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9.1 Introduction

This chapter addresses the following research question: Which commodity

strategies facilitate the optimisation of tenant satisfaction with maintenance services?

The structure of the chapter, as summarised below, follows that of the tender process, and the related requirements for contractors, relationships, and ser- vices. The commodity strategy consists of the choices made during the tender process outlined here.

The process is as follows:

Execution requirements, formulated into specifications: in short, what has to be delivered? We make recommendations for the specifications, and at- tention is also given to their form (input, throughput, output or outcome, Sub-Section 9.2).

Suitability requirements, also known as proficiency requirements for the supplier or selection criteria (Sub-Section 9.3).

The choice of award criteria for suppliers (also Sub-Section 9.3).

The contract, or more specifically, the relationship. How should risk shar- ing be approached, for what period should relationships be entered into, and what requirements should be made regarding these? (Sub-Section 9.4). Incentives in the actual contract (Sub-Section 9.5).

Finally, we briefly examined the issue of whether maintenance services should be insourced or outsourced. In this study, this is approached primarily from the perspective of core competencies.

The various options for optimisation, in particular those related to the contract/relationship, are mainly handled using the tools provided by new in- stitutional economics, as introduced in Chapter 2 (‘Supply, rules of the game, and tools for analysis’, Section 2.4).

9.2 Execution requirements

9.2.1 Introduction

This section addresses the execution requirements drawn up by clients in the form of specifications. In line with this chapter’s objective, we first define the position of specifications in relation to the end-customer. Because execution requirements directly determine a service’s form, they are linked to the ac- tual maintenance service delivered to the tenant (see Figure 9.1). It is thus es- sential to have clear and focused execution requirements in order to achieve tenant satisfaction regarding maintenance.

The sequence below describes the document form used to for specifica- tions, the form of the actual execution or performance requirements, suppli- 1.

2. 3. 4.

ers’ qualities, and the specification decision-making process.

Sub-Section 9.2.2 focuses on choosing suitable performance requirements for optimal service delivery. This sub-section is based on the findings of Chap- ter 8 (The end-customer focus of maintenance service specifications). The recommendations made with regard to the form of performance indicators, which are presented in Sub-Section 9.2.3, are connected to the findings that were presented in Sub-Section 6.6.2 (Performance measurement). Sub-Sec- tion 9.2.4 discusses how suppliers might contribute to specifications. Property rights theory (introduced in Sub-Section 2.3.4) is used to assess the possible benefits of supplier contributions. Sub-Section 9.2.5 examines problems relat- ed to rational decision-making when specifying maintenance services. These problems pose a threat to optimal specifications and therefore service qual- ity. The concept of bounded rationality, which was introduced in Sub-Section 2.3.3 as part of transaction cost theory, is used to identify these problems and to suggest solutions. Finally, in Sub-Section 9.2.6, we look at how selection criteria and award criteria have the potential to add emphasis to certain per- formance requirements, with reference to the findings of Chapters 6, 7 and 8. Table 9.1 offers an overview of the links between Section 9.2 and preceding sections of the thesis.

9.2.2 The choice of performance requirements

Specifications and tenant satisfaction

The tenants’ survey presented in the Chapters 5, 6, and 7, suggests a prioriti- sation of service aspects from the end-customer’s point of view. The quality of the results, completing maintenance work in a single visit and accessibility were found to be the most important aspects. Without repeating the list of service quality determinants and associated priorities, it would be advisable for housing associations to specify these requirements well, in order to guar- antee quality. The contents of specifications could be adapted to the demands of specific groups, such as the elderly, which may differ from more general demands.

