Hampshire County Council

Best Value Review Panel (Recreation and Heritage Committee)

28 March 2001

Service Specification - Hampshire Transport Management

Report of the Director of Property, Business and Regulatory Services

Contact: Richard Green Ext:6281

1. Aims of the Service

1.1 Hampshire Transport Management (HTM) manages and maintains the County Council's fleet of vehicles and plant. It was set up in 1991 under the Compulsory Competitive Tendering (CCT) legislation and it is a successful, self-funding business unit having twice secured the County Council's vehicle maintenance contracts against private sector opposition. Its business targets and strategy are contained within a Business Plan which was approved by the County Council's Business Sub-Committee on 8 January 2001. The current Business Plan is available for consideration as part of consideration of this Review.

1.2 Its core aim is to support the County Council's front-line operations by providing service departments, schools and voluntary bodies with professional advice and the most appropriate vehicles and plant, at competitive hire rates.

1.3 However, HTM is a support service and it must therefore be able to react positively to the policy changes occurring within the front-line service departments, which are its customers. If its customers change the services they provide, then HTM must fit into the new arrangements or go out of business. A good example is the work HTM has been doing with the County Surveyor on the introduction of `wet salt' on highways. HTM has participated fully in the discussions and used its expertise to discuss, agree and procure the new winter maintenance equipment required for a trial.

2. Background and Objectives of the Service

2.1 HTM is an integral part of the Business Services Group, which is within the Property, Business and Regulatory Services Department. The Business Services Group consists of a number of business units, self-funded and trading as separate cost centres. The Group provides a wide range of services to County Council departments and schools, and the business units are developing integrated business strategies with the support of customer liaison groups, e.g. Primary Headteachers Group.

2.2 The objectives of the service are as follows:-

3. Links to the Corporate Aims

3.1 Links to the County Council's Corporate Aims are set out in Appendix 1 of the Business Plan.

3.2 However, HTM is a support service to the front line operations of departments, such as Social Services, which means that most links to the Corporate Objectives are through those front line operations.

4. Background

4.1 A profile of HTM, together with its `Mission, vision and values' are contained within Sections 2 and 3 of the Business Plan.

5. Other Links and Key Stakeholders

5.1 HTM has links with almost every department in the County Council in as much that most departments hire vehicles on either a permanent or temporary basis. In addition, the Courier Service collects from and delivers mail to all departments. The Best Value reviews being undertaken in other departments could all have a potential impact on HTM and requests have been made to involve HTM managers where necessary.

5.2 The Corporate Best Value review of Transport, currently being undertaken by the County Education Officer, the County Surveyor and the Director of Social Services, could have an impact if an outcome is to increase the number of school minibuses as part of a solution for home to school transport. HTM already works closely with the Passenger Transport Group on this type of initiative and currently provides five school minibuses, which are expected to save the County Council in excess of £80,000 per annum. The HTM Transport Manager is participating in elements of this review and HTM is confident that it can meet any additional requirements arising from this review.

5.3 It was agreed by the Best Value Steering Group that HTM should not be part of the Corporate Review of Transport as:-

6. Service Policies

6.1 Until 1996 HTM purchased vehicles and this expenditure was part of the County Council's capital programme. From 1996 all new vehicles have been sourced through operational leases. Early termination of the lease, additional mileage over that agreed and/or a vehicle being returned in an unacceptable condition will incur a penalty from the lessor. HTM takes all possible steps to guard against this through continual monitoring of mileage and condition when vehicles are serviced.

6.2 All vehicles are subject to individual hire agreements between HTM and the customer. The vehicle specification is agreed, along with the hire period which is based on the expected life of the vehicle, taking into account the type of vehicle, the annual mileage and the type of usage. The customer is expected to retain the vehicle for the period of the hire agreement although, to date, where changes have occurred which were outside of the customers control, HTM has always been able to transfer the vehicle between customers, thus saving an early termination penalty charge.

6.3 The annual hire fee charged by HTM represents the lease cost, maintenance, insurance, testing and taxation. In addition, HTM adds a management fee. The hire fee is based on an average maintenance cost over the period of the lease. This effectively means that the annual amount customers pay remains constant other than an increase for inflation or changes in taxation. Tyres are included in the hire charge. This method of charging is much preferred by customers as it is far easier to budget. HTM invoices customers on a monthly basis.

6.4 Customers are liable for costs arising from not checking and/or topping up oil, water, and other fluids.

6.5 There is no specific County Council policy which requires departments to hire their operational vehicles from HTM. This means that HTM must remain competitive and must satisfy the requirements of its customers in order to survive.

6.6 The Courier Service operates under a Service Level Agreement which is reviewed annually with the County Education Officer and with other departments where ad hoc arrangements have been agreed, together with additional funding, which have extended the service to cover other areas and/or organisations.

