Part 3: Managing maintenance work

Housing New Zealand Corporation: Maintenance of state housing.

In this Part, we discuss the Corporation's systems and processes for:

There is one recommendation in this Part. Overall, we are satisfied with the Corporation's systems and processes for managing maintenance work. The exception is discussed in paragraphs 3.19 and 3.20.

The system for carrying out maintenance

The Corporation delivers day-to-day maintenance through an effective performance-based contracting system.

The Corporation operates a national maintenance system featuring:

  • a single or head contractor to serve each region (except for South Auckland, which needs two contractors because of the number of state housing properties there);
  • nationally consistent job-letting systems and performance standards;
  • set charge-out rates and major component costs; and
  • performance-based contracts.

The system is comprehensive. It specifies performance requirements clearly, monitors performance thoroughly, and applies motivational rewards and sanctions.

Each head contractor employs the staff and/or subcontractors needed to supply the wide range of maintenance trades and services for efficient property maintenance in their region or sub-region. This arrangement enables the Corporation to deal directly with only 12 contractors, and to set and enforce national performance standards through them. The contractors deliver maintenance services at rates that include everything needed to complete the work covered by their contracts. The Corporation has negotiated supply arrangements for major items such as paint, building supplies, hardware, flooring, plumbing and electrical supplies, and appliances.

The first 12 head contractors were selected through a tender process in 2004/05. The process required contenders to submit prices for 1200 itemised job lines set out in the Corporation's comprehensive Schedule of Rates, and to also demonstrate that they could meet and sustain the standards of performance required by the Corporation. We did not review the process in detail. Contractors we interviewed reported that they consider the tender system to be comprehensive, rigorous, and fair.

The Corporation's nationally consistent systems and standards are set out in its schedule of maintenance specifications, MasterSpec, and in its Maintenance Standards Manual. The Manual shows, using photographs and text, what is and what is not acceptable. We consider MasterSpec and the Manual to be sound and accessible ways of notifying these types of standards to those who need them.

The Corporation's performance-based contracts require a proportion of contractors' remuneration to be paid according to their performance against specified Key Performance Indicators (KPIs). These KPIs cover compliance management, response times, completion times, quality standards, accuracy and timing of invoicing, customer satisfaction, and community contribution. Contractors we interviewed found compliance with the KPIs exacting in scope and detail.

The Corporation's Property Improvement Team audits the performance of contractors every eight weeks, or every 12 weeks if they consider that the contractors are performing well. Where points of difference about detail cannot be resolved between contractors and auditors, Maintenance Contract Managers based in the regions have the authority to adjudicate. We discuss the quality audit process further in paragraph 4.5.

Property Improvement Team staff we interviewed considered that the performance regime had brought about improvements. They reported that the Corporation pays about 80% of the performance remuneration potential to its contractors. Contractors we interviewed confirmed that failing to meet KPIs has resulted in significant financial penalties.

We consider that the KPIs, quality audit, and significant financial penalties combine to make this an effective performance-based contracting system.

Setting priorities for maintenance work

Day-to-day maintenance work is appropriately focused on urgent and responsive maintenance, exterior painting, and upgrading vacant properties, but the Corporation needs to better prioritise and manage other maintenance work.

The scheduling of maintenance work is based on priorities that are set nationally. At a strategic level, all state housing properties are assigned a future use code. The main factor in the code is whether an asset is determined to be core (in demand from the Corporation's urgent housing need applicants) or non-core (not in such demand). The Corporation aims to prioritise effort and expenditure on its core properties, which are those most capable (because of their location, condition, and form) of contributing to housing outcomes.

At operational levels, maintenance is prioritised in responsive and planned categories. The Corporation gives first priority to urgent responsive maintenance, which is where components break or wear out and place occupants at immediate risk, where reinstating essential services or security is considered critical, or where health and safety is not at immediate risk but remedy is nevertheless an urgent need. We consider the priority given to urgent responsive maintenance to be appropriate.

