Highways Agency

Safe roads, Reliable journeys, Informed travellers

Introduction

The purpose of this paper is to report the findings of the consultation earlier this year with the Research & Development and Technical Consultancy industry and to set out what we plan to do next.

The consultation proposed increasing the use of wider ranging and higher value framework contracts as a contractual means of facilitating the delivery of best value within a non-contractual community environment which supports the operation of the framework contracts.

The consultation paper was developed in association with representatives of the industry. The consultation period ran from the 4th December 2003 to the 30th January 2004. The paper appeared on the Highways Agency's website and the consultation was supported by a press notice. We also consulted with Highways Agency and Department for Transport colleagues.

Consultees were asked to provide their general comments on the proposals and to give specific comments on twelve questions in three specific areas. A summary of the responses to each question can be found the Annex to this letter.

We received a response from 70% of the consultees which we consider to be a good result. The consultation demonstrated that our proposals were supported, and in many cases welcomed, by the industry. The exercise did not reveal any major problems that would cause us to re-think our plans.

A number of concerns were identified :

• Given the differences between R&D/Technical Consultancy work, should they be lumped together ?
• The possible domination by a few prime suppliers
• The potential loss of specialists and small suppliers to the Agency
• Commercial confidentiality and the handling of Intellectual Property Rights
• The mechanics of the Community
• Remuneration arrangements
• The availability of a realistic work programme

We will continue to refine our proposals to ensure that these concerns are managed. The latest thinking on most can be found in the commentary in the Annex.

Next Steps

The consultation has helped us to focus on how we should manage the procurement of our R&D / Technical Consultancy. We will now :

• Develop new model contract documents (MCD) that fully support target cost remuneration arrangements, and the other elements recommended in the Procurement Strategy. Part of this work will be to consider whether the new MCD should be used for the replacement of the existing Consultancy Framework Agreements for Design Services (CFADS). This would standardise the Agency's R&D and consultancy MCD.
• Take forward the procurement of two National Frameworks - one for R&D and one for Technical Consultancy to provide the majority of the Agency's requirements in these areas for a five year period. The frameworks will be supported by the new MCD. In the light of the publication last October of the "National Procurement Strategy for Local Government "we will consider making the frameworks accessible to local authorities to service their highways related R&D.
• Consider building a dedicated R&D / Technical Consultancy page on the HA's website. This would be called "Doing R&D / Technical Consultancy Business with the Highways Agency" and it would give information about what we procure how we procure it and give contact points for further information. This should be particularly helpful to our smaller suppliers.
• Press ahead with the pilot for the new approach for the procurement of R&D / Technical Consultancy services and achieve an award in September 2004. The pilot is a framework for the Pavement Engineering Group ( PEG our reference 2/462), which will consolidate the replacement of three frameworks ( 2 R&D and 1 Technical Consultancy ) with fifteen suppliers, with one framework with a smaller number of lead suppliers who will provide the majority of the work through their supply chains. Expressions of interest for the consolidated framework were invited in the Official Journal of the European Union ( OJEU) in March. The closing date for the submission of the expressions of interest was the 15th April.
  The OJEU Notice referred to this consultation and advised that the PEG framework is the pilot for the new approach. Many of the respondents to the consultation expressed an interest in the pilot. We have completed the assessment of the expressions of interest and we shall be writing to the successful respondents soon.
• Use the document called "Motivating Success - A Toolkit for Performance Management - Research & Development, Technical Consultancy Framework" to manage the performance of our suppliers. The document explains why we want to measure performance, what we will be measuring and how we will do this. It will be the reference point for performance management for the PEG pilot and subsequent procurements using the new approach.

Annex - Summary of Responses

a) Frameworks

Q i. Would remuneration by actual cost and/or target cost in accordance with a stated share formula, where work and target cost is reviewed against specific milestones incentivise the supply chain to provide best value? and

Q ii. If so is this approach appropriate to a) R&D and b) Technical Consultancy work? If not please suggest alternative arrangements.

The general view was that actual cost against an estimate was appropriate for R&D and target cost for consultancy work. This threw up the differences in the disciplines, primarily the imprecise nature of R&D work, and whether it might be preferable to deal with it separately rather than lumping R&D/Technical Consultancy together. Reviewing progress against milestones was accepted as the best way to monitor work.

Comment

The Agency uses Department for Transport ( DfT) services model contract documents for the procurement of its R&D / Technical Consultancy requirements. These do not support target cost remuneration arrangements. What we are doing about this and our plans to procure separate National Frameworks for R&D and Technical Consultancy work is given in the "Next Steps" paragraph of the covering letter.

Q iii. Paragraph 15 concerned Key Performance Indicator's ( KPI's). How should these be measured in the R&D / Technical Consultancy context? and,

Q iv. Paragraph 15 omitted the "Safety " indicator which is included in the suite of KPI's which is used to measure the performance of our Major Projects contractors. Do you think that this indicator is relevant to R&D / Technical Consultancy. If you think it is how could it be measured?

There was widespread acceptance that KPI's are needed to manage the performance of our suppliers and that the Agency's Headline KPI's were about right. Some respondents suggested alternative complicated arrangements. Respondents were content to see the "Safety" and "Defects" indicators omitted though there was a recognition that we should take account of them.

