Archived decisions

Hampshire County Council

Recreation and Heritage Policy Review Committee

17 January 2002

Best Value Review of Hampshire Transport Management

Report of the Director of Property, Business and Regulatory Services

Contact: Richard Green Ext: 6281

1. Summary

1.1 This report contains the outcomes of the Best Value Review of Hampshire Transport Management (HTM). Appendix 1 of the report is an Improvement Plan which identifies areas for improvement, timescales, responsibilities and progress to date. Members are asked to consider the report and to approve the recommendations at paragraph 9.1.

2. The service under review

2.1 HTM is an integral part of the Business Services Group which is managed within the Property, Business and Regulatory Department. The Business Services Group consists of a number of business units, self-funded and trading as separate cost centres in accordance with the County Council's Financial Regulation 20. The Group provides a wide range of services to departments of the County Council, to schools and other organisations and the business units are developing integrated business strategies with the support of customer liaison groups, e.g. Primary Headteachers Group.

2.2 HTM's has an annual turnover of around £3.8m per annum and employs around 45 staff. 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 business plan is reviewed annually for Member approval in January and that review is currently underway. The Business Plan is used to monitor progress throughout the year and the improvements and actions identified within the Best Value review process will be incorporated into the plan and monitoring process.

2.3 The main activities of HTM are as follows:-

· To procure, manage and maintain the County Council's fleet of vehicles and plant. The fleet currently consists of 699 separate items ranging from vans to heavy goods lorries and trailers to gritters. Each vehicle or plant item is subject to an individual hire agreement between HTM and the customer.

· To support the County Surveyor's and the highways term maintenance contractor's winter maintenance operations. HTM workshop staff attend for salt runs to ensure the vehicles start and to deal with any breakdowns. HTM also manages the County Surveyor's stock of salt spreading equipment

· To keep abreast of vehicle legislation and advise departments of legal requirements (including health and safety) and best practice, e.g. access for and safe transportation of people with disabilities and seat belts in school minibuses.

· To keep abreast of vehicle manufacturers latest developments in order to advise departments, schools and voluntary organisations of the most appropriate vehicle and specification for their operational needs.

· To manage the County Council Courier and Schools Delivery Service. This service delivers to and collects post and packets from every school in the County twice a week and most offices daily. The service to schools operates under a Service Level Agreement which is reviewed annually with the County Education Officer.

· To negotiate contracts with private sector hire companies and to manage a small pool of vehicles for short-term hire by County Council departments and establishments

· To procure and manage contracts for a chauffeured car service for Members and the delivery of school meals from production kitchens to serveries through taxi companies and small private sector operators.

3. The review process

3.1 EFQM review

3.1.1 The Recreation and Heritage Best Value Review Panel agreed the scope and contents of the review at their meeting on 28th March 2001. The initial stage was a review of the business unit using the European Foundation for Quality Management (EFQM) model. The review was facilitated by two trained assessors from within other areas of the Property, Business and Regulatory Department and the results are attached as Appendix 2 of this report.

3.1.2 Although most of the issues identified by the EFQM review were already known through the business planning process, a number of new issues were identified and have either been dealt with by the HTM management or incorporated into the action plan at Appendix 1. The rest of the Best Value review concentrated on the 4Cs of Best Value.

3.2 Consultation

3.2.1 HTM have a User Group which consists of representatives of its major internal (HCC) customers. The Group meets twice a year which enables HTM to update customers on legislative or business changes. The Group is also encouraged to provide feedback to HTM on its services and to raise any issues of concern. This Group also involves users of the Courier Service.

3.2.2 In addition, HTM surveys its customers on an annual basis. Departments have flexibility on deciding who completes the questionnaire, e.g. drivers or managers. The annual survey was completed in May 2001 in order that the results could be fed into the Best Value review process. The results identified a few areas for improvement but, overall, the survey confirmed that HTM was valued by its customers and there is a high degree of satisfaction with its services.

3.2.3 HTM also has a number of external customers, the major one being Raynesway Construction Southern Limited (RCS), the current highways term maintenance contractor. HTM hire to and maintain vehicles for RCS. They also support the RCS winter maintenance activities. There is regular consultation between the various HTM and RCS operational managers and the Head of Business Operations and the RCS Business Development Director meet regularly to discuss issues and generally monitor the service arrangements. The relationship between RCS and HTM continues to be strong and discussions are currently underway regarding a more formal partnering arrangement for the future.

