Street Scene Director

Transcription

1 Meeting Date 17 March 2014 Contract Monitoring Overview and Scrutiny Committee Subject Street Lighting PFI Contract Performance report Report of Summary of Report Street Scene Director This report covers the Street Lighting PFI Contract summarising performance (financial and KPIs) Officer Contributors Status (public or exempt) Wards Affected Key Decision Reason for urgency / exemption from call-in Function of Enclosures Paul Bragg, Infrastructure & Parking Manager Roger L Gilbert, Contract Manager Public All No N/A Overview & Scrutiny Committee Appendix 1 Overview of Contract Performance Appendix 2 Performance Sept 2006 to Dec 2009 Appendix 3 Performance Jan 2010 to Dec 2013 Appendix 4 Performance 2013 Contact for Further Information: Paul Bragg, Infrastructure & Parking Manager Paul.Bragg@Barnet.gov.uk

2 1. RECOMMENDATION 1.1 That the Contract Monitoring Overview and Scrutiny Committee consider the information in this report and associated appendices and make comments and recommendations as appropriate. 2. RELEVANT PREVIOUS DECISIONS 2.1 Council, 16 April 2013, (item 4.3) approved recommendations from the Constitution Ethics and Probity Committee, which included the establishment of a Contract Monitoring Overview and Scrutiny Committee with responsibility for scrutinising the performance of the main externalised contracts. 2.2 The Street Lighting PFI Contract signed by the Council, under seal, on the 21 st April Cabinet decision relating to budget savings 13 th December Council decision in relation to the budget savings 25 th January DPR 1330 Street Lighting PFI Contract Energy Saving 16 th June CORPORATE PRIORITIES AND POLICY CONSIDERATIONS 3.1 The three priority outcomes set out in the 2013/16 Corporate Plan are: Promote responsible growth, development and success across the borough Support families and individuals that need it promoting independence, learning and wellbeing Improve the satisfaction of residents and businesses with the London Borough of Barnet as a place to live, work and study 3.2 All the commercial partnerships are intended to contribute to one or more of these priorities. 4. RISK MANAGEMENT ISSUES 4.1 Risks with a rating of 12 or above are reported as part of the Council s quarterly performance monitoring process. 4.2 Many of the risks reported will continue to be live, whilst some will have been closed or replaced. 4.3 The Council maintains its own separate risk logs for all major contracts, which are informed by the risks reported by each partner. The Council s risk log for each contract will be published in the council s quarterly performance reports and reported internally and externally as part of the routine performance cycle. The same applies to the Street Lighting PFI Contract.

3 4.4 Each partner reports their risks at least monthly to the Council for review by the commercial team and respective contract boards. 5. EQUALITIES AND DIVERSITY ISSUES 5.1 Each contract places obligations on our partners to support the Council in carrying out its public sector equality duty (as set out in the Equality Act 2010). 5.2 This means having due regard to the need to: a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under the Act; b) advance equality of opportunity between those who share a relevant protected characteristic and those who do not; c) foster good relations between those who share a relevant protected characteristic and those who do not. The protected characteristics referred to are: age; disability; gender reassignment; pregnancy and maternity; race; religion or belief; sex and sexual orientation. The duty also covers marriage and civil partnership, but to a limited extent. 5.3 Effective contract management is vital to ensuring that the Council s duties under the Equality Act 2010 are supported by its partners. 5.4 Equality performance will be monitored by collecting data on service usage, customer feedback and specific performance indicators. Where service changes affecting residents or service users are proposed, equality impact assessments will be undertaken, and where needed, these will include consultation with residents or service users. 6. USE OF RESOURCES IMPLICATIONS (Finance, Procurement, Performance & Value for Money, Staffing, IT, Property, Sustainability) 6.1 The Council budget provides an annual revenue budget of approximately 6.127m for 2013/14 with additional recognition of annual increases due to contract indexation and increases in the cost of electricity of 0.2m. 6.2 Included in the medium term financial strategy, the Street Scene service is forecasting savings attributed to the Street Lighting PFI Contract of 400k, due to the central management system (CMS) installation project. 200k of this has been delivered in 2013/14 and a further 200k is due to be delivered in 2014/15. The Street Scene service is forecasting these annual savings from the cost of electricity at 0.4m commensurate with the increasing cost of energy. 6.3 The Street Lighting PFI Contract is forecast to stay within its respective budget, including the accepted bids for increases due to indexation and increased electricity costs. The additional costs arising from factors outside of the council s control, for example, Carbon Tax and Elexon re-evaluating the

