No more gold-plating?

The relative ease with which councils have removed "gold-plating" in three new PFI contracts makes me wonder why unnecessary standards were ever specified.

The Government has clarified that it is not against the use of PFI, but it has pointed out the "perverse" incentives to using PFI that were created because it was basically free money. Why would you critically challenge over-the-top services standards and their financial consequences if it's not your bottom-line that it's affecting?

There is new hope that, after the Government's recent announcement that £1.5bn in savings can be made on existing PFI contracts, this will provide the necessary political cover for the coalition to start a new wave of PFI contracts. Both the parties in opposition were critical of the wastefulness, rigidness and secrecy of many PFI contracts.

So if the contracts can be amended to make savings in an open and transparent way, the flexibility and improved value-for-money and greater transparency that this provides will provide an answer to those criticisms. The level of risk transfer in PFI contracts lends itself to greater, rather than less efficiency.

But it's been poorly managed procurement and wasteful and rigid specifications that gave PFI a bad name. Delegates at the Future of Local Transport Delivery roadshow event in Birmingham will discuss how to take forward all the many successes of PFI contracts for the future, adapting them for changing circumstances.

£1bn of savings, there for the taking?

With the Department for Transport inviting chief executives to consider ways that they can transform highways services, the scope for savings in the sector are under the spotlight like never before.


A letter that's gone out to the heads of councils from Norman Baker, the minister for local transport and highways, calls on them to "drive change from the top". He highlights the prize of shaving up to 25% of the £4bn per year expenditure off budgets while still providing exactly the same service.

Many authorities are considering an evolutionary approach to improving services. But all eyes will be on the major transformation programmes being launched in authorities such as Cheshire East and Kensington & Chelsea/Hammersmith & Fulham to find out what dividend is paid by the investment required for change.

And directors and heads of service are heading to the Future of Local Transport Delivery roadshow in Oldham this week to hear what lessons can be learned from the joint ventures that have been delivering services in the North West of England. New models like this have transformed the way that clients and providers work together.

It will be interesting to hear how they can continue to build on what has been achieved as they move forward, and what lessons there are for other authorities.

Do we need to close roads to get more bang for our buck?

Central Bedfordshire took the controversial step this week of deciding to seek to close roads in a bid to reduce unnecessary expenditure. I'd argue that it's a sensible move, and one endorsed by the Audit Commission as better than simply 'salami-slicing' - trying to provide the same service with much less money.

Central Bedfordshire will seek to close a number of "unnecessary" country lanes in rural areas where there is a parallel route. Where it cannot physically stop them up because households need to access their properties, it will leave them to revert to bridleways. They will no longer be maintained by the highways department and will effectively be left to revert to tracks.

Still more roads will be downgraded in status to a new road hierarchy category. These roads will not be resurfaced or have any reactive maintenance either, except in the cases where these are considered dangerous and warrant emergency repairs.

Such a move will not be popular with the residents using the roads. They will expect the service that they have always had. But it's the right one. Highway authorities can't simply carrying on trying to do what they have always done and never questioning it. They need to stop themselves getting into a vicious circle where declining capital budgets mean less and less resurfacing takes place, which in turn creates bigger and bigger demands on revenue budgets for reactive maintenance.

The only way out of this vicious circle is to re-think the current service standards, in order to free up funding for planned maintenance. Northamptonshire took this bold step last year, questioning the national standard demanding that potholes are fixed within 24 hours, which leads to money wasted on expensive temporary repairs, and proposing a five-day target instead.

The Audit Commission says that everything must be considered in this re-think, up to and including closing roads or no longer maintaining them as public highways.

It will take bold local politicians to articulate the need for such a strategy. But without it, the available money will continue to be spread ever more thinly, and councils will be fire-fighting an ever-growing number of potholes. Hopefully the potholes report ordered by minister for local roads Norman Baker will recognise this and make recommendations accordingly.

Baker may well attract the ire of the red-tops, raging that motorists won't see 'their' potholes done right now, and fuming that their roads are being abandoned. But he'll have to face such criticism down.

The sunny uplands are ahead

WORKING in local transport has not been a laugh-a-minute the last couple of years.

