Efficiency Gains from Collaborative Roads Procurement: A Consultation

Note: This consultation is now closed.

Delivering efficiency and best value is central to both the Highways Agency and Local Authority road networks. By working together we can really reap the efficiency benefits that improving our procurement practices can afford.

a consultation

This is becoming even more imperative as we fully understand the implications of the Government's Spending Review 2004. The Highways Agency's collaboration and efficiency team has been liaising with Local Authority colleagues, our suppliers and our stakeholders to identify potential opportunities for working together and to establish new working patterns that will achieve efficiency gains.

We now want to gather even more views and ideas on how to move potential gains forward. Our consultation document through its questionnaire seeks to:

Contents

Efficiency Gains from Collaborative Roads Procurement: A Consultation

Foreword and From the industry

Thank you for taking part in our work to develop greater efficiencies in roads procurement.

I am grateful to members of individual Local Authorities and suppliers, the Institution of Highways and Transportation (IHT), the County Surveyors' Society, the Technical Advisors' Group, Highways Agency staff and other stakeholders for their support to the collaboration and efficiency team. This document seeks to advance the consultation by setting out our new role, clarifying the proposals developed so far and inviting your views on the best way we can move forward together to achieve the efficiency gains targeted in the 'Gershon' Efficiency Review.

The public Spending Review 2004 (SR2004) has set targets of 2.5% efficiency gains year on year in the public sector. This is not about Whitehall telling us how to do things, but is about supporting existing efforts within central and local government and executive agencies to develop and apply best practice. One of the priority areas identified in the 'Gershon' Efficiency Review, which informed SR04, is 'to look at how better value for money could be achieved by more collective and professionalised purchasing across the public sector'.

I recognise there are already many examples of innovative working in the Local Authority environment, which are delivering improved value and we are keen to build on these successes. The National Audit Office and Office of Government Commerce have noted the Agency's achievements in implementing new ways of working with our suppliers following our Procurement Strategy published in 2001. I am also aware of the enormous improvements made by Local Authorities in recent years. But there is still further work for us all to do and scope for greater gains. Together, we can explore new and better ways of procuring and delivering services that could include collaboration, greater standardisation and coordinated planning to make more effective use of resources. In taking this work forward we are establishing a cross-industry advisory group to ensure everyone continues to be involved and represented.

I look forward to receiving your views and ideas in response to this consultation document, and to working with you to deliver the efficiencies we know can be achieved.

Steve Rowsell
Procurement Director, Highways Agency

From the industry...

The County Surveyors' Society and the Institution of Highways and Transportation are joining forces with the Highways Agency to investigate efficiency gains in roads procurement. This collaboration represents an opportunity for chief technical officers in Local Government to engage with the Highways Agency and to share best practice. It will also allow public sector clients to investigate the potential to improve procurement practices leading to a better service for the public. Both Local Authorities and the Highways Agency have made great strides in modernising procurement methods in recent years. These are already providing efficiency savings. We have the opportunity to build on this. A successful collaboration of this kind will undoubtedly contribute to the efficiency challenges laid down by the 'Gershon' Review.

Alastair Jefford
President, County Surveyors' Society

Mike Sharpe
President, Institution of Highways and Transportation

Foreword and From the industry

Seeking further efficiencies through collaboration

Delivering efficiency and best value is central to both the Highways Agency and Local Authority road networks. By working together we can really reap the efficiency benefits that improving our procurement practices can afford. This is becoming even more imperative as we fully understand the implications of the Government's Spending Review 2004.

The Highways Agency's collaboration and efficiency team has been liaising with Local Authority colleagues, our suppliers and our stakeholders to identify potential opportunities for working together and to establish new working patterns that will achieve efficiency gains.

