Highways Agency - Safe roads, Reliable journeys, Informed travellers

1.1 Progress against the 10 Principles for Best Value

Ten Principles for delivery of Best Value

The Agency's Procurement Strategy set out 10 overlying principles to be applied to all categories of Highways Agency procurement to help deliver best value. The principles were embraced by both HA teams and our suppliers and have been crucial to our success. They will remain central to our work during the next three years. As we have worked with the principles and developed them we have identified the need to add Collaboration. And this addition illustrates our commitment to partnerships for successful delivery. Collaboration - clients working together to achieve more effective delivery of services to customers - will be discussed further in part two of this document.

• Early creation of delivery team - early contractor involvement for more scope in innovation, better risk management, and forward planning of work programmes and resources
• Integrated and incentivised supply chain - integrating the supply chain with its specialist knowledge, incentives for innovative ideas to give best value solutions
• Maintaining a competitive and sustainable supply chain - maintaining a good quality supplier base motivated and incentivised to work with the Agency
• Clear points of responsibility, no unnecessary layers of supervision - clarifying roles and responsibilities to reduce contractual interface problems, eliminating resource wastage from unnecessary layers of supervision
• E-procurement - to make tender processes, communications and performance measurement more efficient
• Selection of suppliers on the basis of best value - identifying the aspects of quality which add real, affordable value, using reality checks to confirm quality submissions and promises
• Fair allocation of risks - risks will be allocated to the party best able to manage them and the Agency will accept risks where suppliers are prepared to work in partnership to manage them and control the consequences
• High quality design - design solutions will be based on whole life value, assessed by reviews integrated with Office of Government Commerce gateway review processes. We are committed to achieving the principles of good design set out by the Government Strategy for Better Public Buildings
• Partnership approach based on long-term relationships - moving from short-term project partnering arrangements to long-term relationships for retention of skills and better resource and work programming
• Performance measurement with continual improvement targets - establishing a five-year programme of improvement under the Clients' Charter scheme to confirm benefits in the form of cost and time-savings, reduced defects and accidents, and improved whole life value and satisfaction with the product.

1.1 Progress against the Ten Principles

Both the Agency and the industry have risen to the challenges of delivering best value solutions and services and much has been achieved since 2001. At the core has been the continuing development of an integrated, incentivised, competitive and sustainable supply base in an environment supporting longterm partnerships. This has helped us learn more about the capability and performance of our suppliers, as we also make internal changes to support our procurement principles.

Early creation of delivery team

The Agency has designed and implemented new forms of contract, enabling the early involvement of the supply chain in the planning and designing of projects and service requirements. This means greater innovation, better risk management, forward investment in staff and plant, and affordable, safer solutions. The contracts include:

• The Managing Agent Contractor (MAC) contract for highways maintenance and the pilot Enhanced MAC (or EMAC)
• The TechMAC - A specific managing agent contractor contract to support the delivery of technology-based projects such as Active Traffic Management in the West Midlands
• The Early Contractor Involvement (ECI) contract for major new-build projects and packages of projects
• Frameworks for various consultancy and small works requirements
• Construction Management involving the direct employment of smaller suppliers to deliver specialist services.

Integrated and incentivised supply chain

The flexibility of these contracts enables greater integration at an earlier opportunity and when the supply chain can add most value. The principal incentives are:

• Our customised new forms of contracts are based on the ECC Target-Cost Option with reimbursement of actual cost and payment of bonuses
• Supply chain management is taken into account in our selection process and the most capable and best-performing suppliers are rewarded with further opportunities to tender
• The Agency requires prompt payment throughout the supply chain
• Good progress in removing retention money clauses from our contracts
• The Agency practises alternative forms of dispute resolution.

Maintaining a competitive and sustainable supply chain

Understanding and utilising the capability, capacity, culture, skills and competences of key suppliers is fundamental to the successful, long-term delivery of the Agency's requirements and achievement of best value. Effective supply chain management, including gathering market intelligence, helps to minimise the risks of over-dominance or over-reliance in specialist supply areas. To gain better understanding we have:

• Established our internal Supply Chain Management Team
• Consulted widely with the industry on initiatives prior to implementation
• Designed and implemented new selection and performance reporting processes, which reward those suppliers who deliver best value
• Enabled new suppliers to compete in our markets by making it clear what we require of them.

