Archived decisions

Hampshire County Council

Environment Policy Review Committee

10 February 2005

"Working Together" with the Street Lighting Contractor

Report of the Director of Environment

Item 8

Contact: Brian Millen, tel no. 01256 764444 email: [email protected]

1. Summary

1.1 This report identifies the advantages and benefits to the County Council of improved working with the street lighting Contractor, Southern Electric Contracting Limited (SEC), and the proposed changes this will involve. The report has been updated since discussion was deferred from 1 December 2004 and an Appendix covers issues raised by the Union.

2. Corporate Strategy

2.1 This report supports Aim 5 of the Corporate Strategy (Improving Services) by working together with the street lighting Contractor to improve the efficiency and effectiveness of the working arrangements.

3. Background

3.1 The Term Maintenance Contract for street lighting maintenance for the period 2002 to 2007, plus three possible yearly extensions (based on performance and agreement), was awarded to SEC following a competitive tendering process in January 2002.

3.2 The contract is for the maintenance of illuminated street furniture and associated electrical apparatus. The stock comprises some 144,000 lighting units including street lights, illuminated signs and bollards. The service provides for routine maintenance and repairs and replacing/ upgrading life-expired lighting columns with an annual value of approximately £4.8 million.

3.3 At the time of tender the existing highway management structure had street lighting agents who were locally responsible for maintenance management in the existing District and Borough Councils. There were nine agencies and three directly-controlled areas. The overall management control was through the street lighting section based in Winchester.

3.4 The contract documents allowed for evolution using a partnering arrangement, with each party "working together" for mutual benefits. This was to augment the reorganisation of the Highways Management structure following the termination of the agency arrangements which occurred after the tendering process, thereby bringing improved efficiencies to the service delivery.

3.5 The intended partnering strategy has not been fully implemented, and therefore the advantages of the agency reorganisation have not been entirely realised. County Council engineers have been simply substituted into some of the Highway Units and Sub-Units, effectively mirroring the original set-up.

3.6 The key objectives of "working together" as identified in the contract documents are to:

(i) develop a common culture between the parties;

(ii) share in the management of the services to be delivered;

(iii) develop a seamless delivery of the services;

(iv) develop a team culture between staff;

(v) provide joint leadership and motivation;

(vi) encourage innovation in problem solving; and

(vii) embrace the development of Best Value for service delivery in stakeholders.

4. Achievements So Far

4.1 In August 2003 a partnering workshop was convened and staff from both the Environment Department and the Contractor attended. A mission statement was produced "To provide effective, sustainable lighting for Hampshire through an enlightened partnership". All attendees signed a charter agreeing to the partnering mission to move forward to achieve set goals.

4.2 Following this and as part of the goals set, a Partnering Board was established and a Partnering Champion appointed. A working group was formed using representatives of both organisations along with clear Terms of Reference.

4.3 In line with the key objectives the working group was tasked to look at the following:

(i) a cohesive management structure and to show what benefits this would bring;

(ii) the current methodology of the existing operations and to radically rethink what changes could be made to increase efficiency, reduce travel, improve standards and maintain sustainability;

(iii) to identify economies, where financial savings could be reinvested in infrastructure improvements; and

(iv) to embrace Best Value.

4.4 The Department for Trade and Industry provided external funding through the "Constructing Excellence" initiative to engage Dr Richard O'Connor to assist with a detailed analysis of each element of the service delivery.

4.5 The working group with Dr O'Connor identified a number of issues that significantly affected the efficient operation of the contract and if changed could clearly bring mutual benefits. These inefficiencies include:

(i) duplication of visits to identify and agree work requirements;

(ii) duplication of auditing by both organisations;

(iii) planned maintenance visits considered to be too regular when currently each unit is effectively visited every three years by a repair team;

(iv) too many site visits when installing new units;

(v) inherent inefficiencies through Client/Contractor not being co-located;

(vi) numerous meetings and consequently too much travelling between offices through Client/Contractor not being co-located;

(vii) excessive phone calls between Client/Contractor by not being co-located; and

(viii) a "them and us" approach to service delivery.

5. Proposal Associated with "Working Together"

5.1 There are currently 13 members of County Council staff responsible for the comprehensive range of duties to deliver street lighting services in Hampshire. Of these, seven are located in Winchester headquarters, five in the Highway Units and Sub-Units and one already co-located in the Contractor's main office at Cosham. The location of the five staff in the Highway Units and Sub-Units, in fulfilling their maintenance duties, contributes to many of the inefficiencies identified in paragraph 4.5.

5.2 Members of the public who wish to make defect reports use either the freephone fault reporting service or telephone direct to the Highway Units or Sub-Units. There is also a facility to email defect reports or general queries in addition to conventional correspondence. All of these defect reports or queries are then actioned by the appropriate County Council staff member; this system will not change.

5.3 It is proposed that, to substantially improve upon the efficiency of the maintenance duties, the three staff members currently located in the Highway Units and Sub-Units be co-located, with one manager from Winchester headquarters, to the Contractor's main office. There will also be a requirement to recruit one administrative assistant as this post is currently vacant.

