Highways Agency

Section 3 - Performance specifications

3.1 What is a performance specification?

Traditionally specifications have given a preferred design solution to define how a service is to be delivered, or an item is to be fabricated or constructed. This has often been based on empirical evidence -'it worked before so it will work again'. This method of specifying is inherently conservative with little incentive for suppliers to explore options for potential improvements.

There are many different views on what constitutes a performance specification. In this document we consider performance specifications that avoid prescriptive methods and focus on the final product or service. These can be described either in terms of the delivery itself or in terms of the benefits delivered - output and outcome driven measures:

• Output measures define the end product of works carried out on the network. This is usually in the form of a series of outputs that will deliver the desired outcome. For example meeting road surface skid resistance requirements is one output that will help enable the safety outcome to be realised.
• Outcome measures define the benefits that should be delivered as a consequence of the works carried out on the network. This will usually take the form of the level of service required. For example journey time reliability or level of safety.

3.2 Why use performance specifications?

The Agency's key driver for the further development of performance specifications is the potential to optimise service levels whilst at the same time offering better value for money. The driver, that we see for suppliers, is the ability to innovate more cost effective methods of work, reduce administration costs and increase efficiency.

3.2.0 Benefits

The objective that the Agency seeks to achieve by widening the use of performance specifications is to ensure best value is achieved throughout the life of the contract by:

• aligning suppliers with the Agency's objectives
• encouraging innovation at all levels in the supply chain
• offering an incentive to improve the efficiency and effectiveness of processes
• providing a driver for continuous improvement in service delivery
• improving whole life value decision making processes
• greater cost savings as the industry gains experience and confidence in this relatively new concept.

The adoption of an output / outcome based performance specification will enable suppliers to be rewarded for achieving the Agency's stated objectives, rather than simply by reference to the amount of work done, thereby promoting better value and improved price certainty against service delivery.

The Agency aims to widen the use of performance specifications on the majority of its contracts.

3.2.1 Risks

There are also perceived risks in introducing performance-based specifications across a broader spectrum of work:

• inappropriate application of performance measures resulting in a situation whereby suppliers can meet targets without achieving the desired outcome
• a possible reduction in ability to change contract requirements
• a potential for loss of consistency in approach across the network
• the loss of control of the technical governance role and
• a lack of preparedness in the construction industry.

Overall the greater flexibility of performance specifications should bring a general improvement in value for money and it is therefore worth pursuing their wider use.

3.2.2 Impacts

Widening the use of performance specifications will impact on the way the Agency works together with its suppliers. Potential changes likely to take place are:

• more reliance on risk management
• increased trust between partners
• greater involvement of the supply chain
• changes in working culture.

An atmosphere of trust and unity will need to be established and maintained by development of a partnership culture among suppliers as well as between the suppliers and the Agency. For example, sharing of information on a common platform could generate substantial synergies.

3.3 Feedback from "Paving the Way"

In a previous consultation paper, "Paving the Way" (December 1999) the issues of performance specifying different aspects of the Agency's business were addressed and we asked:

"What are the benefits in working under a performance specification?" and "Which Managing Agent Contractor (MAC) functions would not be suitable under a performance specification?"

The main benefits perceived by respondents were; increased opportunity for innovation, greater flexibility in working practices, improved quality of service and the potential for cost savings.

79% of respondents in December 1999 stated their belief that cyclic and routine works would be suitable for performance specification and only 15% believed that all or the majority of duties should be performance specified.

Significant difficulties were seen in measuring the service providers' effect on customer satisfaction and road safety. It was also felt that longer term functions were difficult to assess and that the effect of random and unforeseen events could distort measurement.

The industry has moved on since 'Paving the Way' and it is worthwhile establishing whether these views are still widely held, and the questions are asked again in this document. The Agency is now looking to explore options for allowing Industry to take greater responsibility for the products and services they offer thus creating the opportunity for innovative approaches to common challenges and driving continuous improvement.