There has been huge uncertainty over funding, firstly three years ago when PFI deals were thrown into disarray because of the credit crunch. Then there was the long period when local authorities were bracing themselves for severe reductions in central Government grant, and the subsequent fallout when the terrible figures were finally issued.

Two reports just out give reason for hope. Firstly, the New Local Government Network highlights the need for a more localist, resilient method for funding capital infrastructure. Relying on hand-outs from Whitehall is a bizarre way of paying for vital transport links, because whenever there is an economic downturn, the tap is turned off. This means that the funding stops at the very moment when there is a need for action to upgrade transport links necessary to get the economy growing again.

A taskforce to find new, affordable ways for councils to take on responsible borrowing for essential infrastructure is welcome and long overdue.

Secondly, the Audit Commission's review of the efficiency of highways maintenance spending is right to highlight that too much of the money that should be used to make our roads fit for bus users, motorists and cyclists is needlessly thrown away because local authorities are not comparing prices for work. And by not jointly purchasing goods that contractors are in any event supplying to a number of authorities across the country, councils are ensuring that the benefits of bulk purchasing are only being enjoyed by contractors.

If the squeeze in public spending leads to a more sustainable way of funding local transport, and to councils getting much better value out of available funding, then some benefit will have come out of it.

The time to kick radical changes into the long grass?

Many eyes were on Suffolk County Council, as it announced plans last autumn to withdraw from either directly providing services or even managing them.

This was going further than traditional and tried-and-tested outsourcings of services such as highways, in which councils still invest lots of money in big teams of people to manage the activities of their contractors. The council would 'divest' services altogether, seeking other bodies to take on this role instead - be it private companies, social enterprises, or parish councils.

The new Conservative leader in Suffolk's decision to order "a period of reflection" has signalled that such far-reaching changes might be politically unpalatable, whatever the hue of the administration.

Other authorities, such as West Sussex County Council, have not been ashamed to say that “there just wasn’t the need to change things too radically" as they re-let contracts that, while building on experience, essentially do not change the role of the council.

It is true that history is littered with examples of change that was subsequently regretted - with the full-blown outsourcing of highways services by Somerset County Council in the 90s just one instance of this.

But while change must be well thought-through, and there are risks in any fundamental change, what about the dangers of not challenging the status quo of how things are done? There is more than one way to 'divest' services, with many authorities in northern England settling on joint ventures, but others, such as Cheshire East, exploring a move to a more strategic 'thin client'.

There is also the option of sharing front-line service delivery. All options must be looked at and considered, to find new ways of making the available money go further and also maintaining or even improving service delivery. http://www.efficiencynetwork.co.uk/

Let's nail down what the true costs are

THE Highways Term Maintenance Association's annual conference last week was unsurprisingly focused on cost.

Phil Hoare, the chairman of the industry body, commented that while times were tough, this was "an opportunity to assess and re-evaulate how highways maintenance spending is carried out". I agree with him.

The HTMA launched the first of a series of initiatives aimed at uncovering waste: costs that are unnecessarily added to term contracts that only take money away from frontline services. The new price indexation mechanism will be used in contracts that will shortly be issued by Cheshire West and Chester Council are overdue and welcome.

They will allow the unitary authority to more accurately reflect changes in the cost of labour, plant and materials over the lifetime of its new contract. Different items of work, whether it be routine maintenance, renewal or construction, or professional services, will have different methods for applying price adjustments that reflect their different proportions for labour, materials and plant.

In a separate project, the HTMA is also trying to unearth the unnecessary costs added by the multitude of different key performance indicators that each local authority uses.

It is amazing that so many of these unnecessary costs have gone unchallenged for so long. I think that these initiatives will make the option of issuing a new contract, rather than simply renegotiating an existing one, more attractive.

Buying time to make savings, but acting before prices rise

THE DILEMMA facing one London borough highlights the conundrum for the entire industry. When to re-let your contract? Should we act as quickly as possible, to seize the lower tender prices on offer before demand picks up again? Or should we not be too hasty and lock ourselves into something for another five to ten years, but wait to give all the many exciting new models full consideration?

Harrow council wanted to extend its existing highways contract to give it time to consider the various radical models floating round. There are mooted joint pan-London contracts that could offer big savings. There are alternatives such as the 'thin client' model that strips council overheads right back. These ideas could offer huge benefits, but are still new and relatively untested, and involve huge change.