Clear points of responsibility, no unnecessary layers of supervision

Clear roles and responsibilities are essential to effective contract management and operation of partnering arrangements. The Agency has developed and implemented:

• MAC contracts with single-point responsibility for delivering front-line services to customers in nine out of 14 maintenance areas
• Early Contractor Involvement contracts with single-point responsibility for delivery of planning, design, and construction services for major new-build projects
• Contract forms and contract management which encourage a culture of trust and a right-first-time approach through quality management and continuous improvement in delivery reducing the need for supervision.

E-procurement

• We have established an electronic supplier database to support our selection process. Its link to ConstructionLine means suppliers do not have to resubmit certain information when expressing an interest to tender
• All notices required for publication under the European Procurement Directives are published electronically and most tender correspondence is conducted by secure e-mail reducing transaction costs for the Agency and our suppliers
• Key supplier systems are electronically integrated with the Agency's 'System for Managing' helping prompt payment of invoices.

Selection of suppliers on the basis of best value

Best value is unlikely to be delivered unless the most capable and best performing suppliers are selected on the basis of evidence:

• The Capability Assessment Toolkit (CAT) helps us identify those suppliers most likely to deliver best value solutions and services. Using a framework of capability indicators based on business excellence models, the CAT measures the approach and potential effectiveness of individual companies
• CAT scores are validated and combined with past performance data to determine which suppliers are invited to tender
• Specialist teams with project management and procurement expertise validate supplier capability and tender submissions, including past performance data
• We have introduced our new best value approach to tendering. Tenderers are required to submit their bids in two parts. In the first they set out their approach including how they will manage the risks to delivery of a safe, affordable, defect-free project or service. In the second they must provide evidence of when and where the proposed approach has been successful.

Fair allocation of risks

• Risk Registers feature in all contract documents for high value, high risk projects. The register is reviewed with the tenderers as part of the tender process to ensure risk allocation is fair and placed with the party best able to manage it.

High quality design

Design quality is assured and enhanced in several ways:

• Early involvement of constructors, service-providers and key specialist suppliers in development of project designs and specifications
• Contractual requirements for ISO 9000 accreditation and the use of quality plans to give assurance in the delivery of key services
• Formal review of projects at key stages in development of solutions

Partnership approach based on long-term relationships

To build and improve our long-term partnerships we have developed:

• Area Maintenance contracts lasting up to seven years subject to good performance
• Early Contractor Involvement contracts covering the project planning, design and construction period for major projects, including packaging them together where possible
• Frameworks for delivering a range of services covering consultancy, technology, surveys and small projects
• The Cultural Assessment Framework (CAF) to measure behaviours and the success of project partnering to support long-term relationships
• Communities between suppliers of similar services - (maintenance, major projects, construction management, and some frameworks) with Agency programme and project sponsors to enable forward planning, retention of key personnel, sharing of best practice and knowledge transfer
• Project Partnering Charters and embedded them.

Performance measurement with continual improvement targets

To improve service delivery to customers we need to ensure continuous improvement is achieved throughout the supply chain. A greater understanding of our performance and that of our suppliers has been achieved through:

• Development of the PRIDe (performance, review, improvement, delivery) team to support Agency and supplier teams in development of robust quality systems and measurement regimes which support continual improvement
• The introduction of standardised Area Performance Indicators in maintenance contracts to support service improvement
• Our accreditation under the Construction Clients' Charter. The Agency's Five Year Action Plan for self-improvement against charter indicators was approved in 2001. Charter Client Status was reaffirmed by the Construction Minister in March 2005
• A comprehensive measurement and reporting regime within the Construction Management Community of specialist suppliers
• Introduction of the Toolkit for Performance Measurement which is based on the Key Performance Indicators developed by the Construction Best Practice Programme
• Annual performance reviews of our key suppliers.