Housing Authority Response to Recommendations in the Public Accounts Committee Report No. 13 - Report on the Housing Authority1s Failure to Follow Through on Undertakings Made to the Committee

Recommendation 1: Given that 35 per cent of the Housing Authority I Agreed. maintenance work is on jobs valued at under $500, the Housing Authority should include in its Annual Report the methodology and outcome of its audit of random samples of maintenance iobs valued at under $500. Recommendation 2: The Housing Authority should include in its I Agreed. Annual Report a comprehensive summary of the performance of the Head Contractor Maintenance Model. Using Key Performance Indicator data obtained from its Head Contractors, this summary should demonstrate the extent to which the model is driving better maintenance outcomes in the areas of timeliness, reduced costs, and quality of workmanship.

Housing has provided to the Committee the methodology and the outcome of its audit of samples of maintenance works valued under $500.

Housing has provided to the Committee a comprehensive summary of the performance of the head maintenance contractor maintenance model commencing 1 November 2014 for the 2014-15 financial year.

Other Actions: Housing will publish the information provided to the Committee in its 2015-16 annual report. This will include information omitted in 2014-15 as an official record and for comparative purposes.

Housing further undertakes to include updates on any additional measures or controls in relation to the maintenance program for each subsequent financial year in its annual report.

Housing acknowledges that it did not provide the relevant information on maintenance in its annual report as agreed and was late providing an explanation to the Public Accounts Committee. Housing accepts that this does not meet public sector standards and its obligations as a public sector agency, and will ensure that it responds to all future matters from the Public Accounts Committee in a timely and appropriate manner.

m Government of Western Australia Housing Authority

Office of the Director General

Your Ref: 24-505199 Our Ref: 1177-2106

Hon Dr Kim Hames MLA Chair Public Accounts Committee 1, 11 Harvest Terrace WEST PERTH WA 6005

Dear Dr Hames

I am writing to provide a response to the recommendations of the Public Accounts Committee's Report No. 13 - Report on the Housing Authority's Failure to Follow Through on Undertakings Made to the Committee. Housing acknowledges that these recommendations are aimed at improving the level of transparency and accountability in relation to its management of its maintenance head contracts.

The Report was written to inform Parliament about Housing's failure to include information in its 2014-15 Annual Report. This failure to respond to the Committee in a timely manner is not acceptable and Housing sincerely apologises for its action.

With regard to the Committee hearing of 16 March 2016, I wish provide the following details:

INFORMATION RELATING TO RECOMMENDATION 1

Recommendation 1 that: Housing publishes the following information relating to its Head Contractor Maintenance Model each year in its annual report:

• a description of its audit methodology, and the number of jobs valued under $500 that are audited each year;

• confirmation of the total number (and percentage) of non-compliant jobs; • a breakdown of this number (and percentage) for each area of

non-compliance; and • a summary of the strategies the Housing Authority is undertaking to address

non-compliance issues.

Housing Authority's Response

Audit Methodologv

The Head Maintenance Contract model is comprised of several elements, including head contractor job inspection and works order audits, Housing staff inspections prior to payment and physical review and desktop audits conducted by Housing Maintenance personnel (including licensed trades personnel). The methodology is outlined in figure 1 below. 99 Plain Street East Perth Western Australia 6004

Private Bag 22 East Perth Western Australia 6892 Telephone (08) 9222 4666 TTY (08) 9476 2446 Facsimile (08) 9221 1627

www.housing .wa.gov.au 1 wa.gov.au

Figure 1

~r1 Government of Western Australia ~ Housing Authority

Contractual Oblikation

IS09001:2008 Standards

Sample of completed works

warders

5% of paid works

orders

• High volume • High Risk • Check licensed

and general trades for compliance

• Analyse trends from monthly reports

Housing Authority Head Maintenance Contract Model Audit Methodology

As at 19 July 2016

I ) , d: '\) I I I

j I iI ' I I 11 \ I I,

Sample selection criteria

Testing Regime including:

