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Get in lane
Supply Management – 2 March 2006

A call for collaborative procurement for road maintenance seems like a U-turn by the Highways Agency. Mark Smulian examines whether councils will be able to tackle bumps in the road - and make savings

Council highways maintenance managers have been experiencing a collective dj vu this winter. This vivid recollection followed the latest proposals from the Highways Agency which, under pressure to meet Gershon efficiency targets, wants to combine procurement for motorway and trunk road maintenance across 150 councils.

It is a return to the situation abolished in 1996 by the agency's last bout of procurement radicalism. Up until then, councils maintained their roads as well as the trunk roads and motorways that passed through their patch. But the agency decided it could get better value by privatising work on its roads, splitting it into 14 areas - few of which related to council boundaries. The move led to a souring of relations as councils lost economies of scale for their work.

But before the change can be introduced obstacles remain. Not least of all is that about 164 council and agency contracts, all with different timescales and boundaries, must be unscrambled before anyone can collaborate on new ones.

Making ends meet

Agency officials last year convened a working group with councils and contractors to seek a way forward. The agency wears two hats - as a procurer in its own right, and as the government-appointed National Change Agent for encouraging better local authority highways procurement.

It is charged with making efficiency savings of 200 million from its 1.8 billion budget by 2007/08. As Change Agent, it must help councils save 700 million from their 4.5 billion total spend. With road maintenance cost annual inflation at 6-7 per cent, the need for savings is acute.

Steve Rowsell, procurement director at the Highways Agency, explains: "We can achieve the targets, but we will need to reduce the number of contracts. There is too much inefficiency and wastage, and a lot of collaborative purchasing power available."

He admits it might be 2008 before enough contracts have lapsed for any significant number to be re-let collaboratively. In the meantime, he says, "There are other efficiencies to be had, such as sharing plant and depots."

According to Rowsell, the agency was right to change its methods in 1996 because contracts back then were adversarial with high cost overruns. It has since moved to a partnering approach that uses "the skills of the supply chain to identify best value".

Agency contacts are with the first-tier contractors, who are expected to deliver best value by encouraging the supply chain to seek savings, usually by sharing these on a partnering basis. "Partners further down the chain are drawn into the planning and design of work so they are gradually getting into the delivery of services and projects and are able to contribute ideas," he says.

The proposal also throws up opportunities for other efficiencies through framework contracts. Both authorities and the agency could save time and money using new deals. The agency also wants to encourage a sustainable approach to construction with whole-life costing where possible, to avoid the need to repeat work because the cheapest, but not the best, method was used.

Council view

It isn't just the agency that sees benefits. Graeme Fitton, head of transport and highways at Warwickshire County Council, says: "We seem to be heading back to joint procurement and shared depots, and there could be economies of scale."

Fitton, who leads on procurement for the County Surveyors Society, which represents local authority chief officers with responsibility for strategic planning, transportation, the environment, waste management and economic development, thinks the savings targets are achievable, but notes that Warwickshire offers an example of the difficulty of collaborative procurement. Currently two agency contracts cover the trunk roads and motorways in the area, neither of which coincides with the county boundary. Meanwhile, the council is in partnership for maintenance work with contractor Carillion until 2009.

He says it is still possible to save costs - and "not just by beating down suppliers with aggregated purchasing". One example of this is orders for road surfacing materials, which often bunch toward the end of the financial year as councils rush to spend their annual budgets. "If everyone orders blacktop at the same time the suppliers will be working their socks off. If the flow was better planned, it would help suppliers and they could reflect that in prices."

Another idea is for the agency and councils to agree protocols with contractors to guarantee payment on time. "That reduces their costs without anybody losing, and it can be reflected in their prices," he says.

Collaborate to accumulate

There are other instances where collaborative procurement can regain efficiencies lost since 1996. Winter maintenance, involving special equipment such as snowploughs and gritting lorries, is one area.

Mike Moore, corporate director of environmental services at North Yorkshire County Council, recalls: "I could send a gritting lorry out in winter back then to cover a trunk road and some of my roads, instead of the agency and ourselves each using a different lorry."

If, for example, an agency gritting lorry must use a local road to reach a trunk road, it can be held up if that road were impassable because the council concerned has not yet sent out its gritter. But, Moore says, collaboration on day-to-day maintenance "is more difficult as most of us are locked into term maintenance contracts".

He believes there are opportunities for savings by packaging resurfacing or rebuilding contracts and is looking to test this with the agency's upgrade of a stretch of the A1, which will intersect with a council bypass project. "We could certainly put that to the market together; collaboration is easier on one-off projects."

Opportunities for integration

Contractors are supportive but see some practical problems. John Jackson, chairman of the Highways Term Maintenance Association, and managing director of contractor RCS, says: "There are savings to be had, but trying to align contracts that don't have common boundaries would be difficult. There may be only a few opportunities for contracts to be integrated but we are seeing increasing collaboration."

One promising prospect for savings is if materials stocks could be shared between council and agency projects, where this would make them available more rapidly. This is important when work must be done during night road closures. Jackson says: "An extra half hour's work when a road is only closed for five hours can be crucial to getting the job done more economically."

The most advanced work is being done in East Anglia, where the agency's contract boundary happens to coincide with those of councils. Michael Warren, assistant director of the East of England Regional Centre of Excellence, plans a 60,000 feasibility study. It will examine whether councils' procurement can be aligned with the agency's contract when it comes up for renewal in 2007, and whether economies would be offered if any council work were transferred to the agency, or vice versa.

If successful, the model would be applied next to a more challenging agency contract that sprawls untidily across several East Midlands councils.

Warren says: "We may look at whether we can extend some contracts or negotiate early ends to others so a new contract could cover trunk roads and the local authority ones. We want to put work together and improve efficiency, but we are dealing with the art of the possible."

Any driver stuck in a traffic jam near road works, or driving over a poor surface, will surely hope improvement is on its way.

The road to improvement

Proposals for collaborative procurement: