Steve Ashley. Chair Service Delivery Working Group. Highways Term Maintenance Association

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1 Steve Ashley Chair Service Delivery Working Group Highways Term Maintenance Association

2 Agenda The HTMA Indexation for Highway Term Maintenance Contract Best Value from Constrained Budgets TUPE Best Practice

3 About HTMA We are the trade body for the UK highways management and maintenance industry Formed in 2005 to promote the positive contribution that the highways management and maintenance industry makes to the nation 24 full and 10 associate members who account for approximately 75-80% of the highways maintenance workload undertaken in Great Britain in excess of 400,000km of roads. DLOs have joined as a member and have a seat on the Committee Open to joint venture membership The industry employs around 20,000 people and the annual value of works is over 3 billion.

4 Our Vision An efficient, effective and sustainable highways management and maintenance industry for the social, economic and environmental benefit of the communities in which we work. Our Strategy the HTMA aspires to be the leading voice of the highways term management and maintenance industry, promoting its overall image, sharing knowledge and feedback, fostering best practice and improved industry standards, whilst influencing government and other stakeholders policies.

5 Committed To The advancement of highways management and maintenance and the creation of a comprehensive vision for the industry to help it meet future challenges; Providing a high quality and relevant service to its members; Being a valued source of assistance and advice; and Enhancing public perception of highway maintenance and helping the industry continue to raise environmental, safety and other standards.

6 Represent the sector s interests Objectives Supply useful information and advice for members Promote a positive image and develop strong external relationships Promote and develop skills and competencies in our industry Drive improved Health, and Safety and Welfare performance across our industry Lead improvements in the efficiency, effectiveness and sustainability of our industry

7 Deliverables for the Sector Price adjustment indices Safety training DVD Breaking New Ground Green driving booklet Sustainability Charter Guidance on Adaptation to Climate Change Guidance on use of legal clauses in contracts Sustainable Highways Maintenance Tool Water Toolkit Benchmarking on: fuel use and CO2 emissions, People matters, Safety (accidents and near misses) Winter Maintenance game for school aged pupils TUPE template to assist the bidding process Responded to Action for Roads, Transforming HA to a GoCo, Network Resilience to Extreme Weather

8 Indexation for Highway Term Maintenance Contracts

9 Indexation for Highway Term Maintenance Contracts Use of Indices 2010 Unspecified index Other indices BCIS CPI Roadcon Updating percentages RPI (all variants) Baxter Total using indexation From those Authorities that gave details of the indexation that they used, the vast majority used form of Baxter (Price Adjustment Formulae Indices for civil engineering) 15 per cent used forms of RPI to account for inflation on their highways maintenance contracts

10 Indexation for Highway Term Maintenance Contracts Use of Baxter Frequency of Adjustment The vast majority (81 per cent) of clients using Baxter made adjustments to payments on an annual basis, with one in ten updating monthly. A small number of clients updated on a quarterly on bi-annual basis, and some clients used different frequency updates for different contracts Total Annual Monthly Other Mixture

11 Indexation for Highway Term Maintenance Contracts Adjustment Formulae for Construction Baxter Data Sources: Labour Indices - compiled by BCIS based on wage rates and allowances nationally agreed and published by the employers and the unions Construction Industry Joint Council (CIJC) Working Rule Agreement Plant Indices from information published by the Office for National Statistics (ONS) Material Indices Producer Price Indices compiled by the Office for National Statistics (ONS) and are manufacturers factory gate prices

12 Indexation for Highway Term Maintenance Contracts This mechanism The Highway Term Maintenance Price Adjustment Mechanism provides benefits to both clients and suppliers is simple enough to be easily understood and implemented fairly recovers actual costs incurred over the life of a contract contributes towards creating a more sustainable industry is applicable to all Highways Term Maintenance contracts, including contracts for a specific Works Category effectively tracks costs to achieve: Lowest priced bids Fair allocation of risk Accurate cost profiling

13 Indexation for Highway Term Maintenance Contracts Highway Term Maintenance Indices 2010 The Highways Term Maintenance Indices 2010 Series are produced monthly & published by BCIS & consist of 9 Work Category Indices WC10/1 - Routine, Cyclic and Time Charge Works WC10/2 - Renewals and Construction Works WC10/3 - Professional Services WC10/4 - Machine Surfacing WC10/5 - Hand Surfacing/Patching WC10/6 - Surface Dressing WC10/7 - Road Markings WC10/8 - Street Lighting WC10/9 - Vehicle Maintenance Based on BCIS weighting 21 Resource Cost Indices by industry assessed proportions

14 Indexation for Highway Term Maintenance Contracts Highways Term Maintenance Price Adjustment Formulae Indices

15 Indexation for Highway Term Maintenance Contracts Highway Term Maintenance Indexation Model Non-Adjust/Efficiency - to avoid erosion over time and for transparency, excluded from Work Category Indices To apply a recommended 10% non-adjust/efficiency - the final Price Adjustment should be factored by 90% Use monthly as : Accurately profiles costs movements throughout the year and throughout the Contract period Work alignment opportunities with market trends throughout the year Contribution to a sustainable industry Opportunity for Client/Provider joint approach to advance planning and timing of transparent cost efficiencies Fair allocation of Risk Benefits for Client and Provider