• On site Inspections • Desktop audits

(process) • Work order reviews

(technlcal)r--__ ...I

Actions

• Rectify • Recoup • Business improvement

activities • Contract Management

Housing Authority Regional Payment

Authorisations

Physical Inspections occur where works orders contain the following:

Void priority code (VOI) Contains tenant liability charges A budget code of Insurance, planned or cyclical A safety device or appliance SOR Quoted works Asbestos removal! remedlatlon Over $500 for a metro region (excluding travel) Over $1000 for a country region (excluding travel)

Total Number (and percentage) of Non-Compliant Jobs Including the Area of Non­Compliance and Breakdown of this number (and percentage) for each area of Non­Compliance

TABLE 1 - Paid Works Orders 1 November, 2014 - 30 June, 2015*

Nov 2014 - Jun 2015 Count of

Works Orders I

No. of Paid Works Orders No. of Audited Works Orders Over $500 No. of Audited Works Orders Under $500 No. of Non Compliant Audited Works Orders No. of Non Compliant Audited Works Orders Under $500

Number and % of non-compliance - audited work orders 01. Labour claimed without authority 02. Labour issued without details 03. Material value incorrectly claimed

Issues 128,491

3,059 1,345 1,066

166

1 o 2

Percentage

2.40% 1.00%

24.20%

12.30%

0.00% 0.00% 0.00%

2

- ~ ----

Nov 2014 - Jun 2015 Count of

Works Orders I Percentage Issues

04. Schedule of Rate (SOR) incorrectly claimed 126 2.90% 05. Incorrect measurement claimed 245 5.60% 06. SOR added not related to original task 0 0.00% 07. Duplication of SOR 28 0.60% 08. Multiple of SOR cannot be claimed 13 0.30% 09. Incorrect or illogical location 71 1.60% 10. Detail not provided as required by SOR 628 14.30% 11. Included in other SOR claimed 103 2.30% 12. Incorrect SOR issued 16 0.40% 13. I ncorrect measurement issued 2 0.00% 14. Faulty workmanship 121 2.70% 15. Task on work order not done 68 1.50% 16. Task on work order not complete 6 0.10% 17. Work not to technical specifications 303 6.90% 18. Warranty management 2 0.00% 19. Product or manufacturer defect 0 0.00% . 20. Variable Travel 19 0.40% 21 . Emergency premium 0 0.00% * As works orders may have multiple issues in different areas the number of non-compliance by area is higher than the number of non-complaint works orders

Non-compliance issues identified are followed up by Housing's Business Improvement team. On the basis of the examples in the above table:

• Housing pursued recoups and refunds in relation to incorrect measurements claimed;

• directed head contractors to supply missing items in relation to details not provided as required; and

• where work was not to technical specifications directions were given to re­perform or correct non-compliant works

Strategies the Housing Authoritv is undertaking to address non-compliance issues Steps have been taken by Housing to validate the self-reported performance results of the head maintenance contractors, which also provides opportunities for continuous improvement. This includes but is not limited to:

• Introduction of Business Improvement Team in Housing Maintenance - the team is made up of qualified Tradespeople, Compliance and Business Improvement Officers who undertake on-site quality audit inspections and desktop audits

• Operational and Quality Assurance meetings with the head maintenance contractors - these sessions directly address any issues relating to non­compliance matters

3

KPI

KPI1

KPI2

KPI3

KPI4

• Development of better supporting tools and materials, such as the development of business rules which are circulated as and when required

• Toolbox Workshops - collaborative sessions between Housing Authority Staff and head maintenance contractors

• Regular reporting and monitoring of Audit Reports, including trends and issues analysis

INFORMATION RELATING TO RECOMMENDATION 2

Recommendation 2 that: Housing publishes a comprehensive summary of the performance of its Head Contractor Maintenance Model each year in its annual report. The summary should include the following information:

• a clear explanation of each of the fifteen KPls; • confirmation as to which of the five overarching performance categories

(timeliness, quality, cost, safety, and participation) each KPI applies; • publication of the target figure for each KPI along with the actual level of

performance achieved; and • a table for each of the four current head contractors indicating the level of

performance against all 15 KPls.

