Joint ventures of Colas/Volker Highways /URS, Ringway/ Jacobs, Enterprise/Mouchel and Conway/Aecom have each won an eight-year highways maintenance contract from Transport for London (TfL) that could be worth a combined £2.6bn.
The winning consortiums beat off six other rival bids from Amey, Balfour Beatty, May Gurney/WSP, Skanska, Costain/ J Murphy/Capita Symonds and Bam Nuttall/Hyder Consulting.
But the winning contractors will have to work hard to make money from the deal.
Final bids were assessed solely on value, and an annual reduction in payment for services is built in; open-book accounting is to be used from day one and strict key performance indicators will have to be met or the duration of the contract will be cut.
TfL will make immediate savings on the deal with the tendered rates and prices representing a saving of 25% against its current highways maintenance contracts that were tendered in 2005/06.
It will also make year-on-year savings through an annual efficiency challenge based on only uplifting rates and prices by 80% of inflation and through volume discounts when more boroughs join in.
The new contract frameworks, developed jointly by TfL and the London boroughs, will cover both road maintenance and the design and construction of new schemes, and, for the first time, can apply to all roads across London.
TfL will use these frameworks for all TfL Road Network (TLRN) highway contracts from April 2013, which will be worth up to £1.2bn during the next eight years.
It is expected that up to 12 London boroughs will also use these contracts for a range of maintenance services from April 2013. As more boroughs switch to using the contracts in future years the total value of the contracts could rise to around £2.6bn.
Payment for core services, including cyclic maintenance and lower value reactive maintenance, will initially be based on a lump sum basis.
In each case the lump sum is a tendered price which will be subject to inflation in accordance with the contract formula. This approach minimises transaction costs by removing the need to issue and agree orders for each piece of work.
But the contracts allow for delivery of core services to be moved from a series of lump sums to a single target cost within the first year or two.
The target cost for core services will be based on a full open book analysis with data being made available from all four contractors from day one.
Rates will be set according to actual costs incurred with an uplift for inflation and the contractor’s tendered fee for profit and overhead.
The target will be revisited annually.
Contractors will be further incentivised by an annual review of performance against five key performance indicators.
Any failure to achieve the indicator targets will see the duration of the deal cut by six months, costing the failing firm around £20M.
Amey challenge triggers procurement suspension
Transport Scotland has suspended the tender process for a highways maintenance contract worth up to £350M following a legal challenge from failed bidder Amey.
Amey has lodged an appeal with the Edinburgh Court of Session after losing out last month to Bear Scotland. The two had bid to operate and maintain the trunk roads in north west and south west Scotland.
As result of the challenge, procurement has been suspended while ministers from Transport Scotland mount a defence.
“The procurement competition for the contract to operate trunk roads in the north west and south west of Scotland from April 2013 has been automatically suspended following a legal challenge which Scottish Ministers will rigorously defend,” said a Transport Scotland spokesman.
“We cannot comment further as this time, however robust contingency plans are being finalised.”
Transport Scotland chose Bear Scotland as preferred bidder for the 10 year contract to maintain 1,300km of road network last month.