Archived decisions

Contact: Phil Samms, ext 7072 email: [email protected]

1. Summary

1.1 This report summarises the new contract strategy for highways developed by the Environment Department for the ongoing delivery of the highway service for the Council. It specifically highlights the importance of the proposed £30 million per annum Term Highways Contract 2008-15 (extendable to 2018) in delivering the ongoing service with a more customer focused approach, and seeks approval to tender the new contract.

1.2 The County Council has a statutory duty to maintain highway infrastructure in a safe and effective manner. The new Term Highways Contract will ensure that the current high standards for the safe operation and maintenance of highways and highway related structures within Hampshire are continued following the cessation of the existing Highways Term Maintenance Contract on 30 April 2008.

1.3 The new Term Highways Contract builds on experiences from the existing contract, together with best practice employed by other local authorities, to provide a more customer focused service. The new contract forms part of a Highways and Transport Strategic Alliance aimed at aligning suppliers directly with the corporate objectives of the Council.

1.4 On 20 March 2007 the Buildings, Land and Procurement Panel considered a report on `The Proposed Highways Contract Strategy Principles' and resolved to advise the Executive Member for Environment to approve the proposals. These proposals included the introduction of an Improvement Works Framework and the Term Highways Contract 2008-15, the latter of which is the subject of this report.

2. Recommendation

2.1 That approval be given to tender the Term Highways Contract 2008-2015 for the ongoing maintenance of highways and related structures within Hampshire, on the basis set out in the report.

3. Background

3.1 The Environment Department is constantly striving to ensure that it delivers a high quality highways service for the people of Hampshire within current and future budget constraints. To this end, the Department is regularly reviewing procurement as a key factor in the search for enhanced value for money services.

3.2 The existing Highways Term Maintenance Contract was potentially available to be extended by up to a further two years. Discussions with the supplier (Balfour Beatty Infrastructure Services Limited) however highlighted significant problems relating to the contract variation of price clauses, due in part to the inclusion of a capping on the maximum annual increase. Following consultation with the Chief Executive and County Treasurer regarding these issues and the new contract strategy proposed in this report, it has been agreed not to extend the contract beyond its current end date of 30 April 2008. The new contract will not include a cap on variation of price, to help avoid a recurrence of this situation. The new contract will, however, retain a requirement for the supplier to provide ongoing efficiency improvements, however different mechanisms and processes are proposed.

3.3 The County Council has also been involved in discussion with the Highways Agency with a view to establishing closer links with its Area 3 Commission, which is also due for renewal in 2008. A scoping study has recently been completed, identifying service and efficiency benefits from such arrangements.

4. The New Highways Contract Strategy

4.1 As set out in the `Proposed Highways Contract Strategy Principles' report to the Buildings, Land and Procurement Panel on 20 March 2007, the new contract strategy consists of two main elements:

(i) a new approximately £30 million Term Highways Contract; and

(ii) a new Improvement Works Framework (value dependent upon capital programme budgets).

4.2 The new Term Highways Contract will cover all the services currently offered by the existing Highways Term Maintenance Contract, with the addition of main road surface dressing and environmental bridge maintenance. It also builds upon existing performance-based clauses, to encourage a more outcome-focused approach, with particular emphasis on the way in which works are delivered. The contract also calls upon significant developments within the existing contract to encourage the use of more sustainable construction processes.

4.3 The new Improvement Works Framework will provide a replacement for both the existing Framework Arrangement for Highway Works and the majority of individually tendered schemes carried out by the Department, up to the European Union's limit for works of approximately £3.6 million. This will provide a more streamlined and efficient system for the delivery of the Integrated Transport, Structural Maintenance and other key programmes.

4.4 It is proposed to operate the Term Highways Contract and Improvement Works Framework closely alongside each other, as an overlap of services will be provided to support the delivery of the highways service by the most appropriate means. It is therefore intended that the two contracts, plus others operated by the Department, will be managed through a strategic alliance, as indicated in the diagram below:

Term Highways Contract

Alliance

Programme Management Group

5. The Term Highways Contract 2008-15

5.1 The new contract will be based upon a modern form of contract, employing the use of the New Engineering Contract (Third Edition) - Term Service Contract. This contract provides significant advantages over the existing contract in terms of flexibility and clarity, and is also well recognised in the construction industry as a stimulus to good management.