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The character of maintenance and performance requirements

The character of a service has a significant impact on its specifications. The amount of interaction between maintenance firms and tenants in the course of service provision should be reflected in the specifications. Chapters 7 and 8 took the end-customer’s perspective in focusing on the impact that main- tenance as a component service has on the attention given to service-quality aspects in specifications. The specifications for reactive maintenance inside dwellings devote more attention to aspects that give end-customers a sense of control. This is in view of first, the often urgent nature of this kind of main- tenance, and second, the greater sense of responsibility that tenants feel for maintenance inside dwellings, as compared with planned maintenance to the outside of dwellings. The aspects addressed include accessibility, flexibility in making appointments, sticking to agreements and providing choices regard- ing maintenance possibilities. It would be advisable for housing associations to examine all of these issues further.

9.2.3 The form of performance indicators

Specifications can focus on any combination of input, throughput, output and outcome. The form of performance indicators determines their potential for performance requirements. The choice of form, however, is subject to certain limitations. In Chapter 6, various options for the form of performance indica- tors in the context of performance measurement were discussed, with impli- cations for specifications. Indeed, performance must first be specified before it can be measured.

Outcome indicators

Outcome indicators, such as end-customer satisfaction, are suitable for over- all performance monitoring as a form of management information. This in- formation can be used to enhance the purchasing function. One problem with outcome indicators is that causality can be hard to establish, given that end- customer satisfaction also depends on many factors other than maintenance

Table 9.1 The links between Section 9.2 and preceding sections of this thesis

Sub-section: Is primarily related to chapter or (sub-) section:

9.2.2 The choice of performance requirements 8 The end-customer focus of maintenance service specifications

9.2.3 The form of performance indicators 6.6.2 Performance measurement 9.2.4 Adapting specifications to suppliers’ qualities 2.3.4 Property rights theory 9.2.5 Rational decision-making and specifying maintenance

services

2.3.3 Transaction cost theory

9.2.6 Giving extra emphasis to performance requirements 6 Securing high performance maintenance service delivery

7 Securing customer satisfaction through component service specifications

8 The end-customer focus of maintenance service specifications

service. Outcome indicators are not specific enough for maintenance specifi- cations, and using outcome indicators for explicit and objective monitoring and holding suppliers accountable would be a laborious process. Maintenance service suppliers will rarely be able to optimise service using outcome indica- tors, unless additional details are provided.

Output indicators

Output indicators that form part of the functional specifications have the po- tential to be specific, and may be objectively measurable. When referring to buildings, output indicators are also known as functional performance indica- tors. The success of output indicators depends on the capacity and quality of service suppliers, which we will discuss further below. Output in this case re- fers to aspects related to the maintenance result and aspects of service qual- ity, with respect to the interaction between the service supplier and the end- customer. Where output indicators are concerned, a housing association has to be very clear about its objectives and expectations regarding maintenance assignments. In other words, the key question is how maintenance can con- tribute to objectives such as customer satisfaction. Housing associations must be able to translate such needs into unambiguous, transparent and measur- able indicators.

Throughput indicators

Throughput indicators, which document the steps of a maintenance process, facilitate the objective measurement of supplier performance, meaning that the activities carried out are traceable and verifiable. Compared with output indicators, a disadvantage of this specification method is that the supplier has fewer opportunities to optimise processes. Detailed specifications, which are commonly used by housing associations, primarily consist of throughput indicators. The use of throughput indicators obliges housing associations to know exactly how a service breaks down into activities, and how it has to be delivered (Axelsson and Wynstra, 2002). Throughput indicators can be used for maintenance and application processes. The maintenance process is con- cerned with the management of maintenance activities, and the application process refers to carrying out the actual activities.

Input indicators

Input indicators are used when purchasing competencies. There are two im- portant types: purchasing additional capacity, and purchasing specialised competencies. Consultancy on maintenance solutions is a specialised form of consultancy (the ‘engineering consultant’; see Straub and Van Mossel, 2007).

9.2.4 Adapting specifications to suppliers’ qualities

Classification

An important principle relating to specifications is that the latter will not work unless they are adapted to suppliers’ qualities and needs. The key ques- tion, then, is whether all suppliers are equal in their capacities to comply with specifications.