Other (non-urgent) responsive maintenance jobs receive lower priority. These include redecorating tenanted properties and upgrades resulting from tenancy management inspections. These jobs may be written off altogether if funds are not available or if scheduling within a reasonable time frame proves impossible.

We understand that the demand for maintenance is likely to outweigh the resources available in any year and that a number of deferrals and write-offs are inevitable. The new Asset Management Framework is intended to enable the Corporation to identify maintenance shortfalls and estimate costs to bring properties up to its standard. This should enable the Corporation to generate high quality information for prioritised business plans, budget bids, and maintenance programmes (see paragraph 2.11).

The Corporation has two important national policies for planned maintenance. These are:

  • that the exterior of every property will be maintained to high standards; and
  • that vacated properties will be upgraded to meet minimum standards as quickly as possible to permit prompt re-letting.

In our view, these policies are consistent with the Corporation's legislative objectives to provide housing in a business-like manner and to effectively manage its assets. Its priorities in planned maintenance are exterior painting on a 10-year cycle (for which it spent $25.2 million in 2007/08) and upgrading vacant properties as required ($46.8 million in 2007/08). These priorities absorb about half of planned maintenance funds ($133.6 million in 2007/08).

The balance of planned maintenance funds ($61.6 million in 2007/08) is mainly used for "other planned maintenance": upgrading interiors, exteriors, appliances, services, and grounds. In our view, this category is not "planned" in the sense of prioritised programmes agreed for implementation within specified time frames. The Corporation's Property Improvement Team decides where and to what purposes these sums are spent in each region. The team bases its decisions on factors including:

  • Regional Asset Management Plans and the views of regional managers;
  • deferred maintenance;
  • the condition of the state housing properties;
  • value for money (which investments will produce the best results); and
  • the capacity of contractors to supply labour and material when and where required.

The Corporation does not prepare overall maintenance plans. Its high-level plan is to meet the demand for urgent responsive maintenance and to keep up the high quality of the exterior repainting programme and the vacant upgrade programme. The Corporation's systems and efforts are focused on implementing this high-level plan. Its third main maintenance activity, "other planned maintenance", addresses a range of regional priorities and requirements as funds and opportunities permit but is not formally "planned".

We consider that the Corporation needs to put in place a system that will enable it to plan expenditure and effort, including its main maintenance activities (that is, responsive maintenance, exterior repainting, and vacant upgrades) in the context of a clear understanding of the overall maintenance workload. We understand that the Asset Management Framework project, which will provide accurate information about the scale, criticality, and cost of the backlog, will form the basis for such a planning system.

Recommendation 3
We recommend that Housing New Zealand Corporation's new Asset Management Framework include systems to plan for effectively managing the overall maintenance workload.

Involving tenants and contractors in addressing maintenance issues

The Corporation has adequate systems and processes in place to involve contractors and tenants in addressing maintenance issues.

The Corporation has systems and processes to assure positive relationships between the different parties with an interest in maintenance operations. Maintenance delivery involves three important sets of relationships: between contractors and tenants, between the Corporation and contractors, and between the Corporation and tenants. The Corporation stated in its 2007/08 Corporate Business Plan that it seeks to become an organisation that people experience as "customer-oriented and inclusive of communities".

The Corporation states that customer service is of vital importance in maintenance delivery. Standards are set out in the Corporation's Maintenance Contractor Code of Conduct and are reinforced by customer satisfaction and community contribution KPIs. Performance is tested in the quality audit process, and also in separate quarterly surveys designed to obtain feedback from tenants about the quality of contractors' responses to maintenance jobs (see paragraph 3.26).

Tenants raise maintenance requests through the Corporation's 24-hour National Contact Centre or through local tenancy managers. Contact Centre and tenancy staff can authorise urgent health and safety jobs immediately (all other jobs are authorised by regional contract management staff). Urgent health and safety jobs include continuity of the means of cooking, hot or cold water supply, gas supply, power supply, rainwater leaks, broken glazing, and faults to sanitary appliances. The Corporation aims to respond to such urgent health and safety requests within four hours, 24 hours a day and seven days a week. In our view, this is reasonable for tenants and realistic and practical for contractors.

