NHT Network 2009 SPRING CONFERENCE COLLABORATION AND INTEGRATION BEST PRACTICE Tuesday 12 May 2009 Manchester MAKING MORE FROM LESS Matthew Lugg

Delivering efficiencies Topics Covered Scene setting Delivering efficiencies - Procurement - Asset Management Summary

Financial Situation 2009 - 2013 Efficiency target increased 4% 2009/11 Government sticking to its spending targets Efficiency target increased 4% (2010/11) Reduced income from developers Low to zero inflation likely to increase Less discretionary capital Beyond 2011 expected large reduction in public spending – likely service cuts

Efficiencies through Business Transformation Organisational Change THE HIGHWAY SERVICES EFFICIENCY REVIEW DELIVERED OVER £2M OF SAVINGS Touch-down Points Through reorganising the Department reducing number of managers by 25%. Consolidated our office base and led the way in implementing mobile working. Collaborative approach to procurement through alliances. Established a completely new way of dealing with customer requests. Highways Works Alliance Customer First

Performance 4 star excellent authority CPA Scored 4, the highest rating in the Environment Block LGC Council of the Year 2007/08 NHT award for best authority 2007/08 from PWC Benchmarking - rated the highest performing County Council for Transport Services Public Satisfaction of highway service 82% LTP2 Progress report highly rated by DfT Shortlisted for the National Transport Authority of the year.

PWC Benchmarking of Performance

WHY COLLABORATE? Savings on the cost of procurement Reduced costs through economies of scale Improved service delivery through adoption of best practice So, this is the answer to the first question that I posed at the start of my presentation. The MHA does just relate to local highway authorities in the East Midlands but it could be broader than that. We all face similar but not necessarily identical challenges – so we’ve decided to work together! Authorities in the West Midlands had been involved in the early discussions about the MHA but have not joined yet.

Midlands Highways Alliance What is it? East Midlands local highway authorities with common interests in improving performance and making efficiency savings in the delivery of highway services working in collaboration

The Alliance Agreement “Unincorporated Association by Agreement” Those signed up already are: Leicestershire County Council Leicester City Council Nottinghamshire County Council Nottingham City Council Derbyshire County Council Derby City Council Lincolnshire County Council Rutland County Council Peterborough City Council Highways Agency By following the unincorporated association by agreement tack, we’ve avoided the need of setting up a separate company. Our link is primarily through one overarching agreement but that is supplemented as necessary by other agreements between fewer members. Also, there is the potential to take on more members within the Midlands area. Those of you who know your geography will realise that Peterborough is not in the East Midlands – my old authority hasn’t been annexed – it’s just recognised the opportunities that are locally available. Northamptonshire CC has sat on the fence a little bit but probably now needs to be added to that list but the Highways Agency is definitely with us on this.

Alliance Agreement Signing

5 Key Objectives To establish and develop collaborative procurement framework(s) to secure the delivery of: major (highway) capital schemes medium size (highway) schemes professional services Overall, we’re looking to establish where best practice exists and flush it out into the open. We’re looking to create and use framework contracts that can be used to help deliver our business, irrespective of how big or small each of us may be. We’re continuously exploring how we can work more closely together and get some economies of scale going. And, of course, if we get some framework contracts established, that should enable us to avoid at least some of the red tape that invariably restricts delivery on the ground.

5 Key Objectives (continued) To establish, implement and develop a continuous improvement model for highway term maintenance to achieve convergence to best practices To embed partnering principles and construction best practice in all its work and throughout the supply chains to optimise commodity acquisition

Work Streams Major Schemes (£5m - £50m) Lead Authority Northamptonshire CC Medium Schemes (£0 - £8m) Lead Authority - Leicestershire CC Term Maintenance Lead Authority - Lincolnshire CC Professional Services Lead Authority - Nottinghamshire CC Commodities Lead Authority - Derbyshire CC We are looking at five workstreams in particular. NorthantsCC are about the only authority with their sights on major schemes over the next few years but Leicester City or Leicestershire County may have some through growth point status – equally, the HA are thinking about this framework too. That’s as much as I will say about this working group I chair the working group looking at medium schemes and it’s probably the most advanced – and I’ll come onto that in more detail shortly and will also cover the other groups too.

