Argyll and Bute Council and Breedon Aggregates Scotland Ltd have entered into a unique partnership arrangement to undertake machine patching, surface dressing, resurfacing and overlay works on Islay, Mull and Kintyre. The partnership has created an opportunity to innovate through early contractor involvement, maximising the use of shared resources and technical expertise and joint resolution of challenges. In this tough economic climate of restricted budgets and rising costs, the Contract has, during its first year, successfully delivered high quality, sustainable road schemes on programme and achieved savings of £90,000 (8.5% of target cost). The partnership has also contributed to the delivery of the Council’s Key Local Outcomes.
PLANNING / · a clear rationale, defined processes and focus on stakeholder needs· contributes to organisation’s goals and addresses current or emerging challenges
Thirty percent of Argyll and Bute Council’s local road network is located on islands. Islay and Mull, the larger of the islands in the Inner Hebrides have substantial lengths of road which have historically presented unique challenges to maintain. These can be summarised as follows:
- Effective surface treatments require hot materials. Although the two main islands each have quarries, neither has an effective coating plant which can produce hot bituminous materials.
- It is not cost effective to maintain expensive road surfacing plant and equipment on the islands. This has to be imported by ferry for each surfacing contract.
- Although the Council maintains a workforce on each of the islands, resources are limited which prevents small remote in-house squads from undertaking capital surfacing schemes. Furthermore, surfacing is not carried out frequently enough for the workforce to develop the specialist skills required.
The customary solution has been for the Council to let each surfacing, surface dressing and machine patching contract individually. The successful Contractor would then bring plant, equipment, skilled workforce and materials to the island to complete the contract. This could happen on each island two to three times during a single summer, resulting in a high level of mobilisation and transportation costs on the overall capital programme. The Contractor was not involved in developing specifications or programming thereby assuming little risk and ownership of projects.
It was recognised that the traditional procurement routes did not achieve Best Value nor would they meet the commitments made by the Council under the Single Outcome Agreement and the aspirations of the key stakeholders and the Key Local Outcomes to which they had contributed, being:
- To ensure that areas are accessible yet retain their remote characters (success measure - Network road condition indicator).
- To ensure that Argyll and Bute is well connected economically and socially (success measure – Transport infrastructure projects completed).
- To create a high quality environment that is valued, recognised and protected (success measure – Council reduces CO2 emissions).
Clearly a new radical approach to capital road maintenance on the islands was required. Maintaining the status quo i.e. routinely tendering work packages and awarding on the basis of lowest price, thus keeping the contractor at arms-length would not achieve best value for the Council. The Procurement and Roads Teams worked jointly to create a unique sourcing strategy in discussion with key stakeholders and following market research, supplier consultation and exploration of the associated risks/opportunities.
The visionary solution was to let a single strategic long-term contract for all machine patching, surface dressing, resurfacing and overlay works on the islands of Islay and Mull as well as the mainland area of Kintyre where the long distances from the nearest quarries gives the area many of the characteristics of an island for road treatment purposes.
The contract was formulated as a partnership arrangement with Breedon Aggregates Scotland Ltd in order to maximise the use of shared resources, allocate risk and rewards with the overall objective of making operational efficiencies and cost savings, delivering sustainability and achieving best value from an increasingly limited budget. This was enabled by the use of the NEC ECC Option D – Target Price form of contract. In a ground breaking departure from the tried and tested commercial relationship, both parties share in an element of savings achieved against target and similarly share an element of overspend against target.
The collaboration enables early contractor involvement whereby creative solutions are developed in terms of road treatments and programming. Best practice is shared with a strong emphasis on Health, Safety and the Environment. The contractor is incentivised to deliver quality over the long term and incorporate continuous improvement into all areas of its activities. Sustainable solutions are being pursued in terms of environmental (in-situ recycling of material; minimisation of transport and impact on biodiversity), social (minimising disruption to local residents and businesses) and economic (whole life cost in terms of the life cycle of the road treatment).
