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

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

3. 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

4. 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

5. 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.

6. PWC Benchmarking of Performance

7. 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.

8. 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

9. 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.

10. Alliance Agreement Signing

11. 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.

12. 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

13. 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.

14. “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!

15. 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.

16. 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 – 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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.

24. 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

25. 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.

26. 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

27. MHA Term Contract Best Practice Model
Spread Analysis

28. MHA Term Contract Best Practice Model

29. 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

30. 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

31. 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 …

32. 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

33. RIEP GOOD PRACTICE CASE STUDY

35. 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

36. 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

37. 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

38. 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

39. 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

40. Membership – CIPFA, DfT, English LHAs, SCOTS and Welsh;
Gross and Depreciated Asset Values through Component Depreciation;
Workshops
Please respond to Consultation;

41. 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

42. 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.

43. A new cost-effective form of traffic calming

44. Thanks
Thank you