Executive Decision Report A8 Decision maker Decision is to be taken by Cabinet Date of decision 2 May 2013 Forward Plan reference: 03949/13/H/A Report title (decision subject) Reporting officer Key decision Access to information classification HOME CONNECTIONS OWNERSHIP Laura Johnson, Director of Housing Yes Public
1. EXECUTIVE SUMMARY 1.1 This paper explains the function of the Home Connections ( a choice based lettings company facilitating the letting of social housing), the history of the Royal Borough s relationship with Home Connections as a customer and the potential benefits to the Royal Borough of taking a share in the ownership of the company. 2. RECOMMENDATIONS 2.1 Cabinet is recommended to grant approval for the Royal Borough of Kensington and Chelsea to take a share in the ownership of Home Connections Lettings Limited. 3. REASONS FOR DECISION 3.1 Existing partners; Westminster City Council and the London Boroughs of Barnet, Camden, Islington and Haringey benefit from reduced costs, more streamlined account management and greater control over software as well as input into Home Connections extensive research and development programme. 4. BACKGROUND 4.1 Home Connections provides the IT system that supports choice based lettings. Home connections was founded in 2001 as a partnership of central London boroughs and housing associations with the objective of piloting a choice based lettings approach to allocating social housing across the founder organisations. This was a pilot scheme and the founding partners were the Royal Borough of Kensington and Chelsea (RBKC), Westminster City Council, and the London Boroughs of Barnet, Camden and Islington. The housing association founders were St Pancras & Humanist (now Origin) and Ujima. 4.2 Home Connections was the largest of the 27 choice based lettings pilots with a vision to transform the relationship between the home seeker and the housing provider from a culture of dependency to one where the home seeker is in the driving seat. 4.3 In 2005, Home Connections formalised itself as a non-profit distributing company limited by guarantee and registered with Companies House in February 2005 (company number 5375099). The Royal Borough was offered the opportunity to become a member at that time however opted out, choosing to remain as a customer only. 4.4 Some of the founding organisations became owners of the company, shortly to be joined by the London borough of Haringey, which entered into ownership of the company in 2008. Currently, each owner has a nominated director on the board of Home Connections. The board meets quarterly to oversee operations and set strategic direction. The constitution of the company is described in the memorandum of agreement and articles of association (Appendix 1 and Appendix 2).
4.5 The Royal Borough of Kensington & Chelsea has been a customer of Home Connections since 2001. Following a strategic review of ownership models, the Home Connections board has passed a resolution to extend the offer of an equal share in ownership of Home Connections to all existing local authority and RP customers. The Royal Borough therefore now has the opportunity to take a share in the ownership of the company. 5. PROPOSAL AND ISSUES 5.1 Home Connections offers the following benefits of ownership to existing and new partners: Ability to directly commission services without recourse to a lengthy and costly procurement process (however, each member of the company is still free to exercise market testing, seek competitive tenders and procure from alternate suppliers should they wish). Control over software to ensure stability of the product, services and ownership Lower prices for software development and software services. Share the cost of development with all, or a section of, other owners. Engage and direct significant R&D activity to ensure that your housing authority is in the vanguard of innovation. Ability to rapidly develop IT solutions or tools to assist housing authorities to tackle the challenges thrown up by today s changing policy environment. Obtain access to a special purpose vehicle that can also be used to participate in bids for funding (we have a track record of winning competitive awards and bids of over 2 million from the CLG, Big Lottery Fund and European Community). 5.2 Given these benefits, the Royal Borough should benefit from reduced costs, more streamlined account management and greater control over software as well as input into Home Connections extensive research and development programme. 5.3 The take up of additional products and services by RBKC is optional and costs cannot be imposed on the borough without prior agreement. 5.4 The headline considerations for this decision are legal and financial and are therefore explained in the relevant sections below. 6. OPTIONS AND ANALYSIS 6.1 To proceed with the Royal Borough of Kensington and Chelsea taking a share in the ownership of Home Connections Lettings Limited. 6.2 Not to proceed with the Royal Borough of Kensington and Chelsea taking a share in the ownership of Home Connections Lettings Limited.
7. CONSULTATION 7.1 This report has been taken to the Cabinet Member for Housing and Property and Cabinet for consideration. 7.2 There are no specific implications for a Ward or for service users. As such, wider public consultation is not necessary. 8. EQUALITY IMPLICATIONS 8.1 As a minimum, service users will continue to receive the same service as they do currently and they and any specific vulnerable groups should not be adversely affected in any way. 8.2 Having taken these considerations into account, an Equality Impact Assessment is not deemed necessary. 9. LEGAL IMPLICATIONS 9.1 Home Connections has sought legal advice from Trowers and Hamlins LLP with particular reference to the requirements in the Public Contracts Regulations 2006 and related European Union law for tendering procedures in relation to the award of contracts by contracting authorities. 9.2 Advice was sought on two specific points in what is known as the Teckal exemption. This line of European case law provides that a contracting authority may procure goods or services from an entity legally distinct from it without following the prescribed tendering procedures where both (a) the authority exercises a sufficient degree of control over the other entity and (b) the other entity performs an essential part of its activities for that authority. 9.3 The advice confirmed that it is possible for more than one contracting authority to exercise a sufficient degree of control over a legal entity owned by a number of contracting authorities for the exemption to apply as between that separate entity and each of those authorities. This has been confirmed in a number of cases at both the European and national level. The advice also confirmed that it is possible for one (or more) of the controlling authorities to be a non-profit private Registered Provider without compromising the application of the Teckal exemption. 9.4 Essentially, should sufficient customers take up the offer to become an owner, as seems likely, Home Connections would become a Teckal compliant company. This would mean the Royal Borough could directly commission any Home Connections service without the need for a lengthy and costly procurement process. The Royal Borough would however remain free to seek competitive tenders and procure from alternative suppliers if it wanted to.
9.5 Home Connections will remain a company limited by guarantee and the liability of each owner is limited to 1. The company is run by professional and experienced officers and a professional board of directors will run the company. This limits the extent of owner involvement to attendance at annual general meetings and review of strategic documents. However, a list of reserved decisions limits the power of company officers and ensures that the owners retain ultimate control over officers. 9.6 Appendix 3 contains the full advice received from Trowers and Hamlin. 9.7 The Bi Borough Integrated Planning and Contracts Law Team has advised that: Paragraphs 9.2 and 9.3 are agreed. So long as no private interests are involved and the council is acting solely in the public interest in carrying out their public service tasks it will not fall foul of The Public Contracts Regulations 2006 under the Teckel exemption. The council (committee) must nominate an officer of the council to be appointed by the board of directors of the Company to represent its interest have control collectively with other local authority members. 10. FINANCIAL AND RESOURCES IMPLICATIONS 10.1 As a member, Home Connections would reduce the Royal Borough s fee by 3,700 (seven per cent) in 2012/13, freeze it for 2013/14 and thereafter revert to an annual RPI percentage increase capped at five per cent until 2016/17. Over five years, this is estimated to be a saving in the region of 18,000 (11 per cent) to the Royal Borough versus the current arrangements. There would also be lower prices for software development and services. 10.2 To become a member, a fee of 1,250 is payable to cover legal costs. 10.3 There are no personnel implications contained within this report. Laura Johnson Director of Housing Local Government Act 1972 (as amended) Background papers used in the preparation of this report: None Contact officer(s): Tony Heavey, Senior Housing Policy Officer, The Royal Borough of Kensington and Chelsea. Tel: 020 7364 2882 E-mail: tony.heavey@rbkc.gov.uk