5.4 The remaining two staff members will stay located in either a Highway Unit or Sub-Unit, acting in an Area Liaison role, where they will action the defect reports and general queries and act as the customer focal point for parish, town and district street lighting issues.

5.5 There will be six members of staff remaining at Winchester headquarters who will fulfil all the other duties currently undertaken by the office, including design, energy, probity and audit of the contract, and Member liaison.

5.6 SEC's current depot is in Cosham, this will be the location for the joint operational centre. An upgrade data-communications link has recently been installed at this operational centre at a cost of approximately £20,000, financed by the County Council.

6. Evaluation of the Proposal

6.1 The main advantage of the proposal is that the inherent inefficiencies identified will either be eliminated or substantially reduced.

6.2 There will be an improvement in the overall service delivery due to the work analysis and co-location.

6.3 The Street Lighting Management and Support Services budget includes a vacant position for an Assistant Engineer at £30,738, inclusive of National Insurance and Local Government Pension scheme contributions. In the proposed structure it will not be necessary to fill this vacancy and therefore the budget will be accordingly reduced.

6.4 A number of posts have been regraded in the proposed structure with an overall extra cost of £26,450. However, this can be offset against the savings identified in paragraph 6.3 with a net saving of £4,288 against the existing Management and Support Services budget.

6.5 By including the supervision, financial and audit functions within the duties of the Assistant Engineer, it is predicted that a further £60,000 savings can be made each year from these activities currently undertaken by Engineering Consultancy. There will also be estimated fuel savings of £3,000 per year as a result of staff not needing to travel to numerous meetings with the Contractor.

6.6 The stakeholders of Hampshire will benefit through improved service delivery at a reduced cost.

6.7 Through one single organisation and one Charter, people will feel positive and motivated, eliminating the "them and us" culture and developing mutual trust between colleagues.

6.8 The proposal "Working Together" will enable SEC to make its operations more efficient.

6.9 The proposal provides an opportunity to trial a management system that could be incorporated into future contracts.

6.10 A one-off cost of £5,000 will be incurred in the `setting up' stage. There will also be a contribution of £25,000 per annum towards accommodating County Council staff in the joint location, which may not be fully recoverable by compensating savings in the area offices.

6.11 Licensing terms need to be in place before entering into the arrangement to ensure there are no hidden costs or risks.

6.12 Consultation on the proposal has taken place with staff and unions. A number of issues were raised by the Union in a letter to Members when the report was on the Agenda for discussion at the meeting on 1 December 2004. The report was deferred. These comments, together with responses, are set out in Appendix 1. Attached as Appendix 2 is a background paper setting out the contract framework.

7. Contract Changes

7.1 The benefits to the County Council by improved working and joint location with the Contractor will be realised without any need for changes to the Conditions of Contract. However it is envisaged the minor contractual changes set out below will bring further benefits to both this Authority and the Contractor.

Change to Conditions of Contract

7.2 The contract requirement is for works to be completed to key performance indicators (KPIs) set in calendar days. It is proposed that works now be completed to KPIs set in working days. The target days will be adjusted to reduce the impact on the service delivery as follows:

(i) KPI 1 - Reactive Maintenance, five calendar days changed to three working days;

(ii) KPI 2 - Ordered Works, ten calendar days to eight working days (no excavations); and

(iii) KPI 2 - Ordered Works, 25 calendar days to 20 working days (with excavations).

7.3 This will bring the Hampshire Maintenance Contract in line with other similar Local Authority contracts. It will also reduce the risk of injury to children who tend to gather around the Contractor's vehicles when not at school during weekend working. The KPI targets can readily be adjusted to compensate for completion times and retain the high standards being achieved.

Change to Methodologies of Working Practices

1. Revise the electrical testing programme

7.4 At the time of tendering the requirement for electrical testing was to ensure that every unit was tested at least once every six years and programmed accordingly. Under Best Value practices and minimising the number of visits needed to each column during the contract period, it is recommended that the electrical testing is now carried out each time the column is visited for a repair. Where no repair takes place the unit will be tested at the existing programmed six year test visit, ensuring that the county's contractual requirement for electrical test and inspection remains unaltered. This will ensure corporate strategies are met by minimising the number of site visits.

2. Revise the methodology for planned maintenance activities

7.5 The specification under clause 2.3 requires that each lighting unit is subject to planned maintenance every two years. The bulk lamp change programme will remain unaltered at generally every four years and will determine the minimum frequency of planned maintenance visits. This will ensure that each unit will have a scheduled planned maintenance visit each time the lamp is changed.

7.6 Approximately 40,000 units are also visited by repair electricians each year. It is proposed that at the repair visit the maintenance under clause 2.3 will also be undertaken. Any unit which has not been attended within the two year period will be identified and attended under a separate programme. This will ensure that the contract requirements are fully met and will reduce the number of separate visits to columns. This will support Aim 2 (Stewardship of the Environment) of the Corporate Strategy.

8. Conclusion

8.1 The advantages offered by the proposal are potentially significant. There is now a unique opportunity for the County Council to move forward in the provision of street lighting maintenance, with all parties, including the stakeholders of Hampshire, enjoying the benefits of this proposal.