16 Indexation for Highway Term Maintenance Contracts Highway Term Maintenance Indexation Model The Work Category Indices have been developed from Resources Indices as follows: People split Management & Admin Labour link to NJC rather than Working Rule Agreement Equipment split Vehicles Operational Plant Materials Remove some Baxter materials Add new TMC materials

17 Indexation for Highway Term Maintenance Contracts Resource Categories

18 % Change Indexation for Highway Term Maintenance Contracts 30% Comparison of Price Fluctuation Indices 5 year Look Back 25% 20% 15% 10% 5% 0% RPI HTMA - TMC (Excl Professional Services) RPIX

19 Key Benefits Indexation for Highway Term Maintenance Contracts Geared to the Highway Term Maintenance sector Provides mechanism to achieve lowest priced bids Joint approach to advance planning/timing of work for cost efficiency Works alignment opportunities with market trends Transparency of operational real efficiencies Fair mechanism for long term contracts + extensions Maintain a sustainable industry Pass through to Supply Chain

20 Indexation for Highway Term Maintenance Contracts Client Panel Review Representatives ADEPT: Cheshire West - Kevin Carrol Shropshire - Darren Merrill Leicestershire - Peter Barclay Northern Ireland Roads Service - Peter Kelly & Bob Cairns Office of Government Commerce - John Loannou Transport for London Steven Dennis Transport Scotland Donald Morrison

21 Best Value from Constrained Budgets

22 Best Value from Constrained Budgets The HTMA recommended the following proposals to prospective clients for the achievement of best value pricing of term maintenance contracts that would result in the fair allocation of risk between the Client, Contractor/Service Providers and the Supply Chain parties involved in the contract.

23 Best Value from Constrained Budgets Overview This work started with looking at around 40 areas including: General Procurement Considerations Method of Measurement Schedule of Rates Standard Working Hours and Restricted Working Schedule of Rates- Quantity Banding Target Cost Lump Sums where efficiencies could be made and producing a suite of guidance documents, The work was shared with HMEP and partly incorporated into the standard contract documents they were producing. Further input into HMEP subsequently followed for the Document Compiler, Standard Form of Contract, Service Information and Schedule of Rates. Method of Measurement documentation will follow once the Schedule of Rates is completed and assistance from a team at Hampshire CC is anticipated.

24 Best Value from Constrained Budgets General Procurement Considerations: Flexibility in procurement Contract duration TUPE Pensions Price Adjustments Efficiency Discounts Incentivisation Mobilisation Budget Management Programme Management Tender Evaluation Models

25 Best Value from Constrained Budgets Method of Measurement: Standard Method of Measurement Payment Mechanism Aggregation of Quantities Minimum Order Value/Minimum Task Order Establishment Items Overheads Site Accommodation Traffic Management Potholes, Patches and Reinstatements Piling Temporary Works for Structures

26 Best Value from Constrained Budgets Schedule of Rates: Number of Items within a Schedule of Rates Quantity Banding Adjustment Items Appropriateness of Target Costs Cost Components Pain/Gain mechanisms Disallowed Costs Direct Fee Subcontract Fee

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28 Best Value from Constrained Budgets Schedule of Rates - Quantity Banding & Minimum Order Fair allocation of risk Quantity banding Reflects where changes in people/gang structure, equipment, materials and economies of scale actually apply Minimum Order Encourages effective planning and programming of work Still too low for sustainable arrangement Parties should work together in partnership to provide significantly larger packages of programmed works

29 Best Value from Constrained Budgets Lump Sums: Risk Scope of Lump Sums Inventory Assets

30 TUPE Template

31 TUPE Template TUPE Template Benefits: Less tender queries for the Client to deal with A standard format for all bidders and the client to consider Should be easy to find and identify within the Tender documents The Client and bidders will know the data they are due to receive This should allow for more accurate pricing of the people elements and clearer risk profiles Should provide a level playing field in the assessment of TUPE data The incumbent can prepare the data at bid stage and then amend or update it later when required

32 Name 13 week Average earnings (incl. all pay elements) company car, van or allowance Grade Pay Date If allowance, how much Job Title Bonus If van, is it taken home Employer Is Bonus contractual If car what value or model Pay grade Shift allowance Fuel provided Dept or Work team Standby Mileage rate paid Date of Birth Call out Annual First aider allowance Start date Ad hoc allowances 9travel, Night out etc) Annual Fire warden allowance Continuous Service Date Overtime rate and conditions Medical insurance and level of cover Contract Work Hours Pension Scheme and type Redundancy, Maternity, Paternity etc statutory or enhanced provided. Detail if enhanced Time spent on Contract (previous 12 Months) Is Employee in scheme or entitled to be annual leave entitlement excluding Bank Holidays Employer Notice Period Employee contributions (% of basic pay) Please confirm what holiday pay is calculated on Pay review date Employer contributions (5 of basic pay) Share Scheme Any pay agreements in place List all pay elements that are pensionable Any other relevant item (Buy, sell Holiday, Flex etc) Any recognition agreements in place and with what Union Is pension scheme fully funded Home Post Code Any recent or collective disputes List impact of pension membership on any enhanced benefits or cost on redundancy Current Depot base Future Training costs commitments Life Assurance has employee entitlement to LGPS Basic Pay Permanent ill health or disability Details of any disciplinary action in last 12 months Pay frequency Sick pay TUPE Template Any Other Comments and details of any other benefits not included elsewhere

33 Thank You