Big savings are possible - with a change in provider, and change in attitude

As each week passes, more and more local authorities are re-letting their contracts with providers of highways maintenance, highways design and transport consultancy.
Dissatisfied with the savings that have been made under the arrangements with their current contractors, many are re-tendering rather than re-negotiating the deals they have. Others are poised to do the same over the next few weeks.
This has born fruit, in Surrey County Council's case, with a full 22% in efficiency savings on current costs to be made following procurement.
Surrey is to replaced arrangements that it found unsatisfactory on performance as well as cost with three levels of contract. A core deal, for day-to-day maintenance; specialist deals for drainage grass-cutting; and two regional deals for major highways schemes.
However, it is important to note that the savings are not being delivered solely by the market.
The re-tendering and competitive dialogue with bidders has resulted in Surrey questioning its own practices, and to a stark admission: the authority acknowledged its "failure to transform the council's internal highways structures and culture".
Its exertion of control over its contractors had "created unnecessary interference and conflict with the supply chain and prevented the council from delivering its strategic management role".
The challenge for councils is to craft slimmer contracts with fewer performance indicators and less duplication, contracts that entail a degree of trust. If the prize is cutting waste by 22%, that has to be what highways managers are aiming for.

Transformation needed to halt service salami slicing

Efficiency savings are there for the taking, with every pound saved meaning one pound more for frontline highways and transport services.

As Hertfordshire County Council reports, while efficiencies have been delivered for a number of years, a review has found a further £4.1m in savings in highways services alone, or 10% of the authority's revenue budget for highways. Operational improvements, management reductions and increases in income have all contributed to this impressive saving.

However, despite these efforts, the county's leadership wants more savings to be found. With the highways service set to be re-procured, cabinet member Cllr Stuart Pile wants all possible ways of securing better delivery to be considered.

This political imperative comes as councillors are given stark choices on frontline service cuts. Despite the efficiencies that will be made, the county faces a corporate budget blackhole of at least £42m, and possibly £92m. This could mean that the county council re-trenches to core provision, providing the minimum necessary to allowing safe passage of its roads. The doom-laden scenario would see an acceleration of the deterioration of its roads and switching off street lights outside pedestrian areas.

Should the politicians decide they want a better-than-minimum highways service, "above bronze" in the officers' report, there would be more funding for cyclical maintenance: clearing gullies, maintaining signs and lines: items important for ensuring safe use of the roads. But that would mean bigger cuts elsewhere.

The bus subsidy budget could be trimmed by nearly £2.4m with little impact on rural services, cutting those that are nice-to-haves rather than life-lines, the evening and Sunday services. Further cuts would mean a watering down of what the council defines as transport "need" in rural areas.

So where can still more savings be found to stop the dreaded salami-slicing of services? Hertfordshire is going through a re-procurement, so can fundamentally challenge the way services are currently delivered.  Further outsourcing, including of highways development control services, is on the table. It'll be interesting to see if they can pull off a transformation that'll mean the cuts are not as bad as first spelt out.

Back to the bad old days of screwing down prices?

Lee Baker
Are we set to return to the 'bad old days' of outsourcing, 80s style, before genuine public-private partnerships? The days when externalisation of services was focused more on obtaining the lowest possible prices than on service improvement and efficiencies.
The saga of outsourcing firm Serco asking its suppliers to provide a 2.5% 'cash rebate' in order to meet the Whitehall demand for multimillion-pound savings on procurement contracts was highlighted at this week's Association of Directors of Environment, economy, Planning and Transport conference.
ADEPT president George Batten told the group's annual meeting in Warwikcshire that while the solution to the need to maximise savings in order to protect frontline services from cuts was likely to involve greater partnership with the private sector, this partnership would be undermined by the public sector merely screwing down prices.
After the Cabinet Office asked Serco to explain itself, Serco issued a statement that its offer of savings to the Government "will not result in any of the Government's cost saving programme being passed on to our suppliers".
Batten commented, rightly, that playing the game of 'passing on the pain to others' is not in the spirit of partnership. His vice president, Matthew Lugg, agreed that the seeking of savings authorities should not take "an adversarial approach that just demands a lower price".
But despite this, Cllr Clyde Loakes, representing the Local Government Association, admitted that his authority, Waltham Forest, has been calling its suppliers in and asking them to reduce costs, saying: "we can't continue to pay as if authorities are not facing these cuts".
Cllr Loakes is right that no authority can carry on paying what they are now. But re-thinking local highways and transport and other services must involve considering how delivery models can be changed to secure savings, rather than simply saying 'give us it cheaper'.
The problem, of course, is that local government only has until April until a 7% cut bites, and the clock is ticking.

Are highways & transport mergers the answer to revenue cuts?

Local authority transport and highways departments have generally only made annual savings of two or three per cent of their budgets in recent years. Asked why they have not moved more swiftly to make their organisations leaner, directors have responded that they've delivered all the savings asked of them.

There was simply no incentive. Why fundamentally transform the way services are delivered, if you are then asked to deliver even more savings a few years down the line, with much less scope to find savings? Now, the rules of the game have changed. Councils are being asked to cope with a 7% a year cut in revenue, and with hardly any time to prepare - there are only 153 days until the first cut will kick in.

It's against this context that three London boroughs - Westminster, Kensington & Chelsea and Hammersmith & Fulham - have announced that they will progress plans to merge services, where it makes economic sense to do so. This would be the first time that highways and transportation departments go further than merging backoffice functions, and merge frontline delivery too.