We now want to gather even more views and ideas on how to move potential gains forward. This consultation document through its questionnaire seeks to:

Roads procurement - Where we are now

Striving for efficiency gains

Regional Centres of Excellence are being established to drive improvement in procurement practices across local government. Long-term frameworks and partnerships between Local Authorities and supply chain providers are already delivering efficiency savings and some Local Authorities are sharing information and resources to deliver better services at lower cost. Recent guidelines1, 2 published by Office of the Deputy Prime Minister (ODPM) promote best practice procurement in local government.In 2001 the Highways Agency launched its Procurement Strategy. setting out new ways of procuring roads and highways services. These included Managing Agent Contractor (MAC), Enhanced MAC (EMAC), Early Contractor Involvement (ECI) and regional frameworks, and the use of the Capability Assessment Toolkit (CAT). The Highways Agency is continually looking for ways to improve contracts to deliver better value for money, safer roads, reduced journey times and informed customers. We also often work with other organisations to establish best practice.

A 2000 survey by DETR/ LGA of procurement practices in the public sector3 highlighted the benefits of long-term relationships and revealed an appetite for further innovation. But it also indicated a range of challenges to be addressed.

Following this the IHT, together with 4Ps, published a Guide to Procuring Local Authority Transport Schemes and Services in November 2004, which gave practical examples of the different procurement practices used by some Local Authorities.

Efficiency savings targets in Spending Review 2004

Sir Peter Gershon was appointed by the Chancellor of the Exchequer in 2003 to review efficiency in public spending. His report4 summarises the main objective as being 'to release major resources out of activities which can be undertaken more efficiently, into front line services that meet the public's highest priorities'.

Based on the 'Gershon' review findings, the 2004 Budget announced an efficiency expectation of 2.5% year on year savings across the whole of government expenditure and this has been fed into the SR04 programme. This gave an overall savings target of at least £20billion by the end of SR04 (2007/08), of which the Local Authorities' target is £6.45 billion.

The Highways Agency must also achieve 2.5% year on year savings while maintaining or improving on the current levels of service. The SR04 target for efficiency savings in our procurement activities is £200m. In recognition of past successes, the Highways Agency has been asked to act as a change agent in helping Local Authorities to achieve savings, the target for which is £190m.

At least half of efficiency gains must be cashable. In the case of Local Authorities, savings will be returned for front line use within the Authority in which the savings were achieved.

New Ways of Working

By sharing the experiences of all our organisations we can deliver better services for the same money or the same services for less. Examples of more efficient ways of working may include:

Collaborative working - case study 1 - 1mproved accountability

Collaborative working can provide greater transparency in the processes for prioritisation and decision-making. There may also be direct benefits from reduced overhead costs and the provision of a 'seamless' service to the customer.

In 2001 the Barnsley MBC Social Services Department and Barnsley Primary Care Trust established a collaborative partnership to provide all social services for the Local Government and Health Sectors1. Contracts have been established for 2003-2008. The partnership encompasses several pooled budgets including mental health, drug action, older people and children and young people's services. As well as achieving greater financial efficiency through the reduction in overheads and better utilisation of pooled resources there has been a marked improvement in public service. Service users and their carers receive a coherent integrated package of care and do not have to confront complicated bureaucracy. 'Whole System' protocols such as Information Sharing have evolved. The collaboration has also resulted in some unexpected outcomes, for example the improved level of understanding by GPs of social care issues and the achievement of Children's Trust Pathfinder Status.

1 See http://www.barnsley.nhs.uk/PartAct//

Collaborative working - case study 2 - Greater 'buying power'

Economies of scale result from procuring services in larger volumes. Wider ranging contracts may also offer greater flexibility to cope with changing demands.

Successful collaborations include Local Authority purchasing consortia such as the Yorkshire Purchasing Organisation1. The YPO is the largest formally constituted Local Authority purchasing consortium in the UK with an annual turnover well in excess of £160 million. A management committee of elected representatives from its 13 constituent Local Authorities governs the YPO. The YPO despatches 400,000 orders per year from its main warehouse, mainly for low value, high volume goods.

Local Authorities in North East England are collaborating on the procurement of salt for winter maintenance. Substantial savings are being realised from suppliers dealing with one coordinated procurement effort.

1 See http://www.ypo.co.uk/online/index.asp?s=about/

Collaborative working - case study 3 - Better use of resources

Better value can be gained from contracts by identifying shared goals and making more effective use of resources. Integrating operational functions that are currently carried out separately may also result in direct savings on expenditure.