Harrow has bought itself a bit of time by extending its current contract by nine months, which still gives it a rollercoaster ride of a timetable - the re-procurement starts now, and there's less than a year to go.

Some authorities have already started on the road to a major transformation. They are trying to balance the competing imperatives of devoting time and thought to an open-minded approach to solutions being given by providers offered by the competitive dialogue process with a need to swiftly implementing a change that will see efficiency savings starting to flow in the next financial year or two. Cheshire East, for instance, has only had from December until next week to assess the detailed proposals from three providers under a competitive dialogue.

It's a difficult balancing act. Councils stand to be accused of undue haste or unnecessary delay. They may play safe and make some savings, but not nearly enough to protect the frontline - missing opportunities to join other contracts. They may risk a hastily-pursued procurement that does not deliver against expectations. There are no simple answers.

But councils must look to the long-term, and try to resist the temptation to simply think about the costs and benefits in the next couple of years. That probably makes waiting and giving greater thought to the new contract models the more sensible option in the long-run. But this advice is easy for me to give - I don't have overwhelming pressure from local politicians to deliver savings, right now!

Why complete visibility over costs is needed

Councils are under greater pressure than ever to critically examine whether they could do things more efficiently, and to root out any unnecessary processes or duplication.
But while they are able to streamline their own management structures and internal procedures, they are stymied by not knowing very much about what is behind contractors' costs. That is why the SE7 Alliance's work on highways costs, led by Surrey County Council, is seeking "complete visibility" over why it costs what it costs to say, put down a square metre of road resurfacing.
How much of this cost is down to the materials, the labour, the vehicles and other, more specialist supplies like road markings? How much of these costs are necessary, and how much of them could be driven down by critically examining business processes? And what scope might there be to jointly purchase some materials?
Transparency of council spending means we know how much a county council is paying its roads contractor every month when it pays its invoice. But we have no idea, as taxpayers, the extent to which that invoice represents good value for money compared to the outcomes achieved and compared to what contractors are providing elsewhere.
Some of these avoidable costs will be down to the local authorities themselves - their ordering processes, their specifications. And contracts when first let are by their very nature good value for money, because they have been won competitively.
But several years into contracts there is no reason why contractors should not be kept on their toes and tasked with overhauling processes and doing things as efficiently as they can.

Where's the information to show the value-for-money councils are giving us?

Road condition got worse in Scotland even during a period of increasing public spending. This was in part because roads did not get enough and actually in real terms saw funding reduce; but also, it suggests, because the available money was not spent as wisely as it could have been.

This is one of the key findings of an Audit Scotland report. Part of the problem is that there is not any information available that would allow councils to put together a business case for radical moves such as joint procurement. Indeed, councils seldom even compare the costs of their own, individual delivery arrangements with other authorities, Audit Scotland found, because different indicators are used by different councils.

This is a problem that was acknowledged south of the border by the Association of Directors for Environment, economy, Planning and Transport last summer at our Future of Local Transport Delivery conference. There is not enough information available allowing councils to benchmark the extent to which they are making the money they've got go as far as it possibly could.

Given the sharp reduction in funds from next month, this paucity of evidence on the value for money different councils offer is increasingly difficult to justify.

Joining up is hard to do

So three London boroughs have studied how they can merge entire departments, including the ones delivering or commissioning highways, transport and parking services.

The report from Westminster, Kensington & Chelsea and Hammersmith & Fulham on ‘Tri-borough Working’ has concluded that the savings to be had from fully amalgamating two highways and transport departments could be as low as £350,000 a year, or, in the best case scenario, £500,000. The biggest savings are to be had elsewhere.

Potentially frontline parking services could also be joined up, to reap further savings, on top of £300,000 that could be saved by merging two councils' back-office parking departments. Again, worth having, but still small beer when you consider that the three councils face a collective £100m blackhole from 2012/13 until 2014/15.

Part of the difficulty is that due to the contracts Westminster holds, that authority could not join any highways, transport or parking merger with the other two authorities until 2014, and even then only if either Westminster, or the other two authorities, were to decide to change their delivery model.

