Contact: Ken Laughlin, ext 6893

1. Summary

1.1 The following decision is sought:

That the publication of an advertisement in the Official Journal of the European Community and the United Kingdom trade and local press, seeking interest in developing a public/private partnership arrangement for a contract period of five years, extendable annually by additional periods of one year up to a maximum total contract period of eight years, to deliver the development, supply, maintenance, operation and management of Intelligent Transport Systems in Hampshire, be approved.

2. Reason

2.1 The existing traffic signal maintenance contract finishes at the end of June 2003 and it is considered that there could be significant benefits for the County Council in developing a partnering approach with the private sector to deliver these services.

3. Other Options Considered and Rejected

3.1 It is considered that in order to obtain best value for the County Council it is appropriate to investigate alternative funding mechanisms and methods of delivering this service. The final form of partnering arrangement will be dependent upon the tendering process, but it is clear that additional benefits could not be obtained if the existing form of the maintenance contract was continued.

4. Conflicts of Interest Declared by the Decision Maker or a Member or Officer consulted - Not applicable.

5. Dispensation granted by the Standards Committee - Not applicable.

6. Reason(s) for the Matter being dealt with if Urgent - Not applicable.

Approved by: Date:

Councillor K B Estlin

7. Introduction

7.1 On 2 October 2000 the former Planning and Transportation Resources Sub-Committee considered a report on the opportunities for a public/private partnership to deliver the development and maintenance of Intelligent Transport Systems (ITS) in Hampshire. Authority to investigate and develop this initiative further in association with the Chief Executive and the County Treasurer was granted. This report outlines the outcome of these investigations and seeks approval to publish an advertisement in the Official Journal of the European Community (OJEC) and the United Kingdom (UK) trade and local press.

8. Background

8.1 In Hampshire the need for ITS is becoming increasingly more important to manage the transport network and support adopted policies. The vision for ITS in Hampshire is to utilise the systems and tools available within an overall integrated transport strategy to make the best use of the transport network, and to deliver a county-wide traffic control and traffic and travel information service to the benefit of the people of Hampshire.

8.2 The strategy for the deployment of ITS in Hampshire was developed building on this vision, County Council policies, the Transport White Paper and the existing systems, infrastructure and expertise already established within the County Council as set out in the Local Transport Plan. The 10 to 15 year strategy will enable the County Council to work with both the public (eg Highways Agency on the Traffic Control Centres project) and private sectors, and be opportunistic in developing the facilities and funding opportunities for ITS in the future.

8.3 The existing traffic signal maintenance contract finishes on 30 June 2003 and it is timely to review the way in which this contract operates and consider alternative funding mechanisms and opportunities for developing a partnership approach with the private sector. A significant amount of work has been undertaken on these investigations to determine the most appropriate arrangement.

9. Objectives and Scope

9.1 In determining the way forward any partnering initiative must:

(i) provide a quality, efficient service which meets the aspirations of the community of Hampshire at an affordable and acceptable cost;

(ii) encourage partnerships and innovation in promoting and developing choice in the provision of the transport networks such that the County Council maintains its position as a leading player in ITS in the UK (and Europe);

(iii) create access to external revenue streams for the County Council;

(iv) demonstrate continuous improvement and value for money in the context of Best Value;

(v) allow for future technical improvements, enhancements and developments in working practices to be incorporated within the proposed contract; and

(vi) work with the County Council to achieve the aims of the sustainable development strategy.

9.2 It is also envisaged that it would need to operate over an optimum period to encourage private sector investment. The scope of this new initiative should be to:

(i) design ITS networks and equipment; and

(ii) supply, support, and maintain the County Council's traffic control and information equipment.

10. Partnering Options Considered

10.1 As part of the investigations that have been undertaken two options have been considered, to:

(i) follow the formal Private Finance Initiative (PFI)/Public Private Partnership (PPP) route; and

(ii) use the principles of PPP but create an 'informal', albeit legally binding, partnership arrangement - potentially a much faster route. Within this option there are a number of sub-options, ie a framework arrangement, which could fundamentally be termed a 'contracting out' arrangement through a service level agreement between the County Council and a service provider (possibly consisting of a consortium of providers), or a full partnership approach, with the County Council and the service provider working as one.

10.2 Discussions have taken place with other local authorities (Essex County Council, Northamptonshire County Council and Bristol City Council) which are also developing or have introduced this type of initiative. The outcomes of these discussions will be a valuable input to the development of the form of contract, specification and the tendering and evaluation process. In addition, the invaluable experience gained by the County Council in the strategic considerations and economic lessons learnt in the recent procurement of the Roads Term Maintenance Contract and the Street Lighting Term Maintenance Contract have been used in evaluating options for the procurement of this work and the associated service provision.

11. Way Forward

11.1 As a result of investigations undertaken, a number of issues have to be considered prior to the advertisement seeking interest in this initiative. These include the form of partnering arrangement, contract duration, scope of services to be provided and geographic coverage.

11.2 It is considered that, given the scale of this contract, a full PPP is not appropriate and an 'informal' partnership arrangement should be developed as per option (ii) in paragraph 10.1. This would provide a more flexible approach for both the County Council and the subsequent partner. It would retain conditions of contract but would include an added value element in the form of a partnering mechanism, allowing both the County Council and the private partner to look for innovation, improve service delivery and seek continuous improvement.

11.3 For the purpose of the advertisement of this initiative, and in line with the current contract, it is proposed to have one contract covering the whole of the county. The scope of the services would be extended to include not only maintenance but also the procurement of new ITS equipment, and could realise significant savings in staff time and finance.

11.4 In order to provide continuity of workload and reasonable returns on capital investment, discussions with contractors have revealed that long contract periods are desirable. Contracts with terms exceeding eight years would allow long term relationships to be developed between the County Council and contractor, with operational benefits such as co-location and problem sharing. In addition, the cost of tendering to both the County Council and contractor may be considerable if retendering is necessary at regular intervals. Alternatively, a short term contract would provide economic benefits because the prices would be market tested at regular intervals and it would allow either party release if working relationships deteriorated.

11.5 Examination of other term maintenance contracts has highlighted that a period of less than three years is considered too short because the cost of retendering becomes a significant factor to economic efficiency and this does not allow enough time to form a good working relationship with the contractor. In addition, there is less incentive for the contractor to invest in new equipment and technologies. At the other end of the scale, contracts in excess of ten years are difficult to manage efficiently because the changes in technology, legislation and service may not always be foreseeable at the start date of a contract. Consequently, if the contract period is too long it can be difficult to ensure that best value is being obtained over the whole life of the contract. Therefore, unless there are significant capital investments required of the contractor, a ten year duration is not recommended. As a compromise position between the extremes, a five year contract period is recommended as this would allow a reasonable period during which capital investments can be recovered by the contractor. In order to provide an incentive for continuing good service and to take advantage of technology development it is suggested that the five year term be extended by additional periods of one year up to a maximum of three years. This will align with the mechanisms currently used by both the Roads and Street Lighting term maintenance contracts.

12. Conclusions

12.1 It is considered that there could be significant benefits to the County Council in developing a partnership arrangement for the development, maintenance and supply of ITS in Hampshire. On the basis of the investigations undertaken, and to comply with the appropriate regulations, it is proposed that an advertisement be placed in OJEC and the UK and local press, seeking interest in providing these services for an initial contract period of five years, extended by additional periods of one year up to a maximum of three years.

7080/KGL