Highways Agency

Consulting questions

Whichever option(s) the Highways Agency chooses to adopt, there are a number of detailed questions about the implementation, scope and operation of new contracts that need to be answered.

Tender Process

Quality Promises at tender stage

It is difficult to ensure that statements made in tender quality submissions ("quality promises") become contractual obligations.

1. Should "quality promises" become contractual obligations, and particularly with regard to staffing promises how can the service provider be encouraged to meet or better the staffing quality promised at tender stage?
2. What should be the balance between quality and price in the selection of the service provider? How should this be evaluated?

Credit for good performance when re-tendering

There are difficulties in applying a verifiable system of performance ranking that gives credit when re-tendering to existing service providers for giving above average performance.

3. Is it appropriate to take into account good or bad performance by existing providers when assessing tenders for future work in any Area? If so, how might this be done in such a way that new players are not disadvantaged?

Cost of tendering

In order to evaluate tenders fairly, and to provide opportunities for quality to be demonstrated, a large amount of information is offered and sought from tenderers. The cost of this exercise, for all parties, has to be balanced by the improvement in pricing and service which it produces.

4. What steps can be taken in the tender process to keep the cost of tendering to a minimum whilst at the same time giving scope to service providers to demonstrate their capabilities? How will these steps vary with respect of each of the procurement options proposed?
5. What information most influences the cost or efficiency of the tender process?
6. How does the form of specification affect the cost and duration of the tender process?

Managing Agent and Term Maintenance Contractor combined bidding

Because partnering will be key to the new contracts one option would be to require the prospective Managing Agent and Term Maintenance Contractor (or Network Adviser and Network Contractor) to partner in advance of making their tender submissions. Under this option the bids would be submitted simultaneously and assessed together, although two separate contracts would be placed.

7. What advantages and disadvantages might flow from this approach? How might it be bettered?

Scope of work and services

Function split

The division of functions between the Managing Agent, the Term Maintenance Contractor and Highways Agency is not always clear. One of the perceived benefits of the Managing Agent Contractor approach is that it will remove this problem.

8. What are the significant areas of duplication? How might the Managing Agent and Term Maintenance Contractor contracts be changed to avoid such duplication?
9. Which roles currently undertaken by the Managing Agent would not be suitable to be carried out by a Managing Agent Contractor, and why? Who should perform these roles?
10. Are there functions currently carried out by the Highways Agency, or procured from others, which could sensibly be carried out by the Managing Agent / Term Maintenance Contractor/ MAC / PFMAC? If so, which ones? What are the risks involved?

One-off schemes and thresholds

The Highways Agency recognises the benefits of providing a steady work flow to the service provider so that a sustainable level of resources can be maintained. Particular care must be taken in setting the threshold levels for work performed within these contracts to ensure that they are efficient and that a local competitive contracting market is sustained.

With the Managing Agent Contractor, there is a further issue as to whether it should manage or procure one-off contracts above the thresholds.

11. What are appropriate levels for the thresholds for discrete schemes under each of the service provider contracts? Should the threshold level vary for different types of design and work activities and if so how?
12. What steps could be taken to preserve the local construction market if the works threshold were raised? onconsultation
13.  What should be the Managing Agent Contractor's role in the design, procurement and/or administration of discrete schemes (major repairs and improvements)? Why?
14. What role should framework contracts play? Should framework contracts be procured by the Term Maintenance Contractor or MAC or by the Highways Agency directly or both? What type of work would be suited to these contracts? How could value for money be demonstrated in each case?

Data collection

The collection of consistent financial and technical data is necessary to facilitate benchmarking, performance review and audit trails. As the contracts become more orientated towards a performance specification, the importance of accurate technical condition data at tender stage increases to facilitate better-informed bids and improved risk management.

15. Under the Managing Agent and Term Maintenance Contractor arrangements, who should be responsible for collecting network condition data? How does this change for MAC / PFMAC contracts? Is the data currently collected sufficient in scope to permit (a) effective tendering; (b) performance specification? If not, what extra data should be collected (or discontinued)?
16. What are the constraints on contractors making available historic data on work quantities for audit purposes and to inform future tenderers?

The proactive role of the Highways Agency

To make full use of the proposed contract options and to take part effectively in the Network Boards etc, the Highways Agency will need to consider ways to integrate its own staff with the service delivery team(s). A practical balance needs to be struck to ensure that full co-operation and efficiency of operation can be achieved whilst retaining independence, upholding propriety and retaining accountability.

17. Would this be advantageous to the operation of the proposed contracts? If so, why?
18. What activities and decisions would benefit most from this approach?

