Agent theory. .............................................................. 41 Adverse Selection ....................................................................................................... 43 Moral Hazard .............................................................................................................. 43 Information Asymmetry .............................................................................................. 43 Bounded Rationality ................................................................................................... 44 Unintended consequences ........................................................................................... 44 Bureaucracy................................................................................................................. 46 Industry/ Market ...................................................................................................... 48 Organisation and the impact of polarisation. .......................................................... 49 Individual ................................................................................................................ 52 Management Practice .................................................................................................. 54 Procurement ................................................................................................................ 56 Targeting & Measurement .......................................................................................... 58 3 Targets – design and outcomes ............................................................................... 58 Measurement. Collection and interpretation ........................................................... 61 The Commons ............................................................................................................. 62 Economic ................................................................................................................ 63 Social perspective...................................................................................................