“Project Management” Awarded £227k EMIP funding, matched by contribution from participating members Project funded for 2 years CWC commissioned as support consultant Leicestershire County Council acting as lead local authority overall Supported by Constructing Excellence Sharing outputs with all who wish to know Courtesy of work carried out by the centre of excellence, we have some match funding which is helping to pump prime some of the work and fund the MHA Manager role which centres round co-ordination of all activities. County Councils and the HA contribute £5k per year and the City Councils and RutlandCC (which is rather small anyway) contribute £2.5k. LeicsCC as the real driving force behind the MHA acts as the banker for all related funds but, in the same way that we distrbute funding to where it needs to go, we also share knowledge with those who want to know or those who’ve got a little bit more time before their train leaves the station!

There should be five working groups regularly reporting back to a programme board which I also chair. However, as I mentioned earlier, the major schemes group is inactive. There’s quarterly feedback to an Executive Board – which is where I should have been this afternoon in fact - that essentially comprises the directors of all the highway authorities. Matthew Lugg chairs that board and he and I are both on the EMIP Project Management Board, monitoring both progress against the project targets and expenditure of the £227k.

Midlands Works Framework 3 (MWF3) Scope of work – all highway works Size of schemes - £0 - £8m Total value of work - £50m - £150m Value from MHA - £50m Number of framework contracts – 4 Duration – 3 + 1 years Start of contract – 7th November 2007 Now the Highways Agency also need to generate efficiency savings and also sees that collaborative working is one way to achieve this. The MWF3 contract preparation process was such that only Leicestershire CC contributed towards the end of the tender preparation stage – enough to make other MHA members content that it was a usable contract for them. However, arriving late into the tender preparation process meant that the contract only addresses trunk roads and motorway specification rather than county roads. That said, there is sufficient coverage to work out the majority of a scheme’s potential cost The Highways Agency regards the MHA arrangement good enough to also consider applying it to the south and the south east

MWF3 Progress to date HA Schemes Each contractor currently allocated in the region of £20m each Two schemes completed M69 resurfacing £7.1m Tarmac A52 Whatton resurfacing £1.3m Carillion Awarded and potential work awards to end of financial year 2008/09 £55m

MWF3 Efficiencies through ECI & Innovation Framework community board established Building integrated teams from scheme inception Operating under a collaborative, cost transparent and incentivised contract Reduced lead-in time Ensures Efficient and effective construction Analysis of the framework predicts efficiencies over “traditional” adversarial contracts of: 6% minimum

MWF3 Efficiencies through ECI & Innovation 2008/09 2009/10 2010/11 Total No. Schemes 3 15 9 27 Efficiencies @ 6% £k 738k 2088k 2898k 5724k

MWF3 Efficiencies through ECI & Innovation Examples During ECI stage the Contractor requested an island kerb line to be moved as part of permanent works to accommodate barriers and preserve traffic flow resulting in reduced duration and savings of £233,000 Use of Benefil in place of foam concrete - £30,000 scheme saving To date Efficiencies of £657k have been identified

Efficiencies in Procurement Medium Schemes Framework 2008/09 2009/10 2010/11 Total No. Schemes 3 15 9 27 Savings £k 300k 1500k 900k 2700k

The 3 Counties Alliance Slightly more localised is the Three Counties Alliance – a bit of a forerunner for the MHA and the unincorporated association by agreement document used for this alliance was used for the MHA agreement

Benefits of 3 Counties Alliance Professional Services Framework? Advantages Shared set-up costs Aggregated workload enough to keep provider busy (£1-2m/yr) Economies of scale Long-term relationship with provider Benchmarking between provider and 3CA An external training provider So we looked at this and concluded that we should pool our needs and offer a more attractive 3 into 1 arrangement and share the costs of doing so. Leicestershire CC’s top-up needs were lesser than Derbyshire’s and Notts but we could all share economies of scale – and of course an external partner that our trainees could gain experience with.