Unlike the other two councils, Westminster has a slimmed down, commissioning department, with few staff to either provide services or to micro-manage those provided externally. Hammersmith & Fulham and Kensington & Chelsea will need to decide whether or not this model suits them.

This will require “much more detailed work to full understand how the range of highways functions are undertaken in all three boroughs and the extent and cost of policy work, service commissioning and operational management and delivery. Only then can a properly informed decision be made”, the report says.

So it's not only about merging council departments, which will of course make it easier to reduce staff overheads. It's about a more fundamental reappraisal of what a council highways and transport department is for. That's where there could be far bigger savings.

We can limit the impact of these cuts

Amid all the stories of doom and gloom, it's easy to forget that not every cut means a reduction in service. Take Oxfordshire County Council, for example. The authority is cutting its bus subsidy budget by £900,000 for the coming financial year, but predicts "very little impact" to services.

The council's revised procurement process has seen "more competitive bids for subsidised services overall". They are not the only ones. The Association of Transport Co-ordinating Officers latest annual survey of bus contract prices showed that in 2010 the industry had its first significant fall in contract prices for 13 years.

There's an argument to be had about the extent to which efficiencies can limit the impact of the cuts in funding for local government. But it's clear that, in some areas at least, both the way that the client arranges procurement, and the way that operators provide services in response, could be overhauled in order to make the available money go further.

Separate procurement of transport in different departments can be merged. Rigid contracts that prevent innovation by providers can be loosened. Productivity can be increased - as the Local Government Association has acknowledged with its programme to improve it.

It is a matter of urgency that these things are done now, given rising costs, and given falling budgets. That is not to say that the reductions in funding can be pain-free across the country, given the size of councils' budget black holes, and given that where efficiencies have already been made, the scope for further savings will be less.

But residents will not forgive councils or contractors that simply throw their hands in the air and say that there's nothing that they can do, because there is.

Is there a compelling case for more investment, not less?

The fabled sunny uplands are still some way off. So it was a surprise to read today that Plymouth City Council is giving consideration to putting more money, not less, into footways.

The fact that a scrutiny committee is still seriously thinking that there is a strong case for additional capital funding for footways is not because its members are mad. It's because there's a compelling economic case, given the amount of money that is leaked in insurance payouts due to inadequate maintenance for footways. And that is a short-term economic case that does not even take into account the economic argument of a 'stitch in time, saves nine'.

Nonetheless, these councillors recognise that there is only so much money to go round, and so, quite rightly, make recommendations on overhauling the service levels for maintenance so that what money is available goes that bit further. 

Giving thought to why so much money is spent on reactive repairs, and why defects are repaired in the timescales that they have been, has got to be the way forward if we are indeed to do 'more for less'.

So this is how big a challenge it will be

Shortly before Christmas, the news that all local authority chiefs had been bracing themselves for: the provisional funding settlement.

Shire counties face an average reduction in formula grant from this coming April of 13%, shire unitaries 12%. Metropolitan councils 10% and London boroughs 9%. While council officers now know exactly what they have to contend with, they have been expecting large cuts for over a year now, whoever was in Government.

As the Local Government Association chair Baroness Margaret Eaton commented: "Councils knew the cuts were coming and did all they could to prepare". She went on to pledge that councils would "now pull out all the stops to minimise the impact of these cuts and build on our record of delivering new and better ways of doing things".

This is rightly where the focus must be. Councils should not simply be saying, 'what services do we have to deliver, and what can we stop doing?' They should be interrogating why things are done as they are now, and this should go beyond looking at what their statutory responsibilities are. 

As the Highways Term Maintenance Association has highlighted, there is a cost associated with every key performance indicator. Why do street lighting faults necessarily have to be fixed within five days, for example. Often, the answer is that this has always been the deadline.

However, the greater the frequency of reactive repairs, that means far more travel, fuel used, manpower taken up. Ideally, less and less money should be spent on reactive maintenance, and more and more on longer-lasting planned work that gives you more bang for your buck.

Similarly, if a council is subsidising an hourly bus service to 95% of residents, do they know whether that is what is actually needed to meet accessibility needs? Are these services relied upon, or is there a demand for something different?

Reviewing how things are done is the urgent need right now. Better that, than suddenly having to cut things in a less planned and less intelligent way.