"The latest form of Highways Agency contracts
for maintaining motorways and trunk roads provide visibility of
costs and the ability to allocate risk appropriately. But, as
is so often the case, a lack of probing analysis of the information
which is available, and continuing gaps in some areas undermine the
drive to maximize value for money. The Agency has not yet
established and benchmarked the unit costs of planned maintenance
tasks, such as resurfacing; and it does not have enough of the
information on or analysis of the continuing condition of assets
necessary to drive down whole life costs of planned maintenance
projects. The Highways Agency also now needs to strengthen the
engineering and commercial management skills of its area
teams."
Amyas Morse, head of the National
Audit Office, 16 October 2009.
Since the introduction of a new type of
maintenance contract in 2001 by the Highways Agency there have been
some improvements in the quality and delivery to budget of
maintenance on England’s motorways and trunk roads. However,
according to a report by the National Audit Office, costs have
risen, with those for routine maintenance increasing since 2002-03
by 11 per cent above inflation. Expenditure on planned maintenance
has risen overall by 5.5 per cent above inflation.
It is not possible to estimate precisely the
extent to which unit costs for planned maintenance have risen
between 2002 -03 and 2008-09 because of the Agency’s lack of
management information. Using the limited data available, the NAO
has estimated a 70 per cent increase in the cost of road
resurfacing. This does not take account of other road renewal
activity such as lighting and barriers. The Agency’s own estimate
of spending on resurfacing indicates an increase of 17 per cent
(between 2004-05 and 2008-09). The NAO was unable to validate this,
and the true figure is likely to lie between the two estimates.
By using Managing Agent Contractor (MAC)
contracts, the Highways Agency appoints a private supplier to be
responsible for the design and delivery of road maintenance in a
particular area of England for a period of four or five years, with
the option to extend this to seven years.
Today’s report identifies shortcomings in the
way the Agency manages these contracts. The Agency has focused on
checking that the private companies are complying with the
contractual requirements rather than the costs or the quality of
the work done. The Agency is only now beginning to exploit the
good visibility of costs within these contracts, for example to
establish the unit costs of items within jobs, so that it can
challenge contractors’ costings and establish benchmarks for
continuous improvement. The NAO found considerable variations
between geographic areas in the unit costs of surfacing, white
lining and traffic management. The Agency has also not pursued
minimising the whole life costs of maintenance work as strongly as
it might.
The Highways Agency has a diminishing number
of staff with the skills necessary to manage the MAC
contracts. It needs staff with skills in engineering and
commercial management (such as quantity surveyors) to manage risks,
costs and contractors’ performance and challenge contractors’
design specifications. The Directorate of the Agency which
manages these contracts has lost more than 50 engineering staff
over the past five years and only had four quantity surveyors at
the time of the review.
The MAC contract process has attracted a good
number of bids for recent competitions, but an increasing
proportion of bidders fail to meet the quality threshold, limiting
price competition. A smaller supplier base would increase the risk
to value for money.
Publication details:
HC: 959, 2008-09
ISBN: 9780102963175