5.2 The contract is proposed to be initially seven years in length, allowing sufficient time for working relationships to develop and evolve, whilst optimising the cost of significant initial outlay for plant essential to service delivery. The contract will have options to extend for a further three single years, based specifically on the ability of the supplier to deliver ongoing good performance. This performance will be closely monitored through the introduction of a performance management framework.

5.3 The contract will be predominantly based upon a `Price List' of items, enabling the delivery of a wide range of services on the highway, both through ongoing service delivery by the contractor and individual task orders, as raised by the Council's own staff. It is intended that service areas will be continuously developed throughout the contract to provide increasing levels of service and/or efficiencies in delivery through innovation between all parties involved in the contract.

5.4 Whilst the new contract seeks to employ new contract innovations, it is recognised that the existing contract has generally performed well, and that lessons should be learned. To this end, the new contract seeks to use more outcome focused objectives, building upon experience of performance clauses for services such as road marking maintenance and sign cleaning. In addition, the contract has been streamlined to improve efficiency in day-to-day management.

5.5 In order to manage the contract more effectively, and to provide alignment between the supplier and the Council's own key drivers, it is intended to incorporate a robust performance management framework within the contract. The attached appendix identifies the general indicators that are proposed to be employed for the contract, with links clearly shown to the Council's three corporate objectives.

5.6 Discussions with the Highways Agency during 2006 have indicated that there could be significant potential to consider a more collaborative approach with the Area 3 contract in the future. Allowance has been made for the development of such an initiative within the new contract, with encouragement being provided for all potential suppliers to consider this as part of their tendering arrangements.

6. Tendering Arrangements

6.1 The Term Highways Contract 2008-15 has been the subject of a Contract Notice in accordance with the European Procurement Directives during March/April 2007. Pre-qualification questionnaires have been received from all suppliers interested in tendering for the contract and are currently being assessed in advance of producing a final select list. The questionnaires cover key areas relating to the financial and technical capability of the prospective suppliers, as well as their experience and established processes in relation to equalities, the environment, quality assurance and health and safety.

6.2 It is proposed to invite tenders for the contract in late July 2007, for return in early October 2007. The tenders will be assessed in terms of submitted prices and quality on the basis of 60/40 respectively. The quality element of the tenders will include the following breakdown:

(i) Organisational Arrangements (30%);

(ii) Customer Focus (25%);

(iii) Managing Performance (20%);

(iv) Collaboration (15%); and

(v) Sustainability (10%).

6.3 Detailed assessment of the quality and price submissions will take place independently during October 2007, with interviews also being held with all tenderers in early November 2007. Following the first round of interviews for all tenderers, price and quality scores will be combined and any non-competitive tenders set aside. All remaining tenders will then be assessed in more detail via a series of site visits to tenderers live contracts, enabling Hampshire County Council officers to consider their relative abilities to deliver the desired level of service, and to consider their viability financially.

6.4 Following completion of the site visits and reality checks, a preferred bidder will be selected and a decision will be made by the Director of Environment, in conjunction with the Head of Corporate and Legal Services and the County Treasurer, to award the contract.

6.5 Following award, mobilisation of the Term Highways Contract will take place between January and April 2008, with the contractor taking over control of the contractual requirements on 1 May 2008.

7. Impact Assessments

7.1 The new contract strategy, including the Term Highways Contract 2008-15, has been developed considering the impact on the environment and equalities at all stages.

7.2 For all construction works and services delivered through the new Term Highways Contract, particular emphasis will be placed on developing safe approaches to temporary works and traffic management. The opportunity to develop earlier contractor involvement under the new arrangements will be used to suitably influence this and the design of the permanent works.

8. Conclusions

8.1 It is proposed that a 7 + 3 year Term Highways Contract be progressed as an integral part of the core strategic approach to highway construction contract for the Environment Department.

8.2 The new contract is written to allow for a flexible approach in terms of services, collaboration with others, funding levels and pricing/payment mechanisms, with a strong emphasis on customer focus.

8.3 The new contract incorporates a robust performance management framework aligned with key strategic objectives for the Environment Department and the County Council as a whole, aimed at providing a continuously improving highways service for the next seven to ten years.

1324Rpt/PS

APPENDIX

Outline Proposals for Contract Key Performance Indicators

Outline Proposals for Contract Key Performance Indicators