Highways Agency

Options for the future

The first Managing Agent and Term Maintenance Contracts for a Highways Agency maintenance Area were let in 1996. Since then contracts in all 24 Areas have been let. The contracts are successful, but improvements can still be made.

Four procurement options have been identified from the initial consultations and our experience of operating the current contracts. These options broadly map out how the Highways Agency sees the contracts being developed over the next few years. Each option will be evaluated in terms of how it achieves best value. The practice of letting Pilot contracts will be employed.

A major principle in this evolutionary process is combining the roles of the Managing Agent and Term Maintenance Contractor into a single company service provider, called a Managing Agent Contractor (MAC). Achieving this integration presents a number of problems and it may be necessary to reach the goal in stages.

No one option is envisaged as providing the perfect solution for all Areas. Geographic, work type etc issues dictate that a basket of procurement options will be required.

Of course, these may not be the only options. Other ideas, emerging from this consultation will be considered and may well be adopted.

Option 1 - Improved Managing Agent and Term Maintenance Contractor contracts with Partnering Board

This option will feature improvements to the Managing Agent and Term Maintenance Contracts, combined with the introduction of a Partnering Board.

Key elements of this option include:

• The Partnering Board will consist of senior members of the Managing Agent, Term Maintenance Contractor and the Highways Agency. The Board will benchmark performance targets, review investment decisions and encourage innovation. It will also have a role in dispute resolution. Note : (In a number of Areas informal "Partnering Board" arrangements already exist).
• The contracts will use a partial performance specification for routine maintenance. This facilitates more innovation in service delivery. Greater use of target cost type arrangements will ensure that there is greater price certainty at the same time as offering incentives to the contractors to improve their performance.
• Increased contract duration, say 5-7 years, and an increased threshold for work done under the Term Maintenance Contract. The precise duration and threshold values will be determined through this consultation exercise, taking into account the type of work, the need to provide a consistent workload, and the effect on the regional or local industry marketplace.

Option 2 - Network Contractor and Network Adviser contracts with Network Board

This option is being developed in parallel to option 1. The key differences over option 1 are that:

• The Contractor role is much greater, with significant additional responsibilities eg quality assurance. The Network Contractor will be required to deliver all works and to do so without the supervision currently provided by the Managing Agent. The roles of the parties will be changed to reflect that the Network Contractor will take more responsibility for highway management, thus allowing the Network Adviser to focus on the strategic planning of maintenance needs, design and whole life costing of maintenance plans.
• A Network Board would replace the Partnering Board discussed in option 1. The Network Board, formed by representatives from the Highways Agency, Network Adviser and Network Contractor will have executive authority to set performance standards, monitor continuous improvement and ensure delivery of the service in addition to steering the contract partnering.
• More robust and planned audit functions need to be in place as there will be a greater need to audit the quality systems to ensure that the work is being delivered to the performance requirements. These audit systems may facilitate the use of more extensive performance specifications, above those used in option 1.

Option 3 - Managing Agent Contractor contracts

This option involves the combination of the Managing Agent and Term Maintenance Contractor roles into a single operating company. The Managing Agent Contractor (MAC) will be required to produce a rigorous quality plan setting out in detail how it will ensure that works are delivered to the Highways Agency's requirements and that appropriate service is provided for the customer. The Highways Agency will use audit processes to demonstrate service delivery, value for money, propriety and accountability.

Key features include:

• The requirement to partner with the Highways Agency, and set up a Network Board, as described in Option 2 above, to provide a strategic steer, set performance targets etc.
• The use of a comprehensive performance specification for routine and capital maintenance (in the short-term this may be a partial performance specification with adjustments made to accommodate the situation).
• A complete focus on service delivery for the customer and optimise efficiency of the administration and management of the contracts

Option 4 - Privately Financed Managing Agent Contractor contracts

The introduction of private finance for major capital works projects has been successful. It is therefore important to see if the same benefits can be achieved in the more predictable and steady expenditure environment existing for maintenance. The Privately Financed Managing Agent Contractor (PFMAC) is seen as a further extension of the Option 3 that is worth Pilot testing.

Key features include:

• Greater risk transfer
• A longer term contract - say 15 to 30 years - although this will have an impact upon the Highways Agency's control of the network.
• Shadow tolls or similar payment mechanisms as developed for the DBFO, for example, payment on availability, would be envisaged.

Evolution of Maintenance Area Contracts Diagram

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