Two of the three boroughs' highways departments have already been sharing a director for over three years now. Graeme Swinburne, who is both director of highways and transportation at the Royal Borough of Kensington and Chelsea and the director of neighbouring Hammersmith & Fulham's highways and engineering department, told LTT 42 months ago that he would consider the case for joint working between the two departments. There were a range of options, he said, up to, and including merging the two boroughs' highway departments.

The prize for taking this forward now could be great in terms of protecting frontline budgets for highways maintenance and local transport schemes. However, the councils emphasised in a statement that there had to be "a democratic case" for change. At a time that senior council officials are saying that national highways service standards need to be reviewed, there will be questions over the scope for political divergence over the priorities for a smaller pot of funding.

It'll be very interesting to see the conclusions of the three boroughs' deliberations in February.

Funding cocktails live on?

Lee Baker, editor,  EfficiencyNetwork

Senior council officials don't seem to have bought the rhetoric. The Chancellor yesterday hailed the "radical simplifying of funding to local authorities, giving them greater choice over how to use their money".

But as council officials examine the fine print of the spending review, they are finding that the coalition Government has not gone as far on removing the restrictions on pots of money as they have urged. Councils want maximum flexibility to reduce multiple bidding processes, many which end abortively. Their dream is a future where funding cocktails will not need to be painstakingly assembled in order to deliver something like a new road link for a regeneration project.

The Department for Transport has been singled out as thwarting this dream. While the DfT has agreed to reduce the number of  different funding streams, it still wants to have a say on how much of them are spent. The DfT's civil servants might soon be far fewer in number, but they still want to devote time to scrutinising councils' proposals for spending.

The DfT will invite bids for its new £560m sustainable transport fund.  Ditto the £1.4bn regional growth fund, a third of which is earmarked for transport schemes unlocking economic growth. And it is down to the DfT, not local authorities, how to get better value out of the bus service operator grant, despite the  cry from the Local Government Association and ADEPT to let councils decide how best to spend money on buses locally.

In more welcome news, there will be £6m funding for councils to develop more efficient ways of delivering highways services. Freedom to make savings is necessary but not sufficient to protect front line services; there needs to be investment, robust business cases and, then, widespread sharing of what's been achieved.

More action needed to allow the public sector to get bigger bang for its buck

Lee Baker
COUNCIL officials have long planned for scenarios that will see their revenue budgets shaved by a quarter, and have said that half of this can be absorbed without affecting service delivery by securing greater efficiency savings. 


They accept that new delivery models - contracts that fuse client, consultant and contractor, procurement and projects that cut across service areas and administrative boundaries -  allow councils to do 'more for less'. But they want reforms to allow this to happen: maximum financial freedom, minimum Whitehall interference.


They will be reading the small print of the spending review to form a judgement as to whether or not the Chancellor has delivered this. But the Local Government Association's immediate reaction this afternoon suggested that ministers have not gone far enough.


Baroness Margaret Eaton, the LGA's chairman, said that ministers had to "move much faster to redraw the way public services are delivered". While ring-fencing has been removed from local authority revenue allocations, what will be done to allow the public sector to get bigger bang for its buck by merging funding streams held by other bodies?


Leicestershire and Leicester councils wanted funding streams that help deliver economic development to be rolled into a single pot - to end the Whitehall turf war that means the Department of Business, Innovation and Skills, say, may not accept funding being given to a transport project even if it unlocks projects that deliver jobs.


The spending review did announce that £4bn of funding from Whitehall departments will be "rolled into formula grant". The implication, of course, of removing restrictions from budgets and letting councils decide what projects to prioritise on the ground could, of course, mean that transport loses out.


As Steer Davis Gleave said in its analysis of the Spending Review today, it will be interesting to see what happens to the new formula grant from the DfT and whether highways and transport departments can hold on to their allocation. More than ever before, they will have to think outside a transport silo to prove the worth of investing in transport.

No one delivery model right for everybody

Lee Baker, editor, EfficiencyNetwork

Looking round the country, I see general agreement among local highways authorities that they cannot carry on delivering their highways services and local transport schemes in the same way. They know that doing things slightly better is not going to be enough to limit the impact on frontline services. However, I can't see any agreement on how best to transform service delivery.

Reducing duplication by fusing consultancy, construction and client teams is the path that Gloucestershire County Council has chosen, and Buckinghamshire County Council has taken even further by reducing the in-house client to just five staff. But other highway authorities considering organisational overhauls, such as Kent, are rejecting combining design and construction contracts and others, like Ealing, say that simply take services back in-house will slash duplication.

Others favour regional contracts as the way of cutting costs by reducing the cost of procurement and also, in some cases, of managing and providing contracts. The Midlands Highways Alliance blazed the trail, and there are now contracts across the country for providing construction or consultancy to more than one council or public body. Some councils, such as Wirral, think the existence of such regional contracts will allow them to do without individual contracts.

But, again, not every authority is convinced that collaborative contracts are the answer: North Yorkshire, for example, worries that "there is no guarantee that work would be delivered when we wanted it, and the development of constructive relationships may be difficult".

There isn't one model that authorities considering change can simply take out of a draw and implement. Suffolk County Council, the latest authority to announce a need to transform service delivery, lists a number of different new vehicles, including a joint venture, arms-length company, management buy-out, limited company or community interest company.

What these models share is a need to move away from a model where, despite outsourcing, “the council still exercises considerable control over the way in which money is spent," Suffolk says, as it highlights that "in some councils, as much as 50% of the budget can be spent deciding what to do with the other 50%".

What most councils can agree on is that less needs to be spent on deciding how a much smaller pot of money is spent. But whether this is achieved by removing in-house or external management teams, by sharing management with other councils, or even by hiving off the management to some, new vehicle, looks likely to continue.