4 electricity consumption rating for the major discharge lamps in use in the borough, has been largely mitigated by the CMS installation project. 6.4 Performance analysis is in Section 9, Background information, with full performance data contained in the Performance Reports in the Appendices. 7. LEGAL ISSUES 7.1 The management of the Street Lighting PFI contract is governed by the terms and conditions of the contract documents, including the Performance Standards set out in the contract. 8. CONSTITUTIONAL POWERS (Relevant section from the Constitution, Key/Non-Key Decision) 8.1 The roles and terms of reference of all Overview and Scrutiny Committees are contained within Part 2, Article 6 of the Constitution; and in the Overview and Scrutiny Procedure Rules (Part 4 of the Constitution). The Contract Monitoring Overview and Scrutiny Committee is responsible for scrutinising reports from the Commissioning Group, Delivery Units and Lead Commissioners detailing the performance against targets that are included within the Corporate Plan and to be able to challenge external providers. 9. BACKGROUND INFORMATION 9.1 The PFI Contract was awarded to Barnet Lighting Services (BLS) in April 2006 as a 25 year contract. April 2014 will be the eighth anniversary of the Contract commencement 9.2 BLS, as the special purpose vehicle (SPV) are contracted to Barnet for the Street Lighting PFI Contract. BLS, in turn, Sub-Contracted the entire operational responsibility to the company then known as David Webster Limited (DWL), a wholly owned subsidiary of ETDE who, in turned were owned by the ultimate parent company, Bouygues Construction, France. During the course of the Contract to date, DWL have twice changed their trading name, first to ETDE and latterly to Bouygues Electricities and Services Limited BE&S), but the ownership of the company has and still does, ultimately, always remained with Bouygues Construction. 9.3 During 2013 BE&S have continued in their efforts to improve the service delivery, against all Performance Standards. They have continued to show improvements, across the board, during the year, whilst also delivering a demanding schedule of central management system (CMS) equipment installations. 9.4 A summary of performance for 2013 is shown in Appendix 1 and indicates the various Performance Standards within scope of the Street Lighting PFI Contract.

5 9.4.1 There are eight headline Performance Standards, numbered 1 to 8, the Service Provider is measured against during the life of the PFI Contract. Each Performance Standard is further sub-divided into separately measurable items accounted for in the Monthly Monitoring Report each Month of the Contract The role of the Performance Standards is to measure various service delivery criteria against the key areas of the Contract, they are: PS 1 Lighting Installation - Core Investment Programme (CIP); PS 2 Lighting Performance and Planned Maintenance; PS 3 Operational Responsiveness and Reactive Maintenance; PS 4 Contract Management and Customer Interface; PS 5 Strategic Assistance and Reporting; PS 6 Working Practices; PS 7 Monitoring and Reporting; PS 8 Lighting Installation Post Core Investment Programme (PCIP) Non delivery against the Performance Standards may result in financial adjustments, reduced payment, against the unitary charge for the month following the service delivery failure Performance Standard 1 is no longer measured, as it was directly related to the core investment programme (CIP) programmed for the first five years from service commencement and is therefore now completed Performance Standard 8 is an annual standard for the post core installation programme (PCIP), which is verified at each anniversary of the Contract following year The highlights of Appendix 1, from the Authority s perspective in terms of results on the ground, are PS 2 E, the number of lighting points (LP) not in light, with an annual average at 0.242%, which means in excess of 99% of the lighting points in the Borough are in light throughout the year Another Performance Standard that is critical to the safe and smooth flow of pedestrians and traffic in and around the Borough, whilst works are being undertaken on the highway, is PS 6. This relates to the method of carrying out works on site in a safe and least disruptive manner. This is closely monitored in association with colleagues in the Permitting and NRSWA Team in Re and infringements are reassuringly low and swiftly rectified when spotted. 9.5 A summary of financial adjustments to the Unitary Charge is provided as Appendix 2 for the period May 2006 to December During this period the Contract had been subjected to significant adjustments which reached a critical point in December of 2009,assessed at some 1.3m, causing the Sub-Contractor to re-evaluate their Sub-Contract with the Authority s Service Provider The Sub-Contract is capped at the cumulative level of Adjustments applied to the Sub-Contractor (all Performance Adjustments are passed through to the

