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 Improvement Works Framework (IWF) in the ongoing delivery of construction schemes with a more Council and customer focused approach, and seeks approval to tender the two framework arrangements that comprise the overall IWF.

1.2 The new IWF builds on experiences from existing contractual arrangements, together with best practice employed by other local authorities, to provide a service more closely aligned with the Council's aspiration to enhance cost and programme certainty for schemes delivered by the Environment Department. The new Framework also forms part of a Highways and Transport Strategic Alliance aimed at aligning suppliers directly with the corporate objectives of the Council.

1.3 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 the Term Highways Contract 2008-15 (currently being tendered), and the Improvement Works Framework 2008-12, which is the subject of this report. 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.

2. Recommendations

2.1 That approval be given to the revised approach, as set out in the report, for procurement of the two framework arrangements comprising the Improvement Works Framework 2008-12, to facilitate the delivery of maintenance and improvement works to highways, related structures and other construction related projects within Hampshire:

Framework 1: Highway Works up to a value of £500,000

Framework 2: Structures Works from £50,000 and larger scale Highway Works (>£500,000), up to the European Union procurement limit for works (currently £3.6 million)

2.2 That approval be given for the cessation of the Register of Approved Contractors for Highway Works as of 1 May 2008.

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 Currently the Department delivers maintenance and improvement schemes through a combination of open tenders, using contractors held on a Register of Approved Contractors for Highways Works, and a Framework Arrangement for Minor Highway Works (for more straightforward highway schemes up to £200,000). The Register of Contractors operates on a five-yearly cycle, containing over 50 contractors who have pre-qualified to deliver certain values of scheme The current Register is due come to an end on 31 March 2008. The Framework Arrangement also concludes on this date.

3.3 The current arrangements have provided good service over many years, with the Framework Arrangement in particular offering proven value for money compared to tendered schemes. The Register of Approved Contractors has, however, presented problems in managing the number of contractors available to deliver schemes. Many of the companies on the list have shown little actual interest in completing works when invited.

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 is currently being tendered, and will cover all the services offered by the existing Highways Term Maintenance Contract, with the addition of main road surface dressing and environmental bridge maintenance. It 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 progress within the existing contract to encourage the use of more sustainable construction methods and processes.

4.3 The new IWF will provide a replacement for both the existing Framework Arrangement for Minor Highway Works and the Register of Approved Contractors for Highway Works. This ensures the delivery of the majority of highway and structures related schemes carried out by the Department, up to the European Union's limit for works (currently approximately £3.6 million). The new framework offers a more streamlined and efficient system for the delivery of the Integrated Transport, Structural Maintenance and other key programmes. The new framework will also be made available for use by District and Borough Councils for the delivery of any minor civil schemes that they wish to undertake, and they will also continue to undertake design and supervision work under the agency arrangements where mutually beneficial.

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

County Council Client

5. The Improvement Works Framework 2008-12

5.1 The IWF consists of two separate framework arrangements:

Framework 1 - Highway Works up to a value of £500,000

Framework 2 - Structures Works from £50,000 and larger scale Highway Works (>£500,000), up to the European Union procurement limit for works (currently £3.6 million)

Both frameworks will be based upon a modern form of contract, employing the use of the New Engineering Contract (Third Edition), similar to the Term Highways Contract 2008-15/18. This form of contract provides significant advantages over existing arrangements, in terms of flexibility and clarity, and is also well recognised in the construction industry as a stimulus to good management.

5.2 It is intended to operate Framework 1 with four to six contractors, and Framework 2 with four or five. Exact numbers will be ascertained following the tendering process on the basis of competitiveness, as it is intended that only those contractors who are likely to be successful in being awarded works through either framework are included.

5.3 Both frameworks are proposed to be four years in length, as this is the maximum timescale permitted for such arrangements by the European Union. Four years will provide an ideal timescale to develop good working relationships with all contractors on the frameworks, and also to review their relative success of the two frameworks, in advance of their replacement in 2012.

5.4 Both frameworks will involve a comprehensive performance management framework, aimed at providing regular feedback to all suppliers on their individual performance, and also in comparison to others on the same framework. Key performance indicators will be used that are appropriate to the service being delivered, and linked to the Council's corporate priorities.

5.5 Framework 1 will be operated in a similar way to the existing Framework Arrangement for Minor Highway Works, based upon a `Price List' of items. This enables a quick assessment of scheme costs by the Council's staff when preparing a scheme, leading to a works order placed with the cheapest contractor within two-three weeks of finished design work.

5.6 Due to the more technically challenging aspects of schemes delivered through Framework 2, it will not employ a standard price list, rather schemes will be individually priced by all contractors on the Framework. In addition, it is envisaged that programmes of work may also be procured through Framework 2, enabling a particular contractor to deliver a number of schemes more efficiently over a period. It is intended that this will provide improvements to service delivery through familiarity and standardisation.

5.7 Framework 2 also offers the Council an opportunity to engage with contractors earlier than is currently permitted through contractual restrictions. Early contractor involvement has been proven to deliver noticeable benefits on scheme delivery, as constructability and material issues can be resolved prior to the completion of designs, thereby improving cost and programme certainty when works actually commence on the ground.

6. Tendering Arrangements

6.1 Both Framework 1 and Framework 2 of the IWF have been the subject of Contract Notices in accordance with the European Procurement Directives during April/May 2007, as works costs anticipated to be delivered through the frameworks are expected to exceed £3.6 million in total over the four years that they will operate. Pre-qualification questionnaires have been received from a significant number of suppliers interested in tendering for the two frameworks 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 intended to invite six to ten contractors to tender for each of the two Frameworks. Tenders are programmed to be issued in early January 2008, following the award of the Term Highways Contract in December 2007. This is to ensure that the new Term Highways Contract contractor is not included on either of the frameworks, although there is opportunity for capital works to be carried out under this contract if maintenance performance is good.

6.3 The tenders will be assessed in terms of submitted prices and quality on the basis of 70/30 respectively for Framework 1 and 45/55 for Framework 2. Exact details of the quality element of the tenders have yet to be finalised, but will most likely include similar headings as the Term Highway Contract 2008-15/18, which were:

(i) Organisational Arrangements

(ii) Customer Focus

(iii) Managing Performance

(iv) Collaboration

(v) Sustainability

The price:quality splits differ for the two frameworks, as Framework 1 will be based upon a price list of items, fixing prices for the entire period of the framework. Framework 2 concentrates more closely on the added value that closer working with the supply chain can offer and, as such, is proposed to be biased more towards the selection of high class suppliers.

6.4 Detailed assessment of the quality and price submissions will take place independently during February/March 2008. Interviews will also be held with all Framework 2 contractors during March 2008, as the relationship required for this arrangement relies upon selection of contractors with whom the Council can develop best working relationships.

6.5 Following the completion of the tender assessments, a short list of contractors for inclusion on each framework will be selected and recommendation made to the Director of Environment, in conjunction with the Head of Corporate and Legal Services and the County Treasurer, to appoint them onto the respective contracts.

6.6 Following award, mobilisation of the two frameworks will take place during March/April 2008, ready for commencement of the new arrangements on 1 May 2008.

6.7 As of 1 May 2008 the Register of Approved Contractors for Highway Works will cease.

7. Impact Assessments

7.1 The new contract strategy, including the Improvement Works Framework 2008-12, 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 IWF, 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 two four-year frameworks, collectively known as the Improvement Works Framework be progressed as an integral part of the core strategic approach to highway construction contracts for the Environment Department.

8.2 The new frameworks are 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 frameworks incorporate 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 four years.

1340Rpt/PS