Kamath and Liker (1994) classify suppliers into four types: Partner, Mature, Child and Contractual (or Article) suppliers. Partners are independently able to design and develop entire subsystems and work with multiple concepts. Mature suppliers need rough specifications on which to base development. Child suppliers need detailed specifications from the outset, which determine the materials, dimensions and functionality of components, and the supplier is obliged to deliver the component as specified. Contractual suppliers are on- ly capable of performing standard services. A continuum is thus drawn from functional to descriptive requirements.

Output specifications or throughput specifications?

One advantage of using functional specifications for maintenance (or specifi- cations based on output indicators), is that contractors are able to make the most effective use of their qualities in designing optimum services and main- tenance solutions. However, the question is whether maintenance firms are capable of approaching specifications in this way. The same applies to hous- ing associations: they have to be capable of drafting authoritative functional specifications, based on the housing association’s objectives. There have been some notable developments in this regard. For instance, a select group of con- tractors in the property maintenance sector, most whom are members of the employers’ association ‘WVB’ together with housing associations and OTB Re- search Institute for Housing, Urban and Mobility Studies, are involved in de- veloping functional specifications. Ongoing tests suggest that a select group of companies do have capability in this regard, with the implication that add- ed value can be created for customers.

The capacities needed by maintenance firms for maintaining relationships with end-customers can be deduced from the supplier categories defined by Kamath and Liker (1994). As mentioned above, Partners are able to design complete subsystems. This means that they are independently capable of de- signing services provided to end-customers. This implies, for instance, that contractors know the tenants and their preferences. For Partner suppliers, outcome and possibly few output indicators might be sufficient for monitor- ing purposes. Mature suppliers, meanwhile, use client output indicators to optimise their services. Contractors are responsible for designing activities and interactions so as to fulfill output indicators. However, unlike Partners, Mature suppliers are not independently capable of determining what is im-

portant for end-customers.

Child suppliers are not able (or at any rate, no better than the client) to determine for themselves how to arrange activities so as to fulfill output in- dicators. The contractor is capable of performing the activities prescribed by the client. The Child supplier is not independently capable of improving the service to the end-customer. Finally, Contractual suppliers are only capable of performing standard services. This situation rarely arises in maintenance, with the possible exceptions of maintenance of shared installations or green- ery. Standard effectiveness is not the same as standard service. As soon as interaction with the end-customer comes into play, the service ceases to be standard. A maintenance service supplier that is capable only of providing standard services for similar systems could be classified as a Contractual sup- plier.

In general, maintenance suppliers can be categorised as Child suppliers. Many maintenance firms are capable of producing services in conformity with specifications, which currently, are usually technical. We know of no Dutch maintenance firms that would fit the description of ‘Partner’. A few firms may be classified as Mature suppliers. In technical terms at least, these firms are capable of defining services themselves. There may be scope for development in non-technical areas, possibly and preferably in partnership with the hous- ing association.

Suppliers’ contributions to specifications

Property rights theory (presented in Sub-Section 2.3.4), which is part of new institutional economics, states – ceteris paribus – that more property rights allow actors greater freedom of action, and as a result, their decisions lead to greater efficiency for society as a whole. This insight also applies to main- tenance service specifications. Firstly, a contractor will reap the rewards of his own efforts if he is contractually bound to a client or given building com- plex for a lengthy period. Secondly, the more a contractor can contribute to designing solutions or services, the broader the contractor’s outlook will be, and it is likely that the contractor will put more effort into solving mainte- nance problems and delivering better services. There are two ways to achieve this. Together, service suppliers and housing associations could refine speci- fications to produce ‘the best solution’. Alternatively, the housing association could structure specifications in such a way as to leave sufficient freedom for maintenance firms to optimise their services as they saw fit. With respect to the end-customer, property rights theory suggests that maintenance firms will come up with better services as soon as they are made responsible and accountable for tailoring services to end-customers’ wishes, or those of cus- tomer groups. To do so, they need more knowledge regarding end-customers.

If European procurement Directives are applicable, then there are certain obstacles to involving maintenance firms in drawing up specifications prior

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