Agenda item

The Environment, Community and Fire Select CommitteeBusiness Planning Group has agreed to call in the proposed decision by the Cabinet Member for Highways and Transport concerning the HMC Term Contract Procurement – decision published on the Executive Decision Database on 18 December 2018 and in the Member’s Information Service on 19 December 2018 HI22 18.19

The decision report asked the Cabinet Member for Highways and Infrastructure to agree:

The commencement of a procurement process to procure a Highways Maintenance Term Contract, or set of contracts, to commence on expiry of the interim contract (with any required extensions); and

To delegate authority to the Director of Highways and Transport to finalise the terms of and award the Highway Maintenance Term Contract, or set of contracts at the conclusion of the procurement process, and to extend if appropriate in accordance with the County Council’s Standing Orders on Procurement and Contracts.

a) Decision report by Executive Director of Economy, Infrastructure and Environment and Director of Highways and Transport – attached.

The call-in was initiated by Sue Mullins, supported by Brenda Smith, Chris Oxlade and Brian Quinn.

b) Call-in request – attached.

Sue Mullins has been invited to outline the reasons for the call-in request to the Committee.

Mr Elkins (Cabinet Member for Highways and infrastructure) has been invited to address the Committee and answer questions.

Lee Harris, Executive Director, Economy, Infrastructure and Environment will also be in attendance

c) Highways Maintenance Contract Procurement Options Appraisal Summary and update

Report by Executive Director Economy Infrastructure and Environment and Director of Highways and Transport – attached.

This report sets out the various options being considered for future service delivery. The first part of the Highways Maintenance Contract procurement process is to narrow down the available options, and to identify a preferred option, using an options appraisal. The report is to update Committee on progress with the new procurement, and to support preview of the preferred option, identified through the initial options appraisal. 

The Committee is asked to consider the suggested scope and timing of the procurement process.

61.1 Mrs Mullins introduced the request to call-in the decision by the Cabinet Member for Highways and Infrastructure concerning the Highways Maintenance Term Contract Procurement – HI22 18.19; (call-in request appended to the signed minutes) and highlighted the following points:-

61.2 In her view, the Cabinet Member decision had been premature as road-related issues were of major concern to many residents in West Sussex and it was important to give the Committee the ability to scrutinise the options available before a new contract, which could be in place for up to 10 years, was awarded.

61.3 She believed that a collaborative approach with partners was needed and a summary of best practice based on visits to other local authorities (LAs), with further detail would be helpful to members, as there had been no identification of how the £1.5 million of savings required would be achieved. 

61.4 She also added that with the implementation of outsourcing within the contract, there was always a risk to reputational damage, so to avoid further loss of money it was essential to get the procurement right and ensure previous mistakes weren’t made.

61.5 The Cabinet Member for Highways and Infrastructure advised that a Local Government Association (LGA) Peer Review had been carried out in 2016, a summary of which was available to members. Feedback had been given on the previous contract, but no underlying facts were discussed. Detail had also been included in the report, but best practice based on LA visits was in reference to the earlier contract. The Options Appraisal also included detail over delivery and further opportunities.  In respect of the in-house sourcing option, there had been detailed consideration but there were risks in delivering this model due to the considerable expertise and skills needed, which were difficult to attract in the public sector. The added risk would be increased overheads and liability for any faults in works carried out, otherwise covered by the contractor.

61.6 The Mixed Economy Single Supplier Framework option was currently considered the most favourable, as greater flexibility could be achieved when a number of contractors delivered services. Savings were not intended to be achieved just through the procurement of the service contract, but more would be known once the process had been completed.  All the options had now been refined and it was hoped that some of the savings outlined would be achieved. 

61.7 Matt Davey, Director for Highways and Transport, added that preparatory work on service delivery had already been undertaken, including detailed conversations with suppliers, as the current process was an extension of the previous procurement process which begun in 2016. He had appointed someone to carry out the independent Options Appraisal which included a comprehensive evaluation of all service options. This had then been narrowed down to 3 options that were deemed appropriate to look at in more detail.

61.8 On reflection, the previous single supplier option was now not thought to be the best solution, mainly due to a change in the market with fewer suppliers available and various disruptions in the market including the collapse of Carillion. Also uncertainty over future government funding had led to a need for greater flexibility and continued delivery of high service regardless of the level of funding available.

61.9 The length of the contract was still yet to be determined, and discussions with suppliers would take place to see what term would be most attractive and deliver the best value for money. It wasn’t necessary to award all the contracts for the same term if this wasn’t considered favourable.

61.10 The current interim contract had been awarded until March 2020, so there was a need to carry out the procurement process, which an independent project manager was running, within the planned timeline. The County Council had not yet committed to any particular model, but a Business Case developed from the Options Appraisal, including more detail and reflecting the most favourable options, would be brought back to the Committee as the process developed. There was an exposure to risks the longer the process took, but it was important to be in a position to deliver a high level service in the future.

61.11The Committee made comments including those that follow. It:

·        Raised concerns that the proposals would entail quite a significant change to the management structure in order to ensure Key Performance Indicators (KPI’s) were managed to maintain the whole service with multiple contractors; querying how would this lead to the overall savings required.  The Cabinet Member for Highways and Infrastructure advised that at this stage it wasn’t yet known whether it would be multiple contractors or just one, but that provisions had been made to ensure upskilling and tighter supervision in the event of managing a range of contractors. The procurement stage was not intended to provide savings so these remained unknown, but multiple contractors would ensure greater flexibility and be good for local contractors, potentially leading to a quicker response in some areas.

·        Requested details of the £1.5 million savings for next year, how these were expected to be delivered if new staff were employed with the necessary skill sets needed, and whether any service changes were anticipated. Mr Davey advised that there was already a broad spectrum of skills within the County Council and staff would be given the opportunity to further develop in new roles. The Cabinet Member for Highways and Infrastructure added that this also included current in-house contract managers.  

·        Requested further detail on the in-house sourcing option, including comparison with other options, set up costs and pension liability.

61.12 The Cabinet Member for Highways and Infrastructure summed up by adding that the preferred Mixed Economy Single Supplier Framework option provided greater flexibility and was an opportunity to use county wide companies. It was expected that any contractor would have to adhere to the County Council’s social ethos and encourage people into the industry. The in-house option had been explored but he hoped that members would support the chosen option as the best way forward. He acknowledged that there was no guarantee that a legal challenge wouldn’t reoccur, but believed it was important that other cases were looked at to ensure the same situation didn’t occur again. The ultimate aim was to fulfil the County Council’s obligations as a highways department and he looked forward to bringing the full Business Case back to the Committee in due course. 

61.13 Resolved – That the Committee supports the proposal, with a request that the Business Case for potential savings for 2019/20/21, to include any in-house changes, be brought back to the Committee in due course.