The Council is on track to deliver significant savings against budget in this first year of the three year contract. In terms of contribution to key outcomes, all (transport infrastructure) works to date have been successfully completed within programme. It is yet to be established whether the partnership has impacted positively upon the Network Road Condition Indicator but this will become apparent when the next survey is complete. It is anticipated, however, that this has been achieved.
DELIVERING / · implemented in all relevant areas and across all the required stakeholders· carried out in a structured and logical way , using robust and sustainable methods
The Council recognised that there were significant risks associated with a Contract of this ‘partnership’ nature. Years of competitive tendering had created a climate of wariness between public and private sectors creating an immediate and obvious obstacle towards realising intended gains. The Council embarked upon an extensive supplier engagement process through Prior Information Notices, questionnaires and surveys and workshops/meetings with leading market players. These frank and open discussions not only ensured buy-in to the strategy but also revealed further opportunities and areas of best practice.
There was further initial resistance internally associated with the Option D NEC form chosen. There was concern that the option was hugely demanding with respect to contract administration and management, requiring examination of a very large amount of paperwork that the contractor must present to justify ‘defined cost’. The contract also sets rigid timescales for actions from both parties, with some commercial consequences if they are not met. The strategy was, however, ratified as although the Client assumes a greater amount of risk under Option D, there is also the potential for greater rewards and was the only mechanism to creating a true partnership relationship.
Partnership is not an easy option and needs to be under-pinned by clear roles and responsibilities for decision-making and effective performance reporting. Both Argyll and Bute Council and Breedon Aggregates Scotland Ltd therefore mutually developed a Partnership Charter setting out the Vision for the contract, the Values that would be upheld and the Objectives and Goals that would be pursued. A shorter form was developed for operational use. In doing so, the agendas of the partners were aligned to help bring about successful innovation.
A Partnership Board was also constituted, pulling together Directors and Operational Managers in order to maintain the strategic focus and ensure commitment at the very highest level of each organisation.
The Contract was mobilised by a Partnership Workshop attended by individuals from both parties who would be involved in the management and operation of the Contract. This was an excellent forum for communicating with employees and users of the contract and to enable all parties to understand the mechanics of the contract and establish methodologies for contract compliance, communication, escalation etc.
Regular progress meetings between the Project Manager and the Contractor are held, supplemented with quarterly contract management meetings during which, amongst other issues, Key Performance Indicators are reported upon and actions taken as appropriate, thus driving further improvement.
The Contract is also unique in that it is aimed very firmly and unusually at encouraging the contractor to share in the objectives of delivering a service direct to the public, rather than being one step removed. The contractor therefore has responsibilities to deal directly with public groups such as community councils and attends their monthly meetings, where appropriate and relevant.
INNOVATION + LEADING PRACTICE / ·Demonstrates leading practice, and is capable of replication elsewhere·Achieves genuine innovation or new ways of working
In these times of austerity and increasing budgetary pressures, this inventive contract has delivered capital road work programmes on time, below target cost and with a longer maintenance period than had previously been achieved (whole life cost).
This has been a challenging process and significant effort has been expended by all stakeholders to bring the contract to fruition. Delivering services through partners can achieve significant benefits and helps bring about successful innovation but inevitably offers less direct control than delivering them alone. Recognition of the potential opportunities, however, overcame any uncertainties about the strategy being pursued.
The contract has undoubtedly delivered better outcomes than those achieved with the traditional methods of delivery. Aggregating demand across the islands and Kintyre and entering a long-term Partnership Contract has created economies of scale, delivered price improvements and cost savings as a result of early contractor involvement and creating an opportunity to innovate, sharing risk and optimising resources. The Council has also gained benefits from partnership working in terms of technical expertise; improvements in the quality of works (5 year guarantee); transfer of risk in supply of hot coated materials and also programme delivery; improvement of quality, consistency and continuity of coated roads materials supply. Mutual success is key – we are all in it together - and there is a recognition that delivering better outcomes by working successfully together brings mutual benefits.