Established in 2002, London Marketplace1 is working to develop traditional e-Procurement, such as e-Catalogue purchasing together with more innovative solutions, including e-RFQ for temporary agency staff, electronic invoicing, and the use of purchase cards. Also in a first for UK Local Authority tendering e-Auctions have been used for electricity and computers. Data shows the boroughs are generating savings of between 40 and 75% on the cost of routine items bought through London Marketplace, compared with traditional methods.

1 See http://www.nepp.org.uk/

Measurement

New ways of working need cultural change, supported by appropriate forms of measurement to help demonstrate improvements in efficiency. The Treasury has set out the following criteria for qualifying efficiency gains:

  1. Efficiency improvements must be transparent and auditable
  2. Gains may be measured in terms of:
    • Reduced inputs (money, people, assets, etc.) for the same outputs
    • Reduced prices (procurement, labour costs, etc.) for the same outputs
    • Additional outputs (extra service, productivity, etc.) for the same inputs
    • Improved ratios of cost / output (unit costs, etc.)

The Highways Agency is researching current measurement practices with Local Authorities and benchmarking clubs with the aim of developing a common measurement framework. ODPM is consulting1 60 Local Authorities to help develop an appropriate measurement system.

1 ODPM (2004) Measuring efficiency gains in local government.

Seeking further efficiencies through collaboration

Consulting on the way forward

This consultation gives Local Authorities, suppliers and other stakeholders an opportunity to give their views on how we can work together for greater efficiency in roads procurement.

The anonymity of respondents will be protected before any information received is passed on to Highways Agency staff or our agents, and before any findings are published, unless respondents request action to the contrary.

Completing the Questionnaire

The questionnaire can be completed online. Alternatively hard copies are available from the collaboration and efficiency team. Please call 01306 874124.

Delivering efficiency and best value is central to both the Highways Agency and Local Authority road networks. By working together we can really reap the efficiency benefits that improving our procurement practices can afford.

This is becoming even more imperative as we fully understand the implications of the Government's Spending Review 2004. The Highways Agency's collaboration and efficiency team has been liaising with Local Authority colleagues, our suppliers and our stakeholders to identify potential opportunities for working together and to establish new working patterns that will achieve efficiency gains.

We now want to gather even more views and ideas on how to move potential gains forward. Our consultation document through its questionnaire seeks to:

Consulting on the way forward

Questionnaire

Closed: The deadline for response was January 28 2005.

Q1B




Q2A Please indicate, in order of importance, the five biggest issues or constraints affecting collaboration:

  1. Legal issues
  2. Competition Commission
  3. Local Authority controls and regulations
  4. Lack of political support
  5. Lack of skills and experience within your organisation
  6. Lack of capacity within your organisation
  7. Lack of capacity in the Highways Agency
  8. Development of appropriate management tools
  9. Development of appropriate measurement systems
  10. Lack of availability of funding and delivery plans
  11. Government controls and regulations
  12. EU procurement regulations


Q2B



Q3A Which of the following offer the greatest benefits from working together. Please select five and rank in order of importance.

  1. Maximising the benefits of investment in procurement
  2. Greater buying power
  3. Better use of resources
  4. Improved accountability and provision of a 'seamless' service
  5. Improved performance measurement
  6. Longer term relationships, greater security and sustainability
  7. Integrating strategy and programme delivery

Q3B




Q4A Please tell us how you measure the performance of your roads procurement activities by ranking the following in order of their importance to your organisation:

  1. Best Value Performance Indicators1
  2. Constructing Excellence KPIs2
  3. Measures defined in the specification of a contract
  4. Measures defined in a standard prepared by your organisation
  6. Management tools (eg Business Excellence Model, Balanced Scorecard)
  7. Measures defined in an inspection and auditing procedure
  8. Other statutory Indicators
  9. Bench marking clubs
  10. Other local performance indicators

    


Q4B




Q4C Please tell us the organisations against which your organisation benchmarks its performance (tick all that apply).


Thank you for taking the time to complete this questionnaire.

The Highways Agency will include unattributed comments from our research into potential collaboration, including this consultation, in a factual report. You will be sent a copy of the report in Spring 2005. We will use your responses as a basis for further development of ways in which we can work together to achieve efficiencies.

Your details will not be used for any other purpose and will not be shared with any 3rd parties.

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Questionnaire