3.2.4 A further major customer for HTM is Balfour Fleet Services Limited. RCS is part of the Balfour Beatty Group of companies and they hire a number of vehicles from Balfour Fleet. HTM maintain these vehicles and a recent meeting with the Balfour Fleet Transport Manager confirmed he was happy with the standards of service and the costs.

3.2.5 Conclusion - There is regular consultation between HTM and its customers. There is customer choice in as much as departments are not `forced' to use the services of HTM and, although HTM does not strive to be the cheapest, it does endeavour to provide the best overall `value for money' hire and maintenance package. HTM's consultation mechanisms are vital tools in adapting its services to achieve this.

3.3 Competition

3.3.1 HTM was set up in 1991 to compete for the County Council vehicle maintenance contracts under the Compulsory Competitive Tendering (CCT) legislation and has been successful on each occasion.

3.3.2 There is complete customer choice in as much as no County Council department is forced to use the HTM services, although the vast majority do.

3.3.3 HTM's continued success in trading with the private sector is a good measure of its competitive position. Its current customers include Raynesway Construction Southern Limited, Balfour Fleet Services Limited, Foster Yeoman Limited, Mott Macdonald Limited, New Century Amenity Services Limited and a number of colleges including Sparsholt and Itchen Colleges.

3.3.4 HTM also provides a number of minibuses to schools. Although some of these are linked to transport initiatives there are a number which schools fund direct and it is clear that they have obtained quotes from other providers before choosing HTM. Vehicles are also hired to the voluntary sector.

3.3.5 In June 2001 Mott Macdonald Limited asked HTM to quote against other providers for 28 vehicles for use on the Area 3 motorway and trunk roads contract. This has now increased to 31 vehicles. In August the HTM quote was accepted and most vehicles were supplied, fully marked and fitted with light bars, etc. in early September.

3.3.6 Conclusion - The above confirms HTM's overall competitive position and HTM is very aware that the loss of that position would probably result in the closure or externalisation of the business unit.

3.4 Comparison

3.4.1 In 1999, prior to the Best Value review, HTM attempted to undertake a comparison exercise with a number of large private sector fleet operators. Only two operators, TLS and Lex Transport, agreed as the others considered this to be commercially confidential information which they would not be willing to share. The comparison was based on the hire rates for a number of standard vehicles and the HTM hire rates proved broadly similar to both companies'. However, in discussions with the Lex Business Development Manager, he made it clear that if Lex were to take over the provision of vehicles for the County Council, he would still expect there to be an `expert client' within the County Council who would be their normal, central point of contact and would be responsible for preparing the vehicle specifications and agreeing them with the client departments. This is part of the role currently undertaken by HTM and the cost of retaining this role within the County Council would need to be added to the Lex hire rates in order to undertake a true cost comparison.

3.4.2 As part of the Best Value review process a number of local authorities were contacted with a view to undertaking a comparison exercise. Again this was based on comparing the hire rates of a number of standard vehicles. Of the 24 authorities contacted, five replied. As expected, there are a number of different approaches regarding the construction of the vehicle hire rate but the exercise confirmed that the HTM hire rates were at a broadly similar level to other providers.

3.4.3 HTM also operates an internal Courier Service and a specialist firm of transport consultants were employed to compare the costs of the internal service with private sector operators. Three firms responded - TNT, Acclaim Parcel Express and Securicor Omega Express. Five other companies did not respond.

3.4.4 The prices quoted resulted in the following average cost per collection/delivery - TNT - £3.35; Acclaim - £5.29; Omega - £5.03. The consultant advised extreme caution over the TNT price as he felt it was low, especially when compared with the other prices quoted. The average cost per collection/delivery for the internal provider, including all overhead costs is £2.95.

3.4.5 The consultant also advised that the companies would expect there to be one pouch per site whereas the internal service collects envelopes, parcels and boxes. In addition, the companies would require the use of a central sorting office for which the internal service currently pays approximately £8,500 per annum in rent and a central client contact to act as liaison, which would require the creation of a new post. Effectively, this would add a further £20,000 - £30,000 to the companies' quoted prices which would increase their average price by a further 3 to 4p.

3.4.6 In addition, the County Council Courier Service undertakes a number of additional tasks at little or no extra charge. Any private sector operator is either unlikely to be able to provide these services or make a significant additional charge. These tasks include:-

    · Mail sorting - the Courier service sorts all mail other than that contained in sealed pouches.