7. Costs of Service

7.1 HTM is a self-funding business unit which means that it is required to cover its costs from its income. The business dimensions are set out in Section 10, the Trading Account, of the Business Plan. This covers the current year's trading together with forecasts for the following two years (2001/02 & 2002/03).

7.2 Section 9 of the Business Plan also identifies those areas for which HTM has earmarked the investment of trading surpluses and the years in which those investments are planned to take place.

7.3 Paragraph 9.5 of this report contains details of HTM's trading surpluses in recent years.

8. Recent Consultation

8.1 The HTM User Group consists of representatives of all the major HTM customer departments and meets twice a year. The User Group provides an opportunity for HTM to update departmental representatives on changes in legislation and/or policy and to receive feedback from departments on service levels and any areas of general concern

8.2 At the last meeting of the User Group the Best Value Review of HTM was discussed and it was agreed that a senior manager from the Social Services Department will be the User Group representative on the Best Value Review Team. In addition, it was agreed that the Review Team would identify key stages of the review process at which to report back to the User Group in order that they can comment on progress on key issues and have a role in shaping the review.

8.3 All major external customers are consulted regularly. In 1996 the County Council sold the Highways Direct Labour Organisation, Hampshire Works, to Balfour Beatty Civil Engineering Limited. A new company, Raynesway Construction Southern Limited (RCS), was formed and HTM has continued to trade with RCS. Regular meetings are held between the HTM Transport and Operations Managers and the RCS operational managers and the RCS Development Director meets the Head of Business Operations on at least a quarterly basis. Any issues are discussed and, where possible a way forward is agreed and implemented immediately. The majority of these discussions tend to focus on price and the availability of additional vehicles.

8.4 In addition, following agreement with the HTM User Group, HTM has designed and circulated a questionnaire to all internal customer departments. The questionnaire is circulated annually and the results will enable HTM to measure and compare its performance in terms of quality and customer satisfaction on a year by year basis. The results of the first survey are included in the Business Plan as Appendix 3.

8.5 Staff have been kept informed of progress on Best Value and will be regularly consulted throughout the review through team briefings and, where required, specific meetings. In addition, the staff representatives will be provided with sufficient time and opportunity to meet with and speak to their colleagues.

9. Performance Data

9.1 HTM is a business unit which competes against other private sector transport providers. The competition can be either through a competitive tendering process or where individual customers ask HTM to quote for a particular vehicle and the business is secured on a vehicle by vehicle basis, e.g. with schools and colleges. HTM's success with both methods of competition is demonstrated by its continued success as a business.

9.2 A significant measure of HTM's competitiveness is the continued trading with RCS and Balfour Plant. RCS would not have continued trading with HTM for the past four years if the hire and maintenance rates were not competitive. Although the current vehicle hire agreement with RCS for vehicles used on the County Council's highways term maintenance contract is a requirement under that contract, RCS still continue to hire vehicles from HTM for the Area 3 motorway and trunk road contract and have asked HTM to consider providing new vehicles if they are successful in retaining the Area 3 contract.

9.3 In addition, RCS has asked HTM to undertake all the maintenance work for which they are responsible (this is predominantly maintenance of the winter maintenance gritter inserts or Epokes). This was after RCS asked a number of other companies to quote.

9.4 HTM also carries out maintenance work for Balfour Plant. On numerous occasions the Balfour Plant Transport Manager has congratulated HTM on its maintenance standards and he would certainly not use HTM if it was more expensive or the quality of the work was poor. Similarly, HTM maintains a number of vehicles for Artel Services who operate a number of grounds maintenance and arboriculture contracts for the County Council. In addition, Accord Plc who have taken over the West Sussex highways and grounds operations have indicated that they to would like to discuss using HTM's services for some of their vehicles operating around the Sussex / Hampshire borders.

9.5 The key indicator for HTM's performance is the level of trading surplus. Since Local Government Reorganisation in April 1997, HTM has created surpluses of over £480,000 (1997/98 - £210,000; 1998/99 - £129,000; 1999/2000 - £143,000). This has been a significant achievement against a background of a reducing fleet and strong competition.

9.6 Successful trading is only possible where the vehicle hire rates are competitive but this is a difficult area to measure. Six large private sector transport companies were approached in February 2000. Of these, only two companies were willing to provide details of hire rates and these confirmed the HTM rates, over a range of vehicles, to be broadly similar or marginally lower. However, most companies see this type of information as commercially sensitive and are not willing to provide it unless there is a real potential for business. Lex Transfleet provided the information on the understanding that the County Council would provide them with a briefing on Best Value.

9.7 The Best Value Review Team will spend some time on this area and determine mechanisms for the regular collection of comparative data, probably from other local authorities. In addition, it is hoped to agree a benchmarking arrangement with Accord Plc.

