Agenda item

Report by Director of Environment and Highways

The existing highway maintenance contract with M-Group Infrastructure (Milestone) is set to expire on 31 March 2025 with no options to extend. Following Cabinet approval in October 2023, officers were instructed to prepare and commence the procurement of a new highway maintenance contract to start on 1st April 2025 (following a mobilisation period) for 8 years with options for two 3-year extensions (14-year potential contract length).

The Audit & Governance Committee is RECOMMENDED to

a)    Note the governance in place and associated activities to enable the successful transition from the existing to new highways maintenance contract due to commence on 1^st April 2025.

The Head of Highway Maintenance presented the report to the Committee and made the following points:

• The existing highway maintenance contract was set to expire on 31 March 2025 with no options to extend. Following approval at Cabinet in October 2023, Officers prepared and commenced the procurement of a new highway maintenance contract to start on 1 April 2025 (following a mobilisation period) for 8 years with options for two 3-year extensions (14-year potential contract length). Following an open procurement exercise, a preferred bidder had been selected and the contract awarded. Work had commenced to manage the transition to the new contract.

• The services covered under this contract are the maintenance and improvement of the Council’s highway network. The agreed procurement process for the contract was a two stage ‘competitive procedure with negotiation’ (CPN) to ensure a meaningful dialogue was maintained with suppliers throughout the lifecycle of the process but still allowed the Council the flexibility to award the contract based on the initial tenders without any negotiation. Following receipt of the Initial Tenders, the Council took the decision to proceed with the award of this Contract based on the evaluation of Initial Tenders, not progressing to negotiation or submission of Final Tenders. The CPN procedure permits the Council to award the contract based on an evaluation of the Initial Tenders and the Council reserved the right to do so at its absolute discretion.

• A recent internal audit report highlighted that there was ‘a good system of internal control in place’ and the fact that the transition plans were ‘robust and clearly outlined and defined the Council’s approach to contract closure of the existing contract and the formal acceptance of project deliverables, objectives and commitments under the new contract.

• Once the contract had commenced, the council would measure and manage performance in accordance with S825 of the scope, Performance Management, which set out the performance requirements for all aspects of the contract. This would be a platinum rated contract for the Council, therefore the Procurement and Contract Management Hub would have strategic oversight of the contract. The operational team would contract manage on a day-to-day operational basis including social value commitments.

Members commented that the report was well informed and provided reassurance to the Committee. The following points were raised by Members:

• The internal audit carried out and scoring well provided good reassurance that the correct internal controls were in place and that the transition plans were robust.

• A point was raised about the agreed procurement process and the question was raised as to why a decision was taken based on the initial tenders. It was clarified to the Committee that there was always the flexibility to award the contract based on the initial tenders without any negotiations. Following receipt of the initial tenders, a decision was taken to proceed with the award of the Contract based on the evaluation of initial tenders. The CPN procedure permits the Council to do this.

• Members asked if any break clauses had been considered in the duration of the contract and were advised that the ability was there if required but a fundamental review had been built in in year 5 which would consider quality and finance. There was a right to terminate the contract if the criteria were not being met.

• Officers were asked if self-certification had been considered and responded that the contract was based on a schedule rate and cost certainty which would be closely monitored and balanced. There was a high level of governance for the contract which was different in many ways where there was greater control and involvement.

• Members asked if Value for Money had been given sufficient regard and had there been market failure as the two stages had not been followed. Officers offered reassurance that the process had been followed that had been set out from the start. There had been sufficient exploration of the market. The tender evaluation was in place and there was greater visibility and confidence in place as Value for Money was the key thing that had been maximised.

• Concern was raised about the works programme and it being the same as the current one. Drainage had been a major concern for residents, and this needed to be addressed in the new works programme. The Committee was reassured that the programme was the scope of work, and this was being developed and all the concerns would be taken into consideration.

Resolved: That all but Councillor Ian Middleton were happy to note the governance in place and associated activities to enable the successful transition from the existing to new highways maintenance contract due to commence on 1 April 2025.