TABLE 2 - Explanation of Each of the Fifteen KPls Including Overarching Performance Categories (timeliness, quality. cost, safety. and participation) and Target for Each KPI

Category Name Explanation Performance Benchmark Score

HSEMP complied with including:

• Safety Inspections carried out for each Category of Work accord with safety inspections

• Contractor has an internal Corporate

Health, Safety and OHS representative with relevant

Environmental train ing and qualifications Safety

Management Plan Safety Work Method Statement • (HSEMP) completed for all high risk

construction work; and

• Take 5 safety check (or equivalent) completed for all SOR Work

100% of statutory notices provided to

Provision of statutory notices to the the Principal immediately (and no later

Safety Statutory Notices than 5 hours from receipt of the notice Principal from a regulator)

Attend and restore or repair life 100% of paid Emergency Work Orders Timeliness Emergency threatening safety issue within 8 hours of Completed within 8 hours of issue of

issue of the Work Order to the Contractor the Work Orders to the Contractor

Attend and restore or repair essential 95% of paid Urgent Work Orders Timeliness Urgent service(s) within 24 hours of issue of the Completed within 24 hours of issue of

Work Order to the Contractor the Work Orders to the Contractor

4

KPI

KPI5

KPI6

KPI7

KPI8

KPI9

KPI10

KPI11

KPI12

KPI13

KPI14

KPJ15

Category Name Explanation Performance Benchmark Score

Attend and repair within 48 hours of issue 95% of paid Priority Work Orders

Timeliness Priority of the Work Order to the Contractor Completed within 48 hours of issue of the Work Orders to the Contractor

Attend and complete Void Maintenance Average of 14 days for the Completion

Timeliness Void activity within 14 days of issue of the Work of paid Void Maintenance Work Orders for the relevant Performance Review Order to the Contractor Quarter

Attend and repair within 28 days of issue 95% of paid Routine Work Orders

Timeliness Routine Completed within 28 days of issue of of the Work Order to the Contractor the Work Orders to the Contractor

Submission of compliant Payment Claims 90% of Payment Claims submitted Timeliness of Invoices

(compliant with all requirements of the within 14 days of Completion of all Timeliness (Payment Claims) Contract) within 14 days following Maintenance Works and Services the

Completion of all Maintenance Works and Services the subject of a Work Order subject of a Work Order

% of Satisfactory or above (measuring 4/5 or above) ratings in sample Tenant

Tenant Satisfaction surveys in each Performance

Satisfaction Tenant Satisfaction Review Quarter. Tenant surveys will be 90% randomly selected from paid Work Orders on a monthly basis and results will be collated to assess the KPI for the relevant Performance Review Quarter.

Non-defective Work Orders as a

Quality Non defective Works percentage of total Maintenance Works 90% and Services Works Orders Completed in the relevant Performance Review Quarter

Number of Improvement Notices achieving the outcome sought to the

Quality Improvement Notices satisfaction of the Principal in the agreed 95% Time for Completion against the number issued for the relevant Performance Review Quarter

Number of Compliance Notices achieving the outcome sought to the satisfaction of

Quality Compliance Notices the Principal in the agreed Time for 100% Completion against the number issued for the relevant Performance Review Quarter

Participation Industry Participation IPP complied with. 100% compliance Plan (IPP)

Indigenous

Participation Employment and IEEP complied with. 100% compliance Enterprise Plan (JEEP)

Participation Apprenticeship Plan AP complied with. 100% compliance (AP)

Housing measures and monitors the head contractors' performance via KPls which identify performance issues on an ongoing basis and help inform business improvement opportunities. A performance-based incentive and abatement regime is applied based on contract KPls and using a methodology developed by KPMG.

5

TABLES 3, 4 AND 5 - Target figure (benchmark) against all 15 KPls along with the actual level of performance achieved for each of the four current head contractors

Contractor performance is measured on a quarterly basis against the 11 Head Maintenance Contract regions for each of the 15 KPI measures.

Tables 3, 4 and 5 (enclosed) are a summary of performance for the head maintenance contractors commencing 1 November 2014 for the 2014-15 financial year.