Comment

The document called "Motivating Success - A Toolkit for Performance Management - Research & Development, Technical Consultancy Framework" will measure how our suppliers perform in terms of safety and defects in the R&D / Technical Consultancy environment by using the Client Satisfaction-Service sub-indicators called "Health, welfare and development of the workforce ( inc sub-suppliers)" and "Reworking". Your copy of the Toolkit, is enclosed with the covering letter.

Q v) How can concerns about confidentiality and Intellectual Property Rights be reconciled with the objective of sharing best practice?

Many respondents commented that the HA should remain the owner for work it has paid for. However, whilst outcomes of research may be the property of the client, some research methods or analytical techniques may be regarded as commercially sensitive by the supplier. Within a Community environment it is appropriate to include developing methods to share best practice, ensuring that credit is given to those who develop techniques adopted by others. The point was made that most consultancies are already involved in the dissemination of good practice through the various professional institutes. There was also a recognition that no single supplier is the market leader in every discipline so all would benefit from knowledge share so that the overall standard of practice would improve.

Comment

The Client Satisfaction Indicator in the Toolkit for Performance Management has a sub-indicator called "Creativity and Innovation" the text of which says " a system to encourage creative and innovative ideas. Procedures to record ideas for future use. Willing to share and discuss innovations in Community meetings". So suppliers who suggest good, workable ideas will be rewarded by a high score against this indicator. Suppliers who suggest good ideas and have a system in place to communicate them throughout the Community will get an even higher score.

b) The Community

Q i. Do you see benefits in the Community concept?

A resounding yes ! Communication, planning, measurement, common purpose, trust and innovation were words that were linked with the Community concept. However, some respondents feared domination by a small number of large prime suppliers, there was also concern that the Community would need strong and committed leadership to avoid it simply becoming a talking shop. It needed to have simple management processes.

Q ii. Do you consider that the foundations mentioned in paragraph 10 are appropriate for the Community and, if so, what values would members need to demonstrate to maintain the foundations and develop the Community?

Most respondents thought that the foundations were appropriate. Several suggested additional foundations and the attributes needed to achieve them.

Q iii. Should there be an infrastructure by which the Community is managed, and, if so, how should this function be managed and funded ?

75% of the respondents thought that there should be an infrastructure and that it should be managed and funded by the Agency. Steering groups, working groups, workshops, awareness days and informal arrangements were also suggested. Several respondents considered that there should be a "Community Manager" and that this important role could be filled by a consultant appointed by the Agency or by suppliers on a rotation basis. A popular suggestion was for Community information to be managed electronically via the Agency's website or by a secure extranet site.

Comment

The Community needs to be carefully managed and nurtured and it needs an infrastructure. It is likely that the infrastructure will consist of a "Community Board" with an Agency Chairperson supported by an Agency Secretariat. This could meet quarterly with nominated Director level representatives of each prime supplier. Further consideration could be given for prime suppliers to each meeting a different representative from their supply chain. The Agency considers it appropriate for it to pay for the costs of accommodating the meetings but not for attendees time.

Q iv. By what criteria should prospective members be allowed to join the Community?

Respondents did not want the Community to be a closed shop or have a "life membership". It should be open to all framework holders. Several respondents said that a Capability Assessment Toolkit ( CAT ) type process should be used to assess membership.

Comment

The consultation paper said " As each new supplier is appointed we hope that they would be willing to join the Community". For the initial assessment stage of each of the longer lasting, higher value and wider ranging frameworks we are developing a process which will provide information about the organisational capabilities and management approach of potential suppliers that is consistent with that required by the CAT. The tender assessment stage will concentrate on those aspects of quality which enable a supplier to demonstrate that it can add real value to the product or service and to provide supporting evidence. The plan is that, over time, we will have a Community of suppliers who possess the organisational capabilities and management approach that we are looking for.

Q v. What barriers, if any, do you see to the creation of the Community?

A frequently quoted barrier was the inability of the Agency to provide realistic work programmes. Other barriers identified were an unwillingness to work in a manner conducive to the Community concept, prime suppliers monopolising smaller suppliers to strengthen their own position, prime suppliers squeezing the margins of their supply chains, a lack of commitment from the Agency in developing the Community and the expertise of smaller specialists being lost if they do not become part of the prime suppliers supply chains.

Comment

We are considering what we can do to provide realistic programmes so that suppliers are encourage to plan their resources. This should allow them to spread their overheads and lower profit margins on subsequent task orders. The way that prime suppliers manage their supply chains is a big concern of the smaller suppliers. The development of a CAT derived process will help us to understand how prime suppliers manage their supply chains. We need to think more about how we can scrutinise the management arrangements during the tender assessment stage, so that we can distinguish between those who say that they partner and those who genuinely share the benefits with their supply chain partners. We will become smarter at doing this.

Q vi. Would you like to join the Community and what do you think you can bring to it?

All respondents said they would and explained what they thought they could bring to it.

c) Frameworks / The Community

Q i. Would you be prepared to join the Agency in applying the The Government Procurement Code of Good Practice?

All respondents said that they would.