8.2 The changes to the Contract are minimal. They can be authorised by the "Engineer" within the provision of Standing Orders.

8.3 The realisation of these benefits will need to be monitored and a report on outcomes made to the Policy Review Committee as part of the preparation for the next Street Lighting Contract.

Recommendation

That the Committee comments on the "Working Together" proposals.


Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1.	Published works.

2.	Documents which disclose exempt or confidential information as defined in the Act.

TITLE

LOCATION

Report to Environment Departmental Management Team - 16 November 2004

Street Lighting Contract

Terms of Reference of Working Party

Structure

Internal Report to Street Lighting Engineer

Environment Department

Room 427

Room 406

9162/BGM

APPENDIX 1

STAFF COMMENTS ON THE PROPOSALS CONTAINED IN THE ENVIRONMENT POLICY REVIEW COMMITTEE REPORT OF 1 DECEMBER 2004

1. Summary

Comment: The report does not identify the disadvantages or situations where the status quo is maintained.

Response: There will be an initial setting up cost associated with the proposal which has been identified in paragraph 6.9.

Some HCC street lighting maintenance staff will be required to re-locate to the Contractor's main operating depot.

HCC street lighting maintenance staff will have changed roles.

The status quo as `no change' does not foster the aims of partnering or more effective and efficient working.

2. Corporate Strategy

Comment: The report gives no indication as to how, or where, the continuous improvements are to be achieved.

Response: The report considers changes to the organisation to improve staff efficiency and the efficiency of the Contractor's working methods.

3. Background

3.1 The Term Maintenance Contract for street lighting maintenance for the period 2002 to 2007 plus three possible yearly extensions was awarded to SEC following a competitive tendering process in January 2002.

Comment: Award of the extensions is dependent on achieving the target levels for each of the KPIs. The report does not cover the current performance levels.

Response: Performance of all highway services for the previous year is reported to the June Policy Review Committee. This report does not cover extensions to the street lighting contract as it is too early in the contract period.

3.2 The contract is for the maintenance of illuminated street furniture and associated electrical apparatus. The stock comprises some 144,000 lighting units including street lights, illuminated signs and bollards. The service provides for routine maintenance and repairs and replacing/upgrading life-expired lighting columns with an annual value of approx £4.8 million.

Comment: This had the benefit of providing engineers with intimate local knowledge of their areas and enabled a high degree of works coordination. This is in line with SEC's own working practices.

Response: This argument was put forward when the street lighting agencies were terminated and the revised arrangements have not proved to be detrimental to the service.

This client side arrangement is not in line with SEC's current working practices.

Comment: The report does not state succinctly what these improved efficiencies were. The contract was written around the Highways Management restructure. The requirement that engineers be based within local highway units and sub-units was put forward by senior HCC management.

Response: The report is about seeking to achieve further efficiency savings.

Comment: It should also be pointed out that the words "working together" do not appear in the Contract.

Response: Agree, but the phrase "working together" covers `The principal aim of the relationship will rely heavily on the relationship between the Council's and Contractor's staff. In order to develop a culture of trust and respect between the Council and the Contractor the Contract will need to be operated in an open manner with a high degree of mutual support and sharing concerns before these develop into problems and disputes' which is in the contract.

3.5 The intended partnering strategy has not been implemented fully, and therefore the advantages of the agency reorganisation have not been fully realised. County Council engineers have been simply substituted into some of the highway units and sub-units, effectively mirroring the original set-up and continuing the inefficiencies.

Comment: Of the original 12 engineers (7.5 FTE) involved in maintenance there are now only 5, an FTE saving of 1.5 with salary savings of between £22,882.50 and £35,833.50 p.a. (based on pay scales between SC4 and SO2) excluding on-costs and overheads. Street Lighting was the only section to make such a saving.

The report does not provide any measure of these inefficiencies or give an idea of the cost savings.

Response: Agree these efficiency savings were made when Agency agreements were terminated, the report identifies further savings to be made.

3.6 The key objectives of "working together" as identified in the contract documents are to:

(i) develop a common culture between the parties;

(ii) share in the management of the services to be delivered;

(iii) develop a seamless delivery of the services;

(iv) develop a team culture between staff;

(v) provide joint leadership and motivation;

(vi) encourage innovation in problem solving; and

(vii) embrace the development of Best Value for service delivery in stakeholders.

Comment: Three other key objectives are also contained within the contract document

_ To develop a successful public/private partnership

_ To seek to develop the partnership where mutually beneficial

_ To develop similar partnerships with all suppliers to the contract.

This report gives no indication why these three key objectives have been omitted.

Response: Legal advice was that to change the nature of the contract could not be taken forward within the current contract framework, although this will be explored for future contract arrangements. However, arrangements are already in place with major lantern and column suppliers to agree to hold consignment stocks for the Contractor. An agreement also exists with the statutory provider for underground electrical connections to complete service and fault restoration works within agreed time scales.

4. Achievements So Far

4.1 During the first year of the contract representatives of the County Council and the Contractor met to look at inefficiencies and to put forward suggestions as to what joint management initiatives could be developed. Four initial suggestions were put forward relating to joint management structures.