    · Boxes and large parcels are delivered, particularly to schools at the start of the academic year.

    · Recorded deliveries are available - this is a service developed for Social Services `sensitive' mail/records

    · Movement of furniture and SEN equipment between schools

    · County Supplies deliveries to West Berkshire

    · Vehicle movements for HTM

    · Some chauffeuring duties for Members

3.4.7 Conclusion - overall the HTM services compare very favourably with other providers from both the private and public sector.

4. Challenge

4.1 Highways fleet

4.1.1 The major issue for HTM is the potential loss of income from the highways fleet when the current highways term maintenance contract expires in April 2002. There have been no replacements for the highways vehicles since 1994 and the current fleet will therefore be beyond its economic life at the end of the current contract. The major impact will be on the workshops (maintenance) where the highways fleet still represents around 40% of the business. However, for the past few years HTM have adopted a successful strategy of expanding into other business sectors and reducing its reliance on the income from the highways fleet. In addition, the workshop staff have been learning new skills in order to reduce the amount of work currently undertaken by outside contractors. This is predominantly in the area of fitting out vehicles with light bars, internal plywood protection and the fitting of specialist equipment

4.1.2 However, all the indications are that the successful highways term maintenance contractor is still likely to want to use the HTM workshop facilities. The workshops are located in the highways depots and HTM prices are competitive. RCS, the current contractors, and Balfour Fleet are proposing a partnership arrangement whereby Balfour Fleet will provide RCS with a brand new, larger fleet of vehicles and HTM will maintain that fleet. Assuming RCS win the contract the challenge for HTM will be to cope with a growth in work and one option will be to look for partners from both the private and public sector. However, the results of the highways contract tender process are unlikely to be known until early in 2002.

4.2 Fuel

4.2.1 HTM manage the County Council's fuel facilities which are located in a number of the highways depots around the County. An option being considered was to close these facilities and issue fuel cards as the pumps and management systems were old and unreliable. However, last year's fuel crisis demonstrated just how vulnerable the County Council was and having our own fuel enabled the County Council to keep a number of the emergency services operating and to support a number of contractors including highways (for emergencies only), home to school transport and some undertakers working for the Coroner.

4.2.2 The updated facilities and new management systems will be completed and fully operational by April 2002. The opportunity has also been taken to fully pressure test all the underground fuel storage tanks to check for leakage. The new management systems will improve the information provided to customers and will include data on fuel usage per vehicle.

4.3 Alternative Fuels

4.3.1 Another challenge for HTM is in the area of sustainability and the use of alternative fuels. There are currently only two `dual fuelled' vehicles (liquid petroleum gas (LPG) and petrol) in the fleet and, more recently, a Toyota electric car has been added. The main problem is that there are still very few sources of LPG around this area. However, it is planned to introduce our own facility once a number of development issues have been resolved surrounding the Bar End highways depot. This will provide a facility in Winchester which could also be made available to Hampshire Police who already run a number of LPG vehicles. A number of HTM's private sector customers have also indicated a possible interest in using a LPG facility.

4.3.2 The new Toyota Prius electric car has been added to the pool fleet and will be available for departments to hire on a short-term basis. To date, the main issue with electric cars is the need to recharge them and with most operators that is done overnight, at a secure facility. Although this may be practical at a smaller authority where all vehicles are returned to a central depot overnight, the majority of County Council vehicles are taken home by their drivers or kept at County Council establishments. There is also an argument that more pollution is caused in generating the electricity to charge the cars than is saved on the emissions when compared with a modern, regularly maintained diesel vehicle. However, this latest vehicle recharges itself as it runs.

4.3.3 The car has been purchased as part of the County Council's sustainability action plan, with the support of government grants. The evaluation of the electric car and the identification of a site for LPG in Winchester will enable HTM to take the alternative fuel initiative forward across the County Council.

4.4 Funding of the Courier Service

4.4.1 The comparison exercise shows the Courier Service to be cheaper and to cover a wider range of tasks than similar operators from the private sector. Since April 1997 when the service was transferred from Education to HTM, the service has expanded and the number of collections and deliveries have increased from around 77,000 to well over 100,000 per annum. The HTM customer survey also shows the service to be highly valued by its customers.

4.4.2 However, the service is funded partially by HTM. Education pay for the schools element of the service and the Chief Executive funds the `corporate' service. However, as the corporate service has grown, the funding has not grown with it. HTM therefore meets the shortfall which, next year could be around £100k. It makes little sense for a small business unit to fund a corporate service to that extent. HTM has endeavoured to increase the income by taking on additional tasks and will continue to do that but the service should be funded centrally and this is being discussed at Chief Officer level.

