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Highways Agency

Client guide; Highways Agency

This year's Highway's Agency budget is £1.4bn - funding is expected to be consistent in the foreseeable future. The Agency's principal duty is to ensure that no more than 7%-8% of existing infrastructure needs maintaining at any one time. Keeping England's 10,000km of motorway and trunk roads in good order will account for £672M this financial year.

Meanwhile, in the prevailing political climate there is little prospect of new road building in the near term, but more than £500M is being allocated to road improvement including construction of bypasses. This year's budget for improving driver information is £80M.

The Highways Agency is responsible to the Department for the Environment, Transport & the Regions and claims to be a leader in the Treasury-driven push for public sector best value procurement. From a 20/80 weighting on quality versus price it has announced a move to reverse the balance, placing 80% emphasis on quality and 20% on price.

Until recently, much Highways Agency work was let under the ICE 5th contract form. In recent years, however, design and build has become the Agency's favoured procurement route. Design and build contracts have been let on a scheme-specific basis for high value work - competitive tender is used on all projects above £5M - with framework contracts supplying lower value construction and maintenance.

Design and build has delivered consistent improvements in quality and delivery time, says project services divisional director for the South East Bill Wadrup. These have been achieved by bringing designer and contractor together at the start of projects, enabling issues such as commercial viability and buildability to be considered as an integral part of the technical solution. It also enables the contractor to start negotiations with suppliers and subcontractors well in advance of construction. The Agency is looking to foster ever-closer working relationships and push gains further.

Second phasesuper agents

Three years ago the Highways Agency divided England into 24 areas. To each, it appointed a super agent who was charged with managing motorway and trunk roads and a term contractor responsible for carrying out maintenance.

It is about to print a new map of England, introducing a new area made up of the M25, spur roads and the Dartford crossing, and redrawing area borders extensively. The alterations are taking place as the Agency prepares to re-tender contracts for management and maintenance of four areas in the south east.

Areas 3, 5, 6 and 8 were the first to be let under the Agency's present procurement regime. Super agent contracts were for three years, extendable to five. Term maintenance contracts ran for two years. With the first tranche of contracts due to expire, the Agency and those who have been working for it believe it is time to institute change once again and to capitalise on current strengths.

New super agent contracts could extend for up to seven years and will run for a minimum of five. Term contracts will be re-bid every three years.

Forward planning is a central theme in the Agency's thinking. At the last comprehensive spending review, central Government introduced a three yearly budgeting cycle. This has enabled the Agency to be more predictive in its approach to maintenance and network improvement, and to allocate funds so as to iron out fluctuations in workload. 'It gives our contractors stability and certainty,' says group manager for procurement policy Joe Burns.

Partnering has evolved voluntarily in the last three years, observes Wadrup. Super agents, term contractors and Agency staff have forged close working relationships, in some cases sharing offices and staff. The Agency has gained better value for money, he reports. Meanwhile, consultants and contractors say they have achieved better margins. Claims are at an unprecedented low, while response and delivery times have improved consistently.

The Agency is so convinced partnering is the way forward, the new super agency and term contracts are being established with network boards - co-located committees bringing together senior staff from the consultant, contractor and the Agency itself. 'Crucial and timely decisions will be taken by this body engaging in full the principles of partnering,' Wadrup states.

The first four contracts are to be advertised in the Official Journal of the European Community next month. Bids are to be returned by October and contracts will be awarded at the end of this year. The new super agents and term contractors will take up their duties on 1 June 2001. Contracts for the other 20 areas will be let over the next two years.

In a bid to push recent efficiency gains yet further, the Agency will next month be inviting tenders to become the first of its single entity managing agent and contractors, or MACs, responsible for Area 8, Berkshire. If the pilot contract delivers the quality and savings anticipated, MACs could become the standard, one-stop-shop route to design, construction and maintenance of England's motorway and trunk-road network.

What is a MAC?