Comment: Could not a copy of the original report be added as an appendix with explanations given showing why the three other options were dropped?

Response: The report referred to is contained within supporting documents.

4.2 In August 2003 a partnering workshop was convened and staff from both the County Council and the Contractor attended. A mission statement was produced "To provide effective, sustainable lighting for Hampshire through an enlightened partnership". All attendees signed a charter agreeing to the partnering mission to move forward to achieve set goals.

Comment: The principle of working closer together was agreed and signed up to by all attendees. However, nothing proposed since has been agreed to or signed up to. What concerns staff is the premise of HCC trying to "save" SEC from its own inefficiencies.

Response: Greater efficiency on both the Client and Contractor side is desirable to minimise the cost of service provision long term.

4.3 Following this and as part of the goals set, a Partnering Board was established and a Partnering Champion appointed. A working group was formed using representatives of both organisations along with clear Terms of Reference.

Comment: The Working Party is made up of two people, one HCC and one SEC employee. The champion was also an SEC employee. The report does not clearly state what Terms of Reference they were operating under.

Response: Champion appointed after an interview process, Terms of Reference are available in support documents.

4.4 In line with the key objectives the working group was tasked to look at the following:

(i) a cohesive management structure and to show what benefits this would bring;

(ii) the current methodology of the existing operations and to radically rethink what changes could be made to increase efficiency, reduce travel, improve standards and maintain sustainability;

(iii) to identify economies, where financial savings could be reinvested in infrastructure improvements; and

(iv) to embrace Best Value.

Comment: This report currently fails to give any detailed analysis of these four points. No copy of the proposed structure is included, no measures or costing of inefficiencies, efficiencies or savings, either to SEC or HCC are clearly identified.

Response: HCC savings are identified in this report, other information is in supporting documents.

Comment: A comment was raised regarding profit sharing.

Response: Commercially confidential information is not contained within this public report.

4.5 The Department for Trade and Industry provided external funding through the "Constructing Excellence" initiative to engage Dr Richard O'Connor to assist with detailed analysis of each element of the service delivery.

4.6 The working group with Dr O'Connor identified a number of issues that significantly affected the efficient operation of the contract and if changed could clearly bring mutual benefits. These inefficiencies include:

(i) duplication of visits to identify and agree work requirements;

Comment: The level of visits currently required is due to the poor quality of information provided by the contractor. The provision of good quality, accurate data is a requirement of the existing contract.

Response: This is due to poor communication between HCC/SEC which will improve with co-location. This has been demonstrated by one Assistant Engineer already co-located who has indicated an improvement in efficiency in excess of 30%.

(ii) duplication of auditing by both organisations;

Comment: The current level of auditing has had to be increased from 25% to 100%, at the request of HCC management, due to poor or non-existent auditing on behalf of the contractor. Auditing is an integral part of the existing contract and not an inefficiency.

Response: The 100% audit is applicable to specific types of works only and will be reduced to a sustainable level at the earliest opportunity. Previous contract experience has also demonstrated that a single auditor provides a much clearer indication of the quality of works. This is currently the situation with planned maintenance.

Comment: SEC is required to provide GIS coordinates for equipment at the time of installation but has, to date, failed to do so. A check by HCC staff is, therefore, required to confirm unit locations.

Response: Instruction to collect GIS co-ordinates only recently given. HCC not yet provided SEC with equipment to collect/confirm this data as detailed in clause 1.32.1 of the specification.

(iii) planned maintenance visits considered to be too regular when currently each unit is effectively visited every three years by a repair team and inspected by a patrol 19 times a year;

Comment: This figure is based purely on average statistical data and misrepresents the actual rate of visitation. The figure of 40,000 visits per annum (see paragraph 7.6) does not take into account repeat visits or situations where no fault was found.

Response: The actual number of visits is 45,000, an allowance has been made for repeat visits.

Comment: The 19 annual night-time and 2 day-time patrols are passive in that they do not, by themselves, repair defects and are merely a reporting procedure by which defects are initially identified. This system remains unchanged by the current proposals.

Response: Agree.

(iv) too many site visits when installing new units;

Comment: This is an SEC activity where inefficiencies have been found to exist. The provision of multitasking teams to deal with this has already been trialled and accommodated within the existing contract.

Response: Agree, the process will be developed in the new organisation.

(v) inherent inefficiencies through Client/Contractor not being co-located;

Comment: The report does not provide a measure of their impact over the proposed changes or give a cost saving.

Response: Saving identified in paragraphs 6.3 and 6.4.

(vi) numerous meetings and consequently too much travelling between offices through Client/Contractor not being co-located;

Comment: Meetings are held with the Contractor once a month. These meetings are held at Cosham at the request of the Contractor.

Response: Through not being co-located there are also numerous other meetings that are required with SEC and HCC management which will be significantly reduced under this proposal.

Comment: No investigation has been carried out to identify improved efficiencies or savings through improved IT technology.

Response: Video linking is a relatively cheap option to investigate but can be considered as a visual telephone call.