3 Counties Alliance Partnership Progress to Date Breadth of commissions has exceeded expectations Total efficiencies year £700k Overall workload £2.0m Success of Accelerated Improvement Groups Recognised as best practice

Commodities Salt Surface dressing materials Street lighting columns Civil engineering materials Fuel Data gathering stage I ought to just comment briefly on the other work steams though. The more partners you have on board, the better your buying power. With the Eastern Shires Purchasing Organisation and Tarmac involved, there’s some pretty influential purchasing that can arise and there are a number of commodities where we think efficiency savings can be derived. Of course, if we all used the same materials and specification this would be straightforward – but we don’t hence the data gathering element here.

Delivering Cross Regional Savings in Highway Commodities Case Study:- Salt procurement 24 highway authorities Through ESPO Like for like saving 6% - 17% £700k over 3 years

MHA Term Contract Best Practice Model Spread Analysis

MHA Term Contract Best Practice Model

Efficiencies Forecast to 2011 by MHA Procurement 2.700 ECI and innovation 5.724 Commodities 0.442 Professional Services 2.1 Total £10.966m Efficiencies to date – Innovation and ECI £0.657m Professional Services £0.691

Further Efficiency Opportunities Extended membership of Medium schemes framework Extended membership of Professional Services frameworks Further Commodities – eg light fittings and other electrical components Term contract – best practice adoption and moving to future procurement frameworks Majors Framework – Procurement, ECI and innovation savings

The process of change Not a quick fix Needs championing Must have clear business case Need project management resource Needs to be well communicated to internal staff Need to keep the politicians on board National firsts ….. A brief overview This needs time, commitment, clarity, resource and naturally political buy-in. keeping your own people in the loop is essential to avoid scare-mongering. Some of what I’ve explained are national firsts and …

Issues Majority of savings achieved are from capital budgets and therefore don’t contribute to LAs 3% target Future RIEP funding will be on the basis of a loan and will need to be paid back Difficulty of future funding on ongoing support and further development, options include subscriptions, levy

RIEP GOOD PRACTICE CASE STUDY

Asset Management CIPFA Report “Local Authority Transport Infrastructure Assets. Review of Accounting, Management and Finance Mechanisms” Co-sponsored by DfT and Treasury Recent announcement by Treasury that they fully support the recommendations

Asset Management CIPFA Report Main findings AM potential to deliver significant efficiency gains and improvements (estimated 5% of £5.0bn) AM approach is the only one capable of fully supporting sound financial management and effective stewardship of the asset base CSS/TAG guidance needs to be updated

Asset Management CIPFA Report Main findings Needs to be an early change to the relevant accounting guidance contained in the SORP (Local Authority Statement of Recommended Practice) Authorities need to have good quality consistent information Proposed interim solutions to address the WGA (Whole Government Accounts) information requirements, using a combination of natural unit costs, asset inventory and condition infrastructure

Asset Management CIPFA Report Main findings Meeting the timetable will require costs of £15m to set up systems and collect and input inventory data Passenger Transport Executive (PTE) should also implement asset management

CSS/TAG Work Plan Getting started with Asset Management Software specification for the calculation of GRC and DRC Levels of service Life-cycle planning Risk management

Membership – CIPFA, DfT, English LHAs, SCOTS and Welsh; Gross and Depreciated Asset Values through Component Depreciation; Workshops Please respond to Consultation; www.leics.gov.uk/amp

What Next? Drawing advice together to produce a plain English publication Bring all advice together Broaden the commission to overview all publications Consult, engage, involve

SUMMARY Challenging times ahead. Must resist soft option of cutting highway maintenance budget. Must deliver on efficiencies to reduce the impact of service cuts. Benchmarking is key in helping us deliver efficiencies and service improvement.

A new cost-effective form of traffic calming

Thanks Thank you