The Corporation's relationships with contractors are managed by the Property Improvement Team at three levels: daily by regional contract management staff, every eight or 12 weeks by quality auditors in connection with formal audits, and every six months by the National Property Improvement Manager and Operations Manager as members of a formal bilateral Alliance Board with each contractor. Alliance Boards are intended to guide relationships and resolve high-level issues and risks. The Corporation's staff and contractors report frank and constructive relationships. Regional variations relate to some degree to the Corporation's rating of the contractor's performance.

Regional tenancy staff are responsible for the Corporation's relationship with tenants about maintenance matters. We noted that tensions exist in some regions between the roles of tenancy staff, with their focus on the interests of tenants, and regional Property Improvement Team staff responsible for managing maintenance resources. Where this tension is well managed, Property Improvement Team staff ensure that tenancy staff are informed about what can and cannot be accomplished with the resources that are available, while tenancy staff try to manage tenants' expectations realistically.

The Corporation runs quarterly surveys of tenants' ratings of contractors' performance, covering matters including work completion standards, communication, clean-up, and consideration and respect. The December 2007 survey resulted in an average overall satisfaction rate of 79%, with a high of 88% and a low of 68%. Results were similar in March 2008. The Corporation uses this information to help it judge contractors' performance against the customer satisfaction KPI referred to in paragraph 3.8.

The Corporation has monitored and analysed the subject matter of Ministerial and chief executive correspondence since 2004/05. The total number of letters in 2006/07 was 995.2 Of these, 29 (2.9%) were about justified complaints to do with maintenance. This compares with 38 justified complaints in 2005/06 (6.9% of the letters), and 32 justified complaints in 2004/05 (4.1% of the letters).

Staffing for maintenance functions

The Corporation has systems and processes to ensure that its staffing for maintenance functions meets current and longer-term requirements, and to ensure that staff who need information about maintenance can access it.

The Corporation has standard systems for recruiting, training, and managing its workforce. It expects managers to have formal workforce plans. Managers are required to review their staffing as part of the annual budget process, to confirm existing positions and produce business cases for any new positions. They are also required to review and confirm the need to fill vacancies as these arise. At the same time, they must review and revise as necessary position descriptions, including person specifications covering qualifications, skills, knowledge, experience, and competencies. The Corporation operates a formal annual performance management process to assess and build skills. It runs a central learning and development function responsible for national training programmes. New recruits for the Auckland regions attend a five-week technical training school before starting their jobs.

The Corporation's staff turnover rate in 2007/08 was 16%. Both the Property Improvement Team (at 14%), which is responsible for delivering the maintenance service, and the Strategic Asset Planning Team (at 9%), which is responsible for planning and budgeting for maintenance, had lower turnover rates than the Corporation nationally. The National Contact Centre, which is in the front line of tenant relationships including urgent maintenance matters, experienced a high turnover rate (34%), which we understand to be characteristic of the contact centre industry. The regions, where tenancy staff are also in the front line, varied, with three regions close to or above the national turnover rate. In our view, retention levels (other than that for the National Contact Centre) are satisfactory, and consistent with the numbers of experienced and positively motivated staff we saw in the Property Improvement Team and the Strategic Asset Planning Team.

In our view, Maintenance Contract Managers and Maintenance Account Managers in the regions perform particularly important roles in the system for maintaining state housing properties. These managers are expected to balance the Corporation's interests in high standards of performance and value for money with maintaining harmonious and constructive relationships with contractors. We expect that the Corporation will ensure that its workforce plans provide for continuity of good quality staffing.

The Corporation documents its maintenance-related processes in three main ways:

  • the Quality System instructions, processes, and forms series;
  • a maintenance tender and contract management document set; and
  • the Maintenance Standards Manual and Rentel system.

In our view, these systems are comprehensive and accessible to those who use them. The Corporation's staff indicated that they were supplied with, or had access to, the information about maintenance systems and processes they need to do their jobs well.

2: These are the latest figures that the Corporation could provide us with.

page top