(vii) excessive phone calls between Client/Contractor by not being co-located.

Comment: The report does not demonstrate the saving in calls over the cost of re-location and long term overheads.

Response: It is the concept of efficiency savings that are considered in this report not specific actual values.

(viii) a "them and us" approach to service delivery.

Comment: Currently good working relationships do exist but will be disrupted by these proposals. Poor handling of change management has led to this same "them and us" attitude between parties within HCC and SEC fragmenting otherwise improving relationships.

Response: The possibility of an adversarial approach will be minimised by both teams being co-located as HCC and SEC staff will be working far more closely together and understanding each others problems. This has already been demonstrated by an Assistant Engineer currently co-located with the Contractor.

Comment: A comment was raised regarding the Contractor's financial situation.

Response: Commercially confidential information is not provided within this public report.

Comment: Contractor repeat visits have increased by 2% from April to 10.5% (KPI 5 source SLIMs).

Response: Can be partly attributed to unreliable electronic ballasts which have been specified in the contract, this has and will continue to have an impact on this KPI. There is currently a contract claim in relation to this problem.

Comment: The report has not shown how these will be collected or written off, the understanding being that it is not within the remit of the `Engineer' to do so.

Response: The contract claim is subject to an independent report. The Engineer to the contract has the authority to agree to an extension of time if considered appropriate.

5. Proposal Associated with "Working Together"

Comment: This needs to be balanced against the advantages of local working from the point of view of travel and office overheads.

Response: Travel costs have been included within the response to paragraph 6.4 and office overheads within the response to paragraph 6.9.

Comment: The report does not show how this element of the service will be dealt with or what the impact will be on local HCC Highway Unit and Sub-Unit staff.

Response: Call handling arrangements will remain in place. Specific queries will now be passed to the two Area Liaison engineers.

Comment: The report does not demonstrate how the improvements to HCC activities will result in savings to SEC.

Response: By being co-located HCC and SEC engineers will be able to quickly resolve issues thus negating the need for numerous meetings and travelling time. This will help SEC in its planning and resource management and aligned with `lean processing' will help to improve upon its efficiency.

Comment: The disadvantages of large working areas, such as loss of local knowledge, increased response times to correspondence, increased travel times and distances, have not been acknowledged or considered.

Response: The two liaison engineers will already have detailed knowledge of the areas that they are currently managing. This in time will be augmented by knowledge of additional areas to be covered. Response times to correspondence should not be increased as the liaison engineers will have more time to concentrate on these due to not having maintenance responsibilities. Travel times and distances will be minimised by planning locations that require visits.

5.6 The success of this proposal will also be affected by the location of the operational centre. SEC's current depot is in Cosham but it has been recognised that the ideal location should be along the M27 corridor, preferably between Fareham and Eastleigh. However, the joint operational centre could still operate from Cosham but not to the projected optimum efficiency. An upgrade data-communications link has recently been installed at this operational centre at a cost of approximately £20,000.

Comment: The current report omits that this is only considered to be a short term solution (source: written responses to staff questions by Brian Millen). In addition S&SE are proposing to close the Cosham depot within the next two to three years (source: SEC Lighting Services). This will incur expenses involved in the relocation of staff and equipment plus additional rental and overhead costs from the new facility.

Response: The contract expires on 31 March 2007. SEC has not confirmed that it will definitely be closing the Cosham depot within the next two to three years. This is a suitable time period for assessing the effectiveness of more integrated working arrangements.

6. Evaluation of the Proposal

6.1 The main advantage of the proposal is that the inherent inefficiencies identified will either be eliminated or substantially reduced.

Please refer to comments in 4.6.

6.2 There will be an improvement in the overall service delivery due to the work analysis and co-location.

Please refer to comments in 3.4.

6.3 There will be reduced County Council overheads arising from the deletion of one Assistant Engineer post. The savings are estimated to be in the region of £30,000 per annum.

Comment: This post has never been budgeted for and no payments ever made so it is misleading to hail this as a saving. Existing staff work loads are reaching maximum capacity. With the effective loss of two area engineers into liaison roles, a third to deal with Infrastructure Improvement and the relocation of the vacant administration team post to Cosham, this could lead to a requirement for additional staff resources in the region of £45,000 being required.

Response: The Street Lighting Management and Support Services budget includes a vacant position for an Assistant Engineer at £30,738, inclusive of National Insurance and Local Government Pension scheme contributions. In the proposed structure it will not be necessary to fill this vacancy and therefore the budget will be accordingly reduced.

6.4 A further £60,000 savings are predicted by assimilating some of the Engineering Consultancy activities within the County Council contract management. There will also be estimated fuel savings of £3,000 per year as a result of staff not needing to travel to numerous meetings with the Contractor. Carbon dioxide emissions will fall as a direct result.

Comment: The figure of £60k is calculated on an expected column replacement programme value of £2.5m. Should this reduce to £1.5m (source: SEC Lighting Services) this will reduce to only £36,000. This also ignores possible TUPE implications for ECU contract staff. This is the one part of the contract that is working well at the moment.