9.8 Collection of performance data for the Courier Service has also proved difficult. The service has expanded significantly since Local Government Reorganisation (annual number of deliveries/collections: 72,180 in 1997/98; 81,996 in 1998/99; and 92,448 in 1999/2000) when it transferred to HTM from the Education Department, but it has not been possible with the resources available to regularly count all the packets, envelopes and boxes that the service collects and delivers. A possible way forward would be to introduce a bar code system but this would be an expensive way of collecting statistics and care must be taken not to introduce any processes resulting in additional costs, a requirement for more staff and/or a delay in the service.

9.9 Feedback from customers is very positive about the service, particularly from the major users like Education and Social Services, and this was confirmed by the last HTM questionnaire.

9.10 A consultant reviewed the service in 1996, in preparation for Local Government Reorganisation, and compared the County Council's costs with a number of leading private sector operators. At that stage the cheapest private sector operators average charge was in excess of £5.00 per delivery/collection. The in-house team's current cost per delivery/collection is around £2.50 which is still well below the 1996 private sector charge. The Review Team will consider how best to undertake a cost comparison exercise on a regular basis and this could be through the consultant who reviewed the service in 1996.

9.11 The service has also developed a reputation for flexibility. The number of large boxes to be delivered has increased substantially and in a number of cases the delivery has to be made within a limited period. Through close liaison with departments the service meets this sort of requirement, often at no additional cost, which would certainly not be the case with a private sector operator.

10. Competition and Other Providers

10.1 The introduction of Compulsory Competitive Tendering (CCT) resulted in little interest being shown by the private sector in competing for vehicle maintenance contracts. This appeared to be mainly due to the diversity of the local authority fleet which normally include a wide range of vehicles and plant, many of which are highly specialised and are produced by a range of manufacturers. The last CCT contract in 1998 attracted just HTM and one private sector bidder and HTM's price was around £100,000 a year cheaper; a saving of £500,000 over the life of the contract. This appears to be the national trend.

10.2 Competition for a combined fleet management and maintenance contract might attract greater interest from the private sector but, as the private sector hire rates appear to be similar to HTM's, (see paragraph 9.4.5 above), there appears to be little benefit to the County Council in following that route. In addition to delivering surpluses at these competitive rates, HTM also contributes towards the costs of central departments by way of Service Level Agreements.

10.3 For the past two years HTM has been trying, quite successfully, to break into new markets. There are two main areas and these are voluntary sector vehicles and school minibuses (see paragraph 11.2 below). This is a gradual process but, as HTM's reputation grows within these sectors, the level of business will increase.

10.4 There is already a well established external market for courier services. However, taking into account the cost of a tendering process and the data from the 1996 consultants report (see paragraph 9.4.5 above), it is unlikely that a full competitive tendering exercise would result in any savings to the County Council. In addition, the service now includes post sorting in Education Area Offices, delivery of work manufactured by Hampshire Printing Services, supporting County Supplies deliveries in West Berkshire, checking and maintenance of some fuel facilities and, occasionally, providing chauffeuring services to the Leader and Chairman of the County Council.

11. Current Challenges Facing the Service

11.1 The overall challenge for HTM is its ability to continue to operate as a successful business unit, supporting the service departments. There are a number of issues that will impact on HTM and these are set out in the Business Plan.

11.2 Success will rely to a large extent on HTM's ability to reduce its reliance on the highways fleet. This will mean expanding into other markets and the main areas for expansion are minibuses for schools, voluntary organisations, Youth Justice Service and colleges. During the last year HTM managed to agree hire arrangements for an additional 18 minibuses and, as their reputation for high quality service and competitive prices continues to grow, other schools and voluntary organisations are likely to take advantage.

11.3 Although it is HTM's wish to end its reliance on the highways fleet, it is possible that this area could continue to provide a substantial income in the future. The next highways term maintenance contract is likely to be for at least seven years. It is quite possible that the successful contractor will require either maintenance and support for its fleet or may wish HTM to provide a new fleet, which would be possible over a seven year contract period. This is an issue for negotiation with the successful contractor when appointed early in 2002.

12. Equalities

12.1 HTM has developed an expertise in the requirements of the disabled in terms of safe access and transport. Although this has been developed predominantly for Social Services clients and pupils at special schools, it is becoming increasingly important in supporting departments in ensuring access to services. A prime example is wheelchair access to the latest mobile library vehicles.

12.2 HTM employs around 45 staff and Section 7 of the Business Plan sets out a Personnel plan which covers the issues of recruitment and retention, performance management, communications and training and development.

13. Sustainability

13.1 HTM contributes to this strategy through the constant monitoring of vehicle emissions and the investigation of alternative fuels.

14. E Government

14.1 HTM is part of the Business Services Group of the County Council. The Group will be developing an Internet web site. Although, initially this will be used as a marketing tool, the longer-term goal will be to use the technology for on-line trading. This also relies on the successful replacement / development of the County Council's major computer systems.

14.2 The HTM workshops are not currently linked to Hantsnet. As the new technology is introduced across the County Council it is intended to look at opportunities to develop this particular area.