ITEM CA7
FULL CABINET – 18 DECEMBER 2007
OXFORDSHIRE HIGHWAYS CONTRACT STRATEGY
Report by Head of Transport
Introduction
1. The Oxfordshire Highways service is currently supported through two separate contracts, the Combined Maintenance Contract (CMC) and the Engineering Consultancy Services (ECS) contract.
2. The contracts have previously been extended and are due to expire in March 2010 and March 2009 respectively. New arrangements will need to be made and this report sets out a strategy for the procurement of a replacement service provider to support Oxfordshire Highways.
Background
3. The ECS contract held by Jacobs covers the design and supervision of engineering projects. This is due to expire at the end of March 2009.
4. The CMC currently held by Enterprise covers highway maintenance, vehicle maintenance and grounds maintenance. This is due to expire at the end of March 2010 (Enterprise took over from the original contractor Accord earlier this year).
5. Three years ago, the county council established the Oxfordshire Highways partnership to improve highway service delivery through a more efficient and effective use of the combined resources of its two contractors and its own staff. Oxfordshire Highways operates under the banner of “Improving your Roads” and has the following objectives:
· Achieve high standards of customer satisfaction · Deliver the Transport Capital Programme reliably and cost effectively · Achieve sustainable and demonstrable efficiency savings · Improve the condition of local roads and pavements · Minimise the environmental impact of our activities
6. Achievement against objectives has been good so far: more than 80% of major projects were on target, initial feedback from customers on schemes has been very favourable, recycling of materials has increased and alternative fuelled vehicles are being utilised. Efficiency savings targets have so far been exceeded through business process review; the re-rating of items within the contract; more efficient use of resources on scheme delivery; and through re-use of materials. In 2006/07, savings of £590k were made and the target of £747k for this year should be achieved.
7. In 2006, Jacobs, Accord and Oxfordshire County Council signed a Memorandum of Understanding with the intention of entering into a legally binding partnering agreement to sit alongside current contractual arrangements. OCC, acting on legal advice earlier this year, aborted plans to establish a formal partnership. This was partly due to the short length of time remaining until contracts would need to be re-tendered, but also due to the considerable support already being received from both partners in making changes to operational practices to bring about more effective working.
8. The establishment of the Oxfordshire Highways partnership was formally accepted as ‘complete’ by the Change Management Board in September this year.
9. The Transport Service is currently undergoing a Fundamental Service Review as part of the Council’s programme of such reviews. The initial scoping has acknowledged the work that has already taken place on Oxfordshire Highways, in terms of business process reviews and partnership working. The scoping has identified the need to do further work to look at the two larger areas of spend on highway maintenance and income generation. This will involve detailed benchmarking to provide a view on value for money and will also look at aligning budgets with service standards. This will present members with an opportunity to align the budget with priorities, whilst ensuring that we are able to meet declared service standards. This outcome of the review will be available to shape the final requirements of the new Oxfordshire Highways service.
Developing a Contract Strategy
10. Earlier this year exp Consulting were commissioned to assist the Head of Transport in developing a strategy for new contractual arrangements. This involved:
· reviewing our current arrangements; · gathering market data on other authorities arrangements and benchmarking against them; · visiting a number of other authorities with different arrangements in place; · consulting key stakeholders including Cabinet Members on what they want to achieve from future arrangements; · facilitating a workshop of key staff members and Cabinet Members to consider and draw conclusions on a recommended approach.
11. The exp Consulting report has been made available to members in the Members’ Resource Centre. This report presents the considered views of the consultants, which do not necessarily replicate the views of officers within the Transport Service. In particular, officers do not fully accept some of the operational judgements given.
12. However, the conclusion of the report and the workshop is that a strategy similar to that adopted in Gloucestershire will provide the best highway service for Oxfordshire. This model differs from current arrangements in that it will involve a single service provider, covering both professional and operational services, working in partnership with OCC staff under the Oxfordshire Highways brand. As in Gloucestershire, the lead officer for the service would be provided by the commercial partner with reporting lines through the County Council structure as well as within the commercial partner. Payment for services would be directly linked to outcome and output Key Performance Indicators.
13. In order to manage the ongoing contract strategy a Project Board will be set up including the Deputy Leader, Cabinet Member for Transport, Director for Environment & Economy, Head of Transport and Assistant Heads of Transport. A lead officer from the procurement service will also be involved. In addition, service specific resources will be drawn from across the Transport Service to assist the Project Leader in delivering the new contract arrangements and organisational change.
14. An outline programme for the tendering process is attached as Annex 1 (download as .doc file) and in recognition of the scale of the task, the timescale allows for a new contract to start in April 2010. In order to deliver the proposed single service provider, strategy arrangements need to be established to deliver the professional Engineering service from 1 April 2009 to 1 April 2010. The only practical way of doing this, without seriously affecting Oxfordshire Highways performance, would be to extend the existing contract with Jacobs for a further 12 months. Legal Services are advising the Head of Transport on the most appropriate way to achieve this.
15. The full detail of the range of services to be included in the new Oxfordshire Highways contract needs further consideration in the future and is a matter for the procurement process. However, it should be pointed out that since the CMC was first let in 2000, the grounds maintenance and vehicle maintenance aspects of the current contract are less directly linked to the main operational aspects of the CMC and are not directly managed through Oxfordshire Highways. Their place in any new contract needs to be reviewed before any EU advert goes out (Autumn 2008).
16. The exp Consulting report refers to both the contract structure and the organisational structure required to deliver the service. This report focuses on the contract structure but during the work, it became clear that in order to deliver the service in the most efficient and effective manner there would be a need for organisational change. Members of the Cabinet were keen to see Oxfordshire Highways continue to improve and “radically evolve” ahead of the new arrangements. Discussions with the Deputy Leader and Cabinet Member for Transport are being held to capture their aspirations for the service and to deliver these alongside the developing contractual arrangements. This will significantly improve the transition into the new contract. Financial Implications
17. The combined staffing and operational costs of the Oxfordshire Highways partnership are in the order of £35 million per annum and these are resourced through a combination of capital and revenue funding through current budgets and programmes. Current annual contract payments to Jacobs and Enterprise are in the order of £3m and £27m respectively. It is anticipated that this level of funding will be required in the future to maintain service levels although this will depend upon capital allocations from Government. We will be looking to the procurement process not only to reduce the costs payable to the contractor, but also to deliver better value through improved business processes and operations.
18. Significant resources, in terms of both time and cost, will be required to draw up and implement new contractual arrangements and these will have to be met from within the overall transport budget. Staff resources will be prioritised to ensure that this project is resourced effectively whilst maintaining front line services.
RECOMMENDATION
19. The Cabinet is RECOMMENDED to approve:
(a) the preparation of a contract for the appointment of a single service provider to support Oxfordshire Highways;
(b) the outline programme in Annex 1 for the tendering process; and,
(c) the setting up of a Project Board as detailed in the report to direct the process.
Steve Howell Head of Transport Environment & Economy
Background papers: exp Consulting report - October 2007
Contact Officer: Steve Howell, Tel 01865 818145
November 2007
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