Response: It is confirmed that the payment to ECU for the year 2003-04 was £60k with a column replacement programme (CRP) value of £1.8m. Indeed the greater the expenditure on CRP results in even more savings to the County Council under this proposal. It is not considered that TUPE would be applicable.

Comment: £3k p.a. = 6521 miles @ 46p per mile. If each meeting means a maximum of 30 mile return journey this would mean each of the four relocated engineers are currently undertaking 217 meetings a year (54 each). As each engineer only has, on average, one meeting a month at Cosham this figure can be reduced to £662 (1440 miles).

Response: See combined answer to next question.

Comment: Based on figures supplied by HCC MIRACLES project, HCC private vehicle fleet produce 5333 tonnes of CO² p.a. A 1.4 HDI vehicle produces 120g/km of CO² which, based on annual mileage of 1440, = 0.2780 tonnes p.a. This represents <0.004% of the County's annual output. In addition, as a result of the relocation to Cosham, private travel mileages will increase by 20520 miles p.a. resulting in an actual increase in CO² emissions of 4.38 tonnes p.a.

Response: The figures for cost and CO² emissions are relatively small in the overall evaluation and exact mileages cannot be calculated. However it is estimated that each Assistant Engineer is currently undertaking 500 business miles per month to fulfil all current duties. The actual figure is in excess of this. As there are five Assistant Engineers this equates to 500x5x12 =30000 business miles per year, @46p per mile = £13800. It is intended to introduce a sustainable audit level of 25% once the confidence in quality has been resolved. The number of meetings will also be significantly reduced due to co-location. Projected savings are therefore 22500 business miles per year @46p per mile = £10350 per year (75% of £13800). However there may be a requirement for some meetings at HQ and for additional costs associated with some staff who may have to travel further to Cosham than their existing place of work. As yet it is not known who this will affect and an estimated value can only be speculated. Therefore allow for an overall reduction of 15000 business miles per year @46p per mile = £6900. Allowing for the same calculations as detailed in the HCC MIRICLES project it can be seen that instead of increasing the CO² emissions by 4.38 tonnes per year there will be a reduction of 3.20 tonnes of CO² emissions per year based upon current business mileage. (Corporate Aim 2 - Stewardship of the Environment.)

6.5 The stakeholders of Hampshire will benefit through improved service delivery at no extra cost.

Comment: The report does not quantify these statements. This ignores SEC ring fencing of HCC budget for profit and the ongoing yearly increases in expenditure needed to fund these proposals. The estimated yearly reduction in available funding would be £xxxxx.

Response: There will be no ring fencing of profits for SEC and therefore this `overhead' is not relevant.

6.6 Through one single organisation and one Charter, people will feel positive and motivated, eliminating the "them and us" culture and developing mutual trust between colleagues.

Comment: The proposed new structure is divided into three distinct parts each with no direct link to each other except through the new Partnering Board. Once new premises have been located it is possible that, for a time, these disparate groups will be located at three different locations and would, effectively, mirror the existing setup.

Response: At present the Corporate activities are at HQ Winchester with maintenance engineers located in various Highway Units and Sub-Units. Under the proposal all maintenance engineers will be located in the same premises as the Contractor.

6.7 SEC's current losses will be minimised. This will encourage the company to continue the contract for the remaining contract term.

Comment: SEC is contractually obliged to carry the contract to term.

Response: Contract arrangements can always be terminated, although the Contractor would be liable for additional costs incurred by the client. Contract claims are also a remedy for addressing contract losses where difficulties arise.

Comment: a. A further comment was made about the Contractor's financial situation.

b. HCC will not accrue any cost benefits from this arrangement.

Response: a. Commercially confidential information is not contained within this public report.

b. Cost benefits to HCC previously covered in paragraphs 6.3 and 6.4.

6.8 This is also an opportunity to trial a management system that could be incorporated into future contracts.

Comment: This should, however, be done with due regard to the short and long term cost implications.

Response: Both short and long term cost implications are beneficial to the County Council.

6.9 There will be a one-off cost involved in the `setting up' stage of between £5,000 to £30,000, depending on location. Also there will be a contribution of £25,000 per annum towards accommodating County Council staff in the joint location, which may not be fully recoverable by compensating savings in the area offices.

Comment: As this report says the location will be Cosham so why is the £5-30K figure dependent on location? This implies it is more cost effective to keep staff at their existing locations.

Response: At the time of writing this report the location had not been confirmed. If Cosham was chosen then there would be a maximum of £5k in setting up costs. Had another location been chosen then this would have increased to a maximum of £30k as dedicated data communications lines would have had to be provided. This is one of the reasons that Cosham was the preferred option. The savings to the County Council far outweigh the initial £5k setting up costs for co-locating at Cosham.

6.10 An accommodation exit strategy needs to be agreed in the event of the Contract not being reviewed.

Comment: It is also essential that a Contract Exit Strategy is in place before entering into any agreement.

Response: Agreed.

7. Recommended Changes

7.1 To achieve the "advantages" of this proposal the following change to the Conditions of Contract and two changes to the methodology (including rationale) of the working practices are required.

