Highways Agency

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:

• Outline proposals for collaborative working
• Highlight the issues and constraints involved
• Establish the industry's views and the best way forward
• Review what changes need to be made to demonstrate efficiency savings

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:

• Greater standardisation of requirements leading to more familiar contract documents
• Synergies from public sector service providers working together on common objectives
• Challenging requirements on service provision and improving demand forecasting
• Forward planning and programming of works and services
• Driving improvements through supply chain management
• Sharing of intelligence and performance data to assist effective benchmarking
• Greater use of current and future frameworks and call-off contracts to achieve economies of scale, including joint contracts and shared highways services
• Improved professionalism of the procurement operation, cutting local overhead costs
• Development of common measures of efficiency
• Sharing of resources and facilities
• Sharing of best practice in procurement strategies and/or forms of contract
• Collaborative pilot projects
• Addressing cultural differences across the industry

• ¹ ODPM/ LGA (2003) National procurement strategy for local government. Available from http://www.odpm.gov.uk/(Local Government)
• ² ODPM/ SPT (2003) An Introduction to Strategic Service Delivery Contracts. Available from http://www.odpm.gov.uk/(Local Government)
• ³ DETR/ LGA (2001) Local authority procurement: a research report. Available from http://www.odpm.gov.uk/ (Local Government)
• ⁴ Gershon Sir Peter (2004) Releasing resources to the front line. Report to the Prime Minister and the Chancellor of the Exchequer. Available from http://www.hm-treasury.gov.uk/ (Recent Publications)

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.