Highways Agency

The business opportunity

The Private Finance Initiative

The funding structure for RTCCs is an issue which requires careful consideration. We are currently assessing the opportunities for the private sector to supply this service and are opening discussions with interested parties through consultation.

The PFI has become one of the Government's main instruments for delivering high-quality and cost-effective public services. It is not simply about financing capital investment in new assets, but also about using the full range of private sector skills and innovation.

PFI projects fall into three broad categories:

• financially free-standing projects, where the private sector's costs are recovered entirely through charges to the end-user;
• services sold to the public sector, where costs are recovered by charges from the private sector to the public sector;
• joint ventures, where costs are met partly from public funds and partly from other sources.

There are two fundamental requirements for a PFI project:

• value for money must be demonstrated for any expenditure by the public sector; and
• the private sector must genuinely assume risk. 

Delivering the RTCC Initiative

Our studies have confirmed that saving motorists' time - through avoiding congestion - has a real economic benefit. Taken over 15 years, these savings alone would easily exceed the cost of investment in RTCCs. However, there is pressure on government funds, and the RTCC Initiative is likely to be delivered earlier by minimising dependence on these. This requires creating third-party revenue streams to pay for the required investment. The potential commercial opportunities include:

• marketing value-added traffic and driver information;
• exploiting the spare capacity of existing under-utilised Agency assets. For example, we have installed telecommunications cables alongside all motorways and some all-purpose trunk roads. These could well be of interest to a company wanting to expand its presence in the UK telecommunications market. We also own strips of land on either side of most stretches of motorway. This land is known as 'soft estate' and has some potential for providing routes for new telecommunications cables or other facilities needing access rights. It could also be used for siting installations such as masts and base stations for mobile cellular telecommunications networks;
• charging for the use of breakdown and recovery services supplied via the emergency roadside telephone services;
• using the spare capacity of any new assets provided as part of the project. For example, RTCCs will require new computer systems and possibly buildings to house them - surplus capacity might be used for commercial activities.

Commercial opportunities

The illustrative diagram above shows how a combination of revenue streams and the utilisation of Agency assets might present sufficient commercial opportunities to make RTCCs a viable self-financing project.

We do not anticipate that one single company will be able to provide all the necessary services. Instead, we expect that consortia will have to be formed in order to provide the necessary expertise. For example, in addition to a traffic-management capability, a consortium might include a facilities management company, an information services provider and a telecommunications company.

Key issues for consultation

• What type of public/private partnership model is most suitable for this project?
• What are the most appropriate payment mechanisms for the range of proposed RTCC services?
• What incentives/penalties might be appropriate for operating RTCCs?
• How long should the contract period for this service be?
• What are the roles of the RTCC service provider and the Agency in the provision of services?
• What Agency assets might be utilised?

Summary

The Highways Agency has identified RTCCs as a high-priority Private Finance Initiative (PFI) project. The aim is to make the RTCCs financially free-standing.