Change to Conditions of Contract

7.2 The Contract requirement is for works to be completed to key performance indicators (KPIs) set in calendar days. It is proposed that works now be completed to KPIs set in working days. The target days will be adjusted to reduce the impact on the service delivery as follows:

(i) KPI 1 - Reactive Maintenance, five calendar days changed to three working days;

(ii) KPI 2 - Ordered Works, ten calendar days to eight working days (no exclusions); and

(iii) 25 calendar days to 20 working days (with exclusions).

Comment: With the proposed changes in planned maintenance the reduction of reactive maintenance repair times to three working days will lead to lower work completion rates due to longer repair times on site, increased site visits over the long term, repeat testing and planning/coordination difficulties. Travel times, distances and vehicle emissions will also be increased as a result.

Response: This is a risk that will be carried by the Contractor. All of these points have already been taken into account within the Contractor's model. One of the principal aims of the Contractor, by using `Lean Construction' processes, is to significantly reduce the number of site visits and therefore vehicle emissions.

Comment: The change from 25 calendar days to 20 working days will increase repair times by over 33%. Changes in the New Roads and Street Works Act legislation will also add to delays in works where excavation is required. This will also affect the County Council's performance in relation to National Street Lighting KPIs.

Response: At present there are no national KPIs for street lighting maintenance. The contractor's performance report for the period 20 July 2004 to date, when a trial was convened to go to working days, has demonstrated an improvement in the contractor's time to complete the works.

Comment: Other local authorities have a 7 day-a-week regime. This was seen as an improvement to service in accordance with Aim 5 of the Corporate Strategy when the contract was let.

If it is seen to be unsafe to work at weekends should works also be halted during school holiday periods when children are at home? Would these same restrictions also then apply to works by other contractors?

KPI 1 is currently 8% below target, KPI 2 is currently 7% below target, KPI 3, planned maintenance, is currently ahead of programme by 30 days and KPI 5 is running at an average of 9% per month. (source: Street Lighting KPI reports.)

If these standards are high why do we need to change and why do we need to do 100% audit at present?

Response: Had the proposal not included a reduction in the number of days to complete the works to compensate for moving to working days from calendar days then it could have been argued that this was not in accordance with Aim 5. However this is not the case. By co-locating and working together many of the problems that prevent the contractor from completing works on time can now be resolved quickly and thus an improvement in service will be realised. With approximately 100 weekend days and 65 school holiday days per year any reduction in risk should be embraced and taken seriously. It would also not be acceptable to the public not to do repairs during school holidays. Under the proposal it is intended to improve upon the KPIs and reduce the level of audit required.

Change to Methodologies of Working Practices

1. Revise the electrical testing programme

Comment: This will reduce the level of liquidated damage but will not result in cost saving to HCC. The use of the word "minimise" suggests losses will still occur leading to no profit share advantages. Whilst this proposal may reduce the number of visits to individual units it will not reduce the number of visits to any given road and may, in fact, have the opposite effect.

Response: This is not connected to liquidated damages.

There will be no profit sharing.

The aim is to reduce the number of visits, not to increase them.

2. Revise the methodology for planned maintenance activities

7.6 Approximately 40,000 units are also visited by repair electricians each year. It is proposed that at the repair visit the maintenance under clause 2.3 will also be undertaken. Any unit which has not been attended within the two year period will be identified and attended under a separate programme. This will ensure that the contract requirements are fully met and will reduce the number of separate visits to columns. This will support the corporate strategy of Stewardship of the Environment.

Comment: This will, however, increase the amount of time each repair takes, reducing the amount of work being done in a day and, thus, increasing the amount of mileage from the last site of one day to the first site of the next. Any savings are thereby negated. This is compounded by the reduction in C order completion times from five to three days.

Response This question has previously been asked and answered (7.2).

Comment: Should electrical testing be missed due to revised working practices, who would pick up the liability for any accident involving a unit without a valid electrical test? Has an estimated cost been produced to recover the testing programme should these proposals fail?

Response: The same liability applies now. Paragraph 7.4 details that the existing testing programme will remain in place for any units that have not been tested within the six year period.

8. Conclusion

8.1 The advantages offered by the proposal are significant. There is now a unique opportunity for the County Council to move forward in the provision of street lighting maintenance, with all parties, including the stakeholders of Hampshire, enjoying the benefits of this proposal.

Comment: With due regard to all the above comments a fair and open justification for this change still needs to be made.

Response: The justification has been set out in the report. The advantages for HCC and its stakeholders are considerable.

8.2 The changes to the Contract are minimal. They can be authorised by the "Engineer" within the provision of Standing Orders.

Comment: The potential implications for the quality of service to the stakeholders, and the rights and benefits to HCC staff, are substantial. The overall additional spend in the first year of this arrangement will be approximately £88,344 with ongoing yearly expenses of approximately £38,000. No recommendations have been made as to how this is to be funded. In addition a further £xxxxx p.a. will be ring fenced by SEC to ensure its profit margins are maintained.

Additional private mileage will cost staff £9439 p.a. and increase CO²emissions by 4 tonnes p.a.

There will be no real term savings to the County Council leading to a "less for more" service delivery.