4.5 Should the County Council continue to manage and maintain its own fleet?

4.5.1 The Best Value Review team confirmed that, in their view, HTM should continue to manage and maintain the County Council's fleet. The business unit is successful, rates are competitive, there is complete customer choice and the customer surveys clearly show that HTM is highly valued by its customers.

4.5.2 HTM has been working with the private sector in partnering style arrangements for some years and that is likely to expand as business grows. It is also likely that a similar service, bought in from the private sector, would result in higher overall costs for the County Council.

4.6 Can HTM continue to be successful?

4.6.1 HTM can continue to be successful and to provide a high quality service to its customers. The strategy of reducing its reliance on the highways income by deliberately expanding into other business sectors has proved to be successful and the likelihood is that the highways maintenance work will actually grow because the highways term maintenance contract covers a larger area and the successful contractor will require a larger fleet. In addition, with suitable funding arrangements the Courier Service can continue to expand both in terms of sites visited and tasks undertaken.

4.6.2 One of the most significant factors which provides the review team with confidence over the future of HTM is its staff. Turnover is low, morale is high and the staff are totally committed to making the business successful.

4.7 Can HTM improve?

4.7.1 The plan at Appendix 1 identifies a number of areas for improvement. These are well known to the HTM management and staff and the issues either will be or, in many cases, have already been addressed. Once the Improvement Plan is approved by Members, it will be incorporated into the Business Plan and progress will then be monitored through the normal operational management processes.

5. E Government

5.1 HTM's current computer systems are relatively old and fragile. They have experienced a number of major failures in their systems and hardware and recently lost a considerable amount of data which needed to be re-input. Their location at Bar End means that they have only just been linked to IT 2000 but it is hoped that this will bring benefits from access to up to date systems. The roll-out of Outlook with its E mail facilities and training for staff, particularly in Word and Excel, will be a major step forward for this group.

5.2 For the future, the SAP system contains a fleet management module and HTM will look at the benefits of moving to this within the next 18 months. In addition, the HTM workshops currently have no IT facilities and the feasibility of linking these sites to the network will also be investigated.

5.3 Recent discussions with RCS and Balfour Fleet over the next highways term maintenance contract have also included the possible provision of a joint IT system to manage and control the vehicles. This would enable all three parties to keep vehicle records updated and will enable HTM to create and update maintenance plans and records for the highways fleet. Similarly, the planning and recording of maintenance records for the County Council's fleet needs to be computerised for the workshops.

6. Equalities

6.1 Although the HTM services are predominantly about vehicles rather than direct services to the public, equalities is still a major issue in as much as many of the vehicles are used to transport people with disabilities and they therefore need to be suitable for the purpose. Access to vehicles and the safe transportation of adults and children are important issues for the County Council and HTM has built up considerable expertise in this specialist field. Many of the vehicles supplied to Social Services and Education require special access arrangements and HTM works closely with the service managers across departments to design a solution which best fits the needs of the particular client group.

6.2 HTM also keeps abreast of developments in the market on these issues to ensure the vehicles are built to reflect both legislative and best practice requirements.

7. Members input

7.1 Members approved the Scoping Report at the meeting of the Recreation and Heritage Best Value Review Panel on 28th March 2001. This was following an informal briefing on the background of HTM and the role it played within the County Council.

7.2 On 21st November 2001 a briefing was attended by Cllr. Mrs. Holden-Brown, Cllr. Mrs Byrom and Cllr. Jo Kelly. Members were provided with a written progress report and a presentation covering the work undertaken for the Best Value Review and the results. In particular, Members' views were sought on the `challenge' issues identified by the review team and Members indicated that they were wholly satisfied with the work of the team and the conclusions reached.

8. Conclusions

8.1 The Best Value Review of HTM confirms it is a successful business unit and its services are competitive and highly valued by customers. The review has identified a number of areas for improvement and these have been included in the Improvement Plan at Appendix 1. The contents of the Improvement Plan will be incorporated into the HTM Business Plan in order that the actions can be taken and progress can be monitored within the normal operational management arrangements.

9. Recommendations

9.1 It is recommended that:-

        (i) the Best Value Review of HTM be approved

        (ii) the improvements identified by the review be implemented in accordance with the Improvement Plan