A managing agent and contractor is a single entity service provider, delivering planning, design, construction, operation, maintenance and, possibly, finance. 'Some of the contractors interested in developing MAC capability have said they would be willing to provide short-term finance,' says Burns. Like present-term contractors, the MACs will carry out all maintenance and improvement work up to a threshold of £0.5M.

The Agency has looked to engineer-procure-construct contractors in the offshore and power sectors for a model of how MACs should work. Burns believes the MAC will be given far greater autonomy than current super agents and term contractors enjoy.

But single entity contractors will need to be ISO 9000 accredited, assuring quality management systems are in place. The Agency will demand open book accounting and emphasises that any financial gains must be shared fully with the supply chain.

Quality

'As a public procurer, the Agency has to open work to all those who express interest,' states Burns. However, it has a supplier database against which it can check bidders' track records. 'If we want to encourage quality, we must monitor work and use that information in informing future decisions.' Staff will need to demonstrate relevant expertise and experience. Particular emphasis will be placed on well qualified team leaders

The contractor will need to demonstrate it has enough staff - that it is 'man enough for the job'.

Management systems will be scrutinised;

Bidders must show they are able to communicate openly with the Agency and strategic suppliers;

Experience of design, contract management and quality assurance is vital;

Relationships with the supply chain must be well established;

Bidders will need to be able to demonstrate innovation - the ability to continually refine methods, technologies, management practices and equipment; and;

Being in the right place geographically is important.

The Agency will be 'invasive' in checking bidders' quality statements, says Burns. He anticipates little if any deception, though. 'Highways Agency contracts are too big and too influential to throw away.'

Contact Joe Burns: joe.burns@highways.gov.uk

or George Jamieson: george.jamieson@highways.gov.uk

www.highways.gov.uk

At a glance

Covers: England

Responsible for: maintaining more than 10,000km of motorway and trunk road, bridges, tunnel, lighting and passenger information systems, and road improvement, including construction of bypasses

Budget this year: £1.4bn

Structure: England is divided into 24 areas, managed through four divisional offices

Consultants say

The Highways Agency is forward looking, good at listening to the industry and acting on advice. It provides clear, detailed briefs and operates a fair and reasonable tendering process.

The Agency's emphasis on quality over price was welcome. It pays well and promptly.

Consultants felt some pressure to take a partial line when negotiating claims for the Agency, though.

All consultants approached by NCE were keen to take on work under the new procurement framework. However, a few doubted whether MACs would improve profitability. The attraction lies in opportunities for establishing long- term relationships and winning work in other areas such as managing the externalisation of council services, local authority maintenance work, the rail sector, and privatised roads in central Europe.

Contractors say

The move towards engineer, procure, construct style contracts is long overdue in the civils sector. Introducing MACs is a logical extension of design and build.

Time and value for money are the Agency's principal drivers.

Because of its 24-area structure, it is difficult to treat as a single entity.

Personalities are highly important in relationships with the Agency. At their best, Agency staff are forward looking and fair minded.

Communication is open, with good levels of feedback. At worst, grudges are borne making long-term relationships difficult.

Projects

There are 37 road improvement schemes in the pipeline - two thirds are past statutory procedures and will go out to tender within the next few months. Burns expects all to be let within the next two years.

Three of the biggest individual improvement contracts are:

The A35, worth £50M, on which three sections have been combined to create a single scheme, allowing the contractor to optimise resources;

The A6 Clapham bypass in Bedfordshire, valued at £25M; and

The A11 Roudham Heath to Attlebrough improvement in East Anglia, worth £15M

The Agency is committed to procurement through the private finance initiative, where workable. There is little appetite among UK contractors for PFI maintenance, though, reports Burns.

Future design and build work will be offered at a fixed price, with risk on the contractor. Incentivisation is in the form of extensions for term contractors and repeat business for framework contractors. Under the new term maintenance contracts and MACs, though, the Agency is planning to introduce target costing with share of gains and losses.

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