Installation of Communications equipment

The Highways Agency currently procures the maintenance of communications equipment separately from the Managing Agent and Term Maintenance contractor contracts

19. Should the service provider be responsible for installing / maintaining communications equipment?
20. What operational benefits / disbenefits would this approach bring?

Specification

Performance

Under the current arrangements the Managing Agent is compensated by lump sum and time charge payments. The Term Maintenance Contract is compensated by reference to a schedule of rates with lump sum preliminaries. In both cases the Brief or Specification tends to be prescriptive. Efficiency and innovation are not encouraged because there is no contractual mechanism for them to be rewarded.

There is a strong belief that performance specifications create the freedom for service providers to deliver most efficiently and effectively. They encourage innovation, ownership of the works and focus on what is really required, ie service for the customer.

The adoption of an output-based performance specification will enable a service provider to be rewarded for achieving the Highways Agency's high level objectives (customer service, network quality, whole life costing and so on), rather than simply by reference to the amount of work done.

21. What benefits and risks do you perceive in working under a performance specification?
22. Which aspects of the existing Managing Agent and Term Maintenance Contractor duties currently undertaken according to prescriptive specifications and compensated by unit rates or time charges could be both specified and valued under a performance related specification?
23. Which of the MAC's functions would not be suitable to be let on a performance specified basis? Why? 24 What aspects of performance will be difficult to deliver because they cannot be easily measured?

Risk allocation

To ensure efficiency, economy and best practice, risks must continue to be allocated to the party best able to manage them. Risk allocation must also be transparent. The risk allocation between the parties will inevitably change under the Managing Agent Contractor contracts.

25. Which risks currently allocated to the Highways Agency, Managing Agent and Term Maintenance Contractor would more appropriately be re-allocated to a different party? Why? When should risks be identified? Who should, and how should they be involved?
26. Which party should bear the network condition risk under the single operator approach, and why?
27. What other risks should be transferred to the single operator which are not borne by the Managing Agent and Term Maintenance Contractor ? And vice versa. How should the MAC be compensated for assuming extra risks?

Contract Duration

Flexibility and change mechanisms

The duration of the contract must recognise the Highways Agency's need for flexibility to deal with strategic changes in management of the network, such as integrated transport policies, tolling, technological developments etc. At the same time the duration needs to be sufficient to encourage investment in plant, to enable the benefits of continuous improvement to be obtained and to encourage the network contractor to embrace whole life costing.

28. Bearing in mind the above, what is the ideal duration for the Managing Agent and Term Maintenance Contractor and MAC/ PFMAC, and why?
29. What are the advantages/disadvantages of having a contract period with possible extensions, as opposed to a fixed term?

Preserving the market

Contracts of longer duration and wider scope could result in better services and lower prices, but fewer, larger contractors may dominate the local market. This may lead to a restricted and uncompetitive market in the long-term unless provision is made to foster and utilise a balanced competitive market. This balanced market should represent the best ie quality service providers and specialists drawn from international, national and regional spheres of operation.

30. What are the implications for regional construction markets in extending the duration or widening the scope of the service provider contracts?
31. What steps should the Agency take to ensure that the regional market for smaller highway maintenance contractors is preserved?
32. How will the local construction market be affected if a MAC/PFMAC replaces the Managing Agent and Term Maintenance Contractor contracts?

Payment Mechanisms

Whole life costing

Whole life cost evaluation is a vital part of the Highways Agency's investment decision making process.

33. How can the MA, TMC and MACs be incentivised to embrace whole life cost issues more fully? What payment mechanisms would be most appropriate to achieve this?

Incentives

The Highways Agency wishes to encourage efficiency, innovation and the sharing of good ideas and best practice.

34. What payment mechanisms should be developed which will reward the service providers at the same time as benefiting the Highways Agency, either through cost savings or improved levels of service?
35. Which payment mechanism, or combination of payment mechanisms, would be most suitable for each of the following categories of work under each contract option and why?:
    • routine maintenance?
    • winter maintenance?
    • minor repairs, structural maintenance and improvements (pavement and bridge repairs, safety fencing, white lining etc)?
    • network management?
    • design and construction of discrete schemes?
    • advisory functions?
36. How should innovative ideas be trialled to demonstrate value for money? Who should fund those trials?

Continuous Improvement

Continuous improvement can be considered both in terms of quality and price. Longer-term contracts will provide obligations and incentives towards continuous improvement, with a view to increasing efficiency and economy.

37. What performance indicators should be used to best monitor continuous improvement through the life of the contract? What incentives/penalties should be offered/imposed to ensure achievement of the required levels of performance? Does this change with type of contract ie MA, TMC, MAC or PFMAC ?

