Post Covid-19 – Asset Management Recovery

Stresses have been well and truly tested. 

Disaster recovery plans have been actioned and essential changes such as working from home implemented without fuss. The Regulator pushed back reporting deadlines, delayed In-Depth Assessments and focussed its monitoring on critical services. Meanwhile, all housing associations have been exposed to cost pressures in their asset management systems and processes. 

Now lockdown is being relaxed, superficially the current situation doesn’t look too bad. Despite the challenges of delivering vital services during a pandemic, the Regulator’s July Coronavirus Operational Response Survey tells us that the sector is already working towards the resumption of normal levels of service. The Regulator reports a high degree of compliance, and emergency repairs are getting done, but hints that material risks in relation to gas, fire and other vital safety checks are evident. 

Four months of lower-than-normal demand for non-emergency repairs has ‘fortunately’ prevented a growing backlog.  However, demand is now returning to pre-Covid levels and some landlords have expanded their emergency definition to include “urgent” priorities. The Regulator is rightly focussing on emergency repairs performance, but what is happening with the other 70% of routine repairs?  

There are possibly two explanations for the absence of a backlog: either the backlog will gradually emerge as life returns to normality; or it doesn’t emerge, and we discover a hidden reserve of asset management savings. Those four years of rent cuts, which has only recently ended, drove providers to deliver savings; therefore, the second of these is less plausible.  

Covid-19 is the biggest test of governance in our lifetime. Servicing the emerging backlog whilst maintaining value for money is the next big test, to be swiftly followed by the Zero-carbon agenda.

Pandemic Fostered Change

Swimming through the seas of change has felt refreshing. 

Practical considerations under pandemic conditions have trumped spending concerns. Health and safety for both staff and residents was prioritised and technology rapidly adopted. In most cases, the freedom to adapt to new working practices has been relished. Overall, the responsiveness of the industry to pandemic has been nothing short of amazing. 

The timing of lockdown bridged the main business planning season, but that didn’t stop spending plans from being reworked, new costs added, and business plans tweaked. Business planning is inexact at the best of times and involves a degree of good guesswork. It’s still early; we don’t yet know which decisions were the right ones and have no visibility over the true cost. 

No amount of business planning and clever stress testing will overcome the stored up practical problems that are now emerging.  Planned maintenance, in particular, has been hit hard. The suspicion that a hidden backlog exists has not been overlooked by providers, or the Regulator, but has largely been accounted for in the business plan numbers by rephasing alone. 

Relying on just a rephasing isn’t realistic. Even if a vaccine became quickly available, nobody expects that recovery from pandemic to be quick. Working practices have adapted but at the cost of inefficiency. Without collecting fresh data this means the full costs of delivering a backlog under an extended recovery period of Covid-19 restrictions remains guesswork. We urgently need to replace good guesswork with good data.

Now the hard work begins

Asset management looks likely to become a whole lot more expensive, permanently. Let’s face it; we may never go back to the way we were. Even as we enter the recovery phase, concerns about how to manage the backlog whilst delivering VFM are beginning to take hold. Without a vaccine, many of the ‘temporary’ changes brought in under lockdown could quite feasibly become permanent.

The ‘hard’ costs of working from home, technology and PPE are already quantifiable. Less apparent are the ‘soft’ costs; inefficiencies necessarily brought about by changing working practices through social distancing. Such changes have created new inefficiencies that rephasing won’t solve and may require a more fundamental rethink about how repairs are managed and delivered. The July CORS report notes that some landlords have resourced “additional contractor services.” We need to understand what this means, if these extra costs are required just to do the originally anticipated works. 

Performance based management agreements won’t work if operatives, handicapped by new working practices, simply can’t deliver the same output as before. Outsourced contracts may need to be revisited if contractors need to gear up with extra operatives simply to deliver the same output under their new working arrangements. If these inefficiencies become permanent it may force contractors revisit their force majeure wording. 

We may need the spirit of change to continue just in order to recover some of the time lost to keeping people safe. 

Asset Management Recovery Planning

The priority must be to take stock of the current situation because the challenge is to fill in the blanks in our current knowledge. A critical assessment needs to be made about how costs have changed. We urgently require top quality data on costs to inform our future business planning and we need to start collecting it now. 

This would also be a good time to revisit some of the expedient decisions taken during lockdown, review working arrangements and reprioritise spending.  Even before we get to grips with the recovery, we may require a review of the scope and quality of the reporting from the asset management team just to understand what this all means for our future reinvestment strategy. 

As the high tide of the pandemic ebbs away, it will not be long before we discover what went right and what didn’t. If we haven’t already started, we will have to refocus our efforts on a realistic post-Covid recovery plan based on the latest data on costs. 

The Regulator has treated the pandemic as exceptional and is already seeing providers planning to return to normality. It is sure to taking a close interest in the recovery. 

Getting the recovery right will need more than just a plan.

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About the Author

Philip Johnson of PDA Asset Management is a Chartered Building Surveyor with an engineering background. He has extensive experience of repairs services (responsive, void and cyclical repairs), and planned maintenance programming and delivery. His strong analytical skills have been used to address a wide range of asset management issues affecting strategy, performance, compliance, and service delivery across the housing stock. He specialises in identifying service weaknesses and implementing service improvements.