6 Sub-Contractor under the contractual arrangements). A breach of this adjustment cap permits the Sub-Contractor to exit the PFI Project, on payment of a fixed penalty for so doing December 2009, a critical time, as the Contract was nearing the end of the CIP period, reducing the exit penalty by over 1m, to approximately 1.3m. The Sub-Contractor therefore required assurances the level of on-going adjustments would not exceed the exit penalty, otherwise it was not commercially viable to continue The previous Director of Environment agreed, at that time, that it was not desirable for the Authority to cause the PFI Contract to collapse, which was the potential outcome of the Sub-Contractor exiting. Consequently, a number of measures were agreed, which would secure the operational stability and sustainability of the Contract, whilst also ensuring that service delivery was maintained at an acceptable level. A change notice was also issued which identified a number of potential opportunities for significant savings to be made from operational and energy efficiencies during the rest of the Contract The measures agreed included a more reasonable approach to the provision of relief against financial adjustments, particularly where the Sub-Contractor has little, or no, real control over a third party, for example UK Power Networks (UKPN), who are the electricity company responsible for all connections, disconnections, transfers and repairs to their underground supply network. UKPN were the biggest single contributor to the high level of financial adjustments levied on the Sub-Contractor. Since these changes were agreed the Performance Adjustments have stabilised, and performance levels have also been improved and the threat of the Sub-Contractor exiting the contract has now gone. 9.6 Appendix 3 - is a summary of financial adjustments to the Unitary Charge for the period January 2010 to December Since January 2010 the level of performance and consequent financial Adjustments to the Unitary Charge have stabilised. In fact, it may be seen from the graphical representation of this for the period, that Adjustments are slowly reducing, which indicates the underlying trend on performance is improving. 9.7 A summary of the main financial and KPI out-turns are included, below, for : Financial: 2013/14 - predicted out-turn m 2013/14 - predicted electricity cost savings - 200k KPIs: average percentage of lighting points in light 99.74% average monthly percentage of light points out 0.242% CMS installation project completion ahead of target 75% 9.8 All Performance Standards are being maintained at an acceptable level, with key successes including: Over 99% of lighting points in the Borough being in light year round;

7 Financial performance in line with the annually adjusted Financial Model; CMS Project installation ahead of completion target by over 2 months; Electricity consumption projected reductions from CMS installations are expected to deliver in excess of target. 9.9 The performance report for Street Lighting PFI Contract, which is contract managed by the Street Scene Delivery Unit, can be found at Appendix Appendix 4 is a summary graphical representation of the Performance Adjustments against the Unitary Charge for The key notable element is the overall continuing downward trend of the level of Adjustments. A clear indication of the continuing improvements in overall service delivery for the Street Lighting PFI Contract PFI Contracts are largely self-monitoring through the management information system and the performance and financial reports provided by the Service Provider for each monthly monitoring meeting. The Contract is actively monitored by the Contract Manager for financial controls and testing and the Senior Technician carrying out sample testing of the operational key deliverables Operational monitoring concentrates on the areas likely to impact adversely on resident perception of the service. These include lighting performance, physical condition of the assets and operational response times to reports of faults identified by residents The future The CMS installation is due to complete this Summer and was, originally, programmed for September The current progress will result in early completion and, at current rate of installation, should complete around three months early, in June In addition to the CMS innovation it is planned to replace all footpath lighting in the borough with LED lanterns, which will further reduce the energy consumption but, more importantly, further contribute to the carbon reduction targets of Council. The footpath conversions, to LED, will act as a trial for a wider proposal to convert further assets in the Borough to LED lighting The management team are also working on the additional operational efficiencies referred to in the Change Notice, these are in line with DfT s aspirations to further improve the potential for operational savings from PFI contracts more generally. The Service Provider has been tasked with considering every aspect of the service with a view to proposing a range of efficiencies and gains through change that will result in financial benefit to Council without adversely affecting service delivery more generally. 10. LIST OF BACKGROUND PAPERS 10.1 All Street Scene performance reports are published on the council s website at Cleared by Legal (Officer s initials) Cleared by Financial (Officer s initials) SD JH