National Benchmarking and Best Practice

Comparison of performance between Areas is difficult and benchmarking has been identified as key. The Highways Agency also wants to be able to implement best practice identified in one Area throughout the national Network. Continuous improvement in terms of cost, customer service and network quality and safety within each Area needs to be demonstrated.

Under the existing contracts, specifications and prices are not benchmarked during the life of the contract

38. What is the mechanism to enable best practice to be shared and disseminated across the network in the face of commercial pressure not to do so?
39. How should intellectual property rights in ideas be addressed (if the Highways Agency then wanted to use the idea on another contract not held by the innovator? How should the approach differ between innovations within a tender and innovations brought forward within the life of the contract?

Partnering

General

The Highways Agency, as Network Operator, has a key part to play as part of the team delivering the service for customers on the network. The Highways Agency will seek to select service provider partners who are committed to the principles of openness, teamwork and commitment throughout the supply chain.

The partnering ethos demands that parties raise and solve problems as they occur. Partnering is an accepted concept within both the Highways Agency and the construction industry. It however represents an aspiration that is difficult to turn into reality.

40. What steps should be taken to ensure that the partnering concept permeates the relationship between the Highways Agency and its service providers, at all levels within their organisations?
41. How should partnering be extended throughout the supply chain?

Network Board

The role of the Network Management Board is that of a Partnering Board with additional executive functions to address strategic issues affecting the Area contracts, for example; best practice, consistency, accountability, overall targets, whole life costing, and benchmark targets to measure continuous improvement. The Board must operate in such a way as to prevent the single operating company instigating high value, high profit work for its own benefit.

42. What form should the Network Board take? Should it administer constraints and resolve disputes or should it be more proactive in setting targets for continuous improvement?
43. How should such arrangements be formally provided for within the contract structure?

Road User Issues

Safety and Environment

Network Safety and congestion represent significant costs to the nation. Accountability for problems such as noise and pollution rests with the Highways Agency. There are no incentives for current service providers to identify improvements that may be environmentally necessary or desirable, such as quieter surfacing, habitat improvements and enhancement of the soft estate. The Highways Agency needs to ensure that, in future, service providers are properly aligned to deliver its objectives and responsibilities by using performance measures and payment mechanisms. There are also a number of legal requirements relating to the protection of flora and fauna that must be considered.

44. How can the MA and TMC, MAC and PFMAC be encouraged to take this wider perspective in their day-to-day operations? How can they be encouraged to take ownership of the problems and to identify solutions?
45. How should the views of road users and those living close to the road be captured and evaluated?
46. How should good stewardship of the environment be measured and rewarded?
47. How should service providers be incentivised to identify improvements and enhancements to the soft estate and road environment?
48. How can the service providers be fully committed to considering integrated transport within their remit? How might a Network Board assist in promoting integrated transport solutions?
49. How should performance in relation to "soft" issues (sustainable construction, network safety, congestion etc) be measured, evaluated and rewarded?

Key Performance Indicators (KPIs)

Key performance indicators can be pitched across a wide range -depending upon whether a macroscopic or microscopic view is taken. They can measure the contractual as well as the physical. They can be geared towards customer satisfaction targets or measuring the degree of continuous improvement within a contract. A critical element of the output-based approach to procurement is the need to define robust and measurable performance indicators against which to judge performance. Easily measured key performance indicators can be directly related to payment, however, qualitative issues may be better linked to bonus/penalty point incentives.

50. Do KPIs have to be linked to incentive payments? If so, why? And, how might a system be implemented? (Give examples of KPIs where possible.)
51. Should the incentive be in the form of quality points or cash payment? How might these point systems operate?
52. What are the respective advantages and disadvantages of indicators which are general, covering the entire contract with a single indicator (ie an outcome- a network fit for purpose) or selective, covering major items only ie an output- drainage and winter maintenance)? Would there be any advantage in KPIs which were even more specific, covering each individual item of work?

Highways Agency franchising

The Highways Agency can allocate risk under the contract to the service provider, but ultimately, as the Network Operator it is accountable to the Road User.

One of the key functions of the service provider will be to receive and deal with comments, queries and complaints from the public about the road network. Getting the right incentive and reward mechanisms for this activity is difficult but essential. An example of this is the handling of 3rd party claims for and against the Highways Agency.

53. How can service providers be encouraged to develop a level of ownership at the same time as being given the freedom to deliver a service, and yet still ensure a uniformity of service delivery across the Network that fully reflects the Highways Agency's ideals?
54. Should special road signs be erected in an area to advertise who is the service provider?
55. How should the customer interface be handled under each approach? Should the first-line response be for the service provider in all cases, or should it be the Highways Agency?