The London Borough of Hackney Council
Simon Theobald – Head of Finance
Hackney’s housing strategy 2017-22 outlines how Hackney Borough Council intends to realise the vision of delivering the homes Hackney needs. The Borough Council has integrated SDS software into the delivery of the strategy. This case study outlines the housing strategy for 2017-22, and how SDS helps that strategy to become reality.
Homes are being built using a model that cross subsidies outright sales to fund affordable housing. The aim is to deliver 2,000 homes by 2022 with the scope of the overall project to build over 9000 homes. These will be high quality affordable homes for tenants and will help to shape the communities they are in. Hackney uses SDS ProVal and Sequel at different points throughout the development of a scheme.
Getting to grips with ProVal LS
ProVal is used as a fundamental part of the appraisal / design phase. It allows the Finance and Development teams to manage all the changes that happen during that phase. Before ProVal everything would have been recorded in multiple spreadsheets. The spreadsheets showed all potential variables that impacted the scheme, and updating these spreadsheets
for each project and consolidating them was extremely time consuming. It would often take two or three weeks before knowing the outcome of the changes. In addition, with such a complex system there was also the risk of human error.
With the introduction of ProVal, almost overnight there was an instant understanding of the financial impact of any changes. Typical changes would include; design, tenure, number of floors, additional costs, and change in sales values. Visibility into the financial impact these
have within a single scheme, or across schemes, means is easily modelled in an SDS appraisal. From the base appraisal, various scenarios are created in ProVal, which enables the Council to select a development which optimizes the management of cost and risk. Due to build costs increasing and sales values dropping, these figures need to be managed on a
day to day basis. ProVal has drastically improved the development decision making process, enabling Hackney to be more agile, adapting to the changing environment. Ultimately, delivering affordable housing schemes with better value for money.
Initially, ProVal was implemented primarily for the regeneration team, who were tasked to look at the redevelopment of Hackney’s housing stock. Subsequently then, an infield programme of house building housing supply programme has been introduced. The use of ProVal has been shared with other departments, increasing overall employee skill and understanding of the development process at Hackney Borough Council.
“We have expanded the number of departments who use ProVal as Strategic property services who manage the Hackney commercial and community portfolio work with the development team to do appraisals. These appraisals were often done by consultants who would have to re-appraise a scheme to identify the impact of change, this was costly and
time consuming. Now the finance and regeneration team work together to run 8/9 different appraisal options to understand all the factors and their impacts.”
“The huge strategic plans for delivery are a result of the information, knowledge and understanding of development that has been brought to the team via ProVal. If we were still using spreadsheets I’m not sure we would ever have that insight. We may still have delivered, but it would have been at an unknown cost, in the sense that we would never know how much better value we could have achieved. With ProVal we’ve continued to
deliver with measurable value, we’re delivering 2,000 units by 2022, and that’s the measure of our success.”
To gain board development approval, a gateway process is used throughout all the stages. ProVal is used to first complete a very simple appraisal to look at the finances, site capacity to work out what’s deliverable on the site and potential tenure mix options, property sizes, and other facilities for the community or commercial spaces within the development. If viable these are brought into the programme for approval which is the baseline financial position.
This is then developed to a detailed design and planning permission is submitted. During the wait for planning permission approval, there are often more cost changes that are identified and monitored until it goes to tender. When the tenders come back they are compared and how well the scheme has moved through the design development is reviewed to consider finally cost to build from the contractor.
Sequel is used to project manage the build phase, replicating the finance system monitoring and controlling budgets and spend in line with authorised payments.
With Sequel, it is easier for project managers to manage their costs as the finance systems are complicated to understand and set up specifically for regeneration. Costs are replicated from the finance system to allow project managers to understand costs within the context of their scheme and manage their budget spend. This includes awarding a contract for an
architect or a consultant.
At the end of the development process Sequel is used to keep a record of all the properties built, who shared ownership properties were sold to, the percentage equity and rent amounts. Workflows are a key area of Sequel which Hackney have used extensively to monitor finances and save time producing reports.
“From a finance perspective, our success has been the ability to double the number of projects we support without increasing staff resources. This is because the project managers now have more accountability, and understand the appraisal part of their role is as important as what they do in design development. Previously, they would ask something, then they’d go away and look at it on a spreadsheet, come up with an answer, then something else would change, and so on….. it was resource intensive from a financial appraisal and control perspective.”
Hackney have also noticed the increased confidence in governance, through deeper knowledge, and the ability to respond appropriately to issues such as; change in sales prices, increase build costs, design changes and tenure mixes. This enables better support for the project managers in delivering the scheme. From a finance perspective, it saves time and resources whilst continuing to deliver an appraisal. The development departments success is the delivery of a scheme in line with the approved appraisal so that there are no shocks.
“ProVal and Sequel are great products and we looked at a number of different options before we chose SDS, the key selling point was that the software is intuitive. One of my favourite lines from our Director of Finance is ‘can someone show me the instruction manual for facebook?’, so with ProVal particularly, those 2-3 days we took setting up the system with no
instruction handbook meant we don’t need it. It’s obvious what you need to do to build the appraisal. We required minimal guidance to get the template. Once you’ve created templates, all of the appraisal changes are intuitive. The real selling point to us of ProVal was that it was obvious what you needed to do to get the answer you wanted out of the system.”
ProVal has given Hackney better visibility and improved the quality of schemes due to the vastly improved information now available which supports better decision making. This has enabled the implementation of more structured governance and gateways to approval processes.
“When we set up ProVal, the team spent 2 / 3 days inputting all the parameters which seemed quite resource intensive at the time but now we can see the benefit of that. It would take me about 5 minutes but even for a new project manager joining the team, it would take them no more than 10 minutes to appraise a scheme, because all the parameters are in there. This speed has helped us exponentially.”
All involved now have an understanding of the costs being approved, the risks and what other options were considered. This shared knowledge, financial understanding and performance across the team is giving the project managers and Regeneration Teams responsibility and ownership of finance. This is an evolution from a corporate control environment, where the Finance department sign off everything. This has enabled Hackney to measure spend against the appraisal being delivered to the objectives and accountability.
“One of the perks of SDS Software is the continuous development of the products, and the new bits you find while expanding your capabilities. For example, recently we were doing some work, looking through the other tabs and we found in (tab I) we could view individual unit financial performance, this is a new bit of information for us which we use particularly for GLA bids referring to changing tenures based on the net present value of an outright sale / shared ownership or shared rent so you know the cost of change.”
Category: Local Authority
Bought ProVal & Sequel:
Number of ProVal users: 30
Number of Sequel users: 41