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National Audit Office report: Highways Agency: Contracting for Highways Maintenance

Highways Agency: Contracting for Highways Maintenance

"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."

 

"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:

ISBN: 9780102963175 [Buy from TSO]

HC: 959, 2008-09

Published date: October 16, 2009