OFFICE OF THE AUDITOR GENERAL (OAG) INTERIM AUDIT FOR THE YEAR ENDING 30 JUNE 2016 I would like to inform the Committee that the OAG has recently completed an interim audit of the Housing Authority for the year ending 30 June 2016, which is yet to be tabled in Parliament. The Report makes a number of recommendations, including one which relates to maintenance quality assurance procedures. In particular, this highlights the need for Housing to further expand its quality assurance regime, so as to ensure reasonable coverage of work orders paid.

Housing acknowledges the findings and recommendations of the OAG and will further develop maintenance quality assurance procedures. To this end, Housing has recently engaged KPMG to review relevant aspects of its maintenance procedures, and in particular matters highlighted in the ~AG's report. This should provide assurance and validation of adequacy of the internal controls and practices.

FURTHER ACTIONS Appropriate arrangements have been made for the actions detailed in the Public Accounts Committee report to be included in this year's annual report and in future annual reports. As an official record and for comparative purposes, Housing will provide a comprehensive summary of the performance of the head maintenance contractor model for the 2014-15 and 2015-16 financial years in the 2015-16 annual report. This will include relevant information omitted in the 2014-15 report and additional information recommended by the Committee.

Housing further undertakes to include updates on any additional measures or controls put in place for each financial year.

I would also like to apologise for Housing's failure to provide the relevant information on maintenance in its annual report as agreed and for the delay in providing an explanation to the Public Accounts Committee.

6

I accept that this does not meet public sector standards and Housing's obligations as a public sector agency, and will ensure that Housing responds to all future requests from the Committee in a timely and appropriate manner.

Yours sincerely

PAULWHYTE AlCHIEF EXECUTIVE OFFICER

28 July 2016

Enc.

7

Head Maintenance Contract Key Performance Indicators

TABLE 6

NO. DEFINITION OF NON COMPLIANT ISSUES 1 Head Contractor has added a labour claim to a works order without

authorisation from the Housing Authority.

2 Housing Authority staff has added a labour Schedule of Rate (SOR) without sufficient detail.

3 Receipt produced by Head Contractor does not match the value being claimed on the works order.

4 SOR item has either been issued incorrectly by Housing Authority staff or incorrectly claimed by Head Contractor.

5 As a result of an audit of works, measurements have been found to be incorrect.

6 Head Contractor has added an additional SOR task to the works order, which does not relate to the original task requested by Housing Authority.

7 SOR item has been duplicated either by issuing officer (Housing Authority) or by Head Contractor duplicating SOR item when returning works order.

8 Housing Authority Business Rules do not allow for more than one of these SOR items to be claimed on each works order.

9 Location listed on works order at the time of issuance, or when returned by Head Contractor, does not reflect the correct location of works undertaken. This only affects Housing Authority's historical records.

10 Housing Authority specifications require certain documents to be returned upon completion of works . Documents may include receipts, inspection reports and compliance certificates .

11 New SOR task has been added to the works order. New works incorporate the original task, which has not been removed prior to returning the works order to the Housing Authority.

12 Incorrect SOR issued by Housing Authority. The Head Contractor has not corrected the works order prior to returning to the Housing Authority. Incorrect issuance may be as a result of information supplied by tenant.

13 Housing Authority has issued works order with incorrect measurement or quantity, and Head Contractor has not amended prior to returning works order. Incorrect measurement or quantity may be as a result of information supplied by the tenant.

14 Works are of poor quality e.g. painting light switches.

15 A task requested has not been attended to by the Head Contractor.

16 A task requested has only been partially attended to.

17 Head Contractor has not completed tasks in accordance with Housing Authority contractual Technical Specifications.

18 Items have been replaced / repaired when under warranty.

19 Defective product has been installed by Head Contractor.

20 The Head Contractor has incorrectly claimed variable travel that does not meet the Housing Authority Business Rule.

21 Emergency Premium has been incorrectly claimed due to not meeting specified timeframe, or Housing Authority staff have incorrectly added Emergency Premium to works order.