Completion times for ordered works will increase.

Reduced C order repair times will reduce performance further.

The promised ploughing of SEC profits into infrastructure improvements has been dropped.

Response: Whilst there are cost savings to HCC which are relatively small in the overall appraisal, the main advantages are the efficiency savings that will be enjoyed by both HCC and SEC. The claim that there would be an overall additional expenditure of £88344 in the first year can be discounted. This is made up of:

a. Administrative post £13344 - already budgeted for within section overhead and filled by succession of temporary staff.

b. Set up costs £30000 - not applicable now only £5000.

c. IT upgrades £20000 - not applicable and was covered in the £30000.

d. Co-location overheads £25000 - already budgeted for in section overhead and will be recovered.

The claim that there will be an ongoing annual cost of £38000 can also be discounted as this is referred to in items a & d above. Additional private mileage - answered under paragraph 6.4.

Savings to the County Council - answered under paragraphs 6.3 & 6.4.

Completion times for ordered works - covered under paragraph 7.2.

Reduced C order repair times - answered under paragraph 7.2.

SEC profits into infrastructure improvements - not covered in this report.

Recommendations

1. That the Committee comments on the "Working Together" Proposal.

2. That co-location of County Council staff with Southern Electric Contracting Limited be noted.

3. That the appointment of staff to the new structure as soon as possible be noted.

Comment: That an independent consultant be appointed to review these proposals and that they are given full access to the Working Party's findings.

Response: An independent consultant, Dr Richard O'Connor, has been working with and advising the working group since March 2004.

Comment: That, dependent on the findings of that review, the consultant will independently observe a six month trial during which time actual performance data will be obtained.

Response: Trial data can be obtained and presented to management at any time, a consultant is not required for this.

Comment: That, following successful completion of the trial, the existing contract be re-tendered on the basis of the new management system and structure.

Response: No provision is made within the Conditions of Contract to re-tender.

9162app1/BGM

APPENDIX 2

BACKGROUND PAPER SETTING OUT THE CONTRACT FRAMEWORK

1. Summary

1.1 This note explains the contractual arrangements between the County Council and the street lighting contractor Southern Electric Contracting Limited (SEC) as background to the Street Lighting report.

2. Background

2.1 The Street Lighting Contract is a term contract starting on 1 April 2002 and ending on 31 March 2007. There is provision for three years annual extension to the term of the Contract. Work is instructed using Works Orders sent to the Contractor via an electronic system. Each Works Order identifies if the lighting unit is not working, the works to be completed and a date for completion. In addition the Contractor has access to the system to identify defects during execution of his work, which allows the street lighting database to be continually updated.

2.2 The contract documents are unique to the County Council and convey the standards required from the Contractor. The prime objective of the documents are to ensure that as many lighting units as possible are lit during the hours of darkness and that energy is not wasted during daylight hours. Secondary objectives are that the existing stock is maintained to a high standard, together with the introduction of new technology to upgrade existing units.

2.3 The contract documents include many innovative areas with mechanisms for continuous improvement and partnering methodologies.

2.4 Financial performance is also geared to continuous improvement by linking price increases to the Retail Price Index (RPI). Historical data indicates that the use of RPI is significantly lower than the nationally recognised indices for tender and cost increases.

2.5 The accepted tender submitted by SEC also included a quality submission allowing future improvements to be evolved through a partnering procedure.

3. Management of the Contract

3.1 The terms of the Contract require the Contractor to carry out the works to the standards prescribed within the time designated. In return the County Council is required to provide regular orders for works and comply with the provisions for payment. A nominated officer manages the contract on behalf of the County Council and may vary the works by specification, request extra works to be completed and give decisions upon certain matters relating to requests received from the Contractor.

4.2 Overall the Contractor is performing well by delivering works to the required standard at contract prices. Over 99% of the street lights and lighting units are operating correctly, representing more than 138,500 units. All contracts have to be flexible to account for changes in workload, budgets and specification. The Street Lighting Contract has clauses that allow the Engineer to make changes and the procedures to be applied.

4.3 A number of issues have arisen that require such procedures. These are:

(i) additional lighting units transferred from the Highways Agency to the County Council;

(ii) additional column replacement above the levels anticipated at time of tender; and

(iii) use of electronic components to encourage energy saving.

4.4 The County Council has recognised the effect of the above issues upon the Contractor's programme of works and the original time limits have not been enforced. This decision protects the Contractor from damages and allows additional time to complete the extra work involved.

4.5 As the Contract is approximately at mid-term in its life span, it is likely that further issues will arise requiring further minor adjustments to time scales. These mechanisms are in line with all construction related contracts and County Council Standing Orders.

5. Conclusion

5.1 Overall the service delivery of this Contract is satisfactory with obligations of both parties being met.

5.2 The mechanisms within the Contract are being operated as prescribed and a temporary extension of time has been granted related to variations from tendered work volumes and a specification issue. Further adjustments may be necessary as the Contract progresses.

5.3 An opportunity to improve service efficiency is currently being explored under the partnering clauses of the Contract and this is addressed in the report to the Committee.

9162app2/KG

This content is archived

Item 8