“From Breedon Aggregates Scotland Ltd.’s perspective, this is an inspirational contract agreement and fair to both parties. It has broken down traditional barriers and created a strong ethos of teamwork and delivery and has already enabled, by working together, best practice between us.”
(Alan Mackenzie, Chief Executive, Breedon Aggregates Scotland Ltd.)
The success of this creative contract can be demonstrated not only in terms of delivering against target cost and to programme but also by benchmarking productivity and costs delivered by the partnership against capital works undertaken internally by the Council in other areas of Argyll and Bute. At this stage of the contract, this information is not yet available but it has been recognised that benchmarking shall be a tool for continual improvement assessment and an opportunity to share best practice between the Council’s operations and the Contractor’s activities. This information shall also identify opportunities to replicate the contract strategy in other geographical areas, as appropriate. There is a potential that being able to demonstrate and evidence that value for money is being achieved by benchmarking, there is a strong case for attracting further capital in the future.
Benchmarking can also be undertaken by comparing productivity achieved against that of other local authorities via the APSE and SCOTS workstreams. This collaboration shall also enable Argyll and Bute Council to share successes achieved and communicate best practice. Argyll and Bute Council’s entry to the GO Procurement Excellence Awards based upon this successful project has been shortlisted thus enabling the Council to share its experiences and practices with other public sector organisations.
RESULTS + IMPACT / · a convincing mix of customer and internal performance measures· clear line of sight to the delivery of better outcomes for communities
· a full range of relevant results– either already achieved or with potential to deliverover time
By working in close collaboration with Breedon Aggregates Scotland Ltd., the Council has, to date, achieved significant savings of £90,000 (8.5%) against target costs of £1.06 million and a background of rising material costs. Measurement valuations have been agreed for all schemes completed on Mull and Kintyre, wherein Breedon have bettered their targets as follows:
- Mull: £65,000 saving against a £695,000 budget
- Kintyre: £25,000 saving against a £370,000 budget
These savings have been ring-fenced and can be used to undertake additional capital road works thus creating even greater benefit to the local community in which the roads infrastructure improvements are being undertaken. This directly contributes to achievement of the key local outcomes (derived from National Outcomes) described earlier i.e. ensuring remote areas are accessible and that the community is well-connected. The savings shall also be shared with Breedon Aggregates Scotland Ltd upon completion of all schemes.
In terms of programme, this was adhered to for the Mull and Kintyre Work Packages. This can be attributed to the NEC3 ‘early warning’ mechanism. Any issues which may have resulted in a slip to the programme were highlighted at an early stage e.g. material delivery, plant breakdown etc. thus allowing both parties to work together and mitigate delay.
Significant sustainable benefits have already been achieved by minimising transportation to the islands (x tonnes of CO2 to date). There has also been minimal impact upon transport systems and local communities, particularly during the busy tourist season which coincides with optimal conditions for roads operations. Further sustainable opportunities shall be actively pursued throughout the duration of the contract including use of recycled road materials, using environmentally friendly treatments where appropriate and maximising the efficiency of energy, water and waste management.
The Contractor has achieved 100% in respect of the Key Performance Indicator for Quality of Material (Operating Compliance Level).
As the Contract is only in its first year and the initial programme of works has not yet been completed, it is not possible at this time to provide reports upon all of the Key Performance Indicators (KPIs). These indicators have been mutually agreed by both parties as relevant to the operations and shall be rigorously monitored upon. The majority of the information shall be gathered in Year 1 and benchmarked thereafter.
The measures include:
- Defects (At Completion; 52 weeks; 104 weeks; 156 weeks
- Customer Satisfaction (Complaints; Compliments; Response to Customer Survey; Perception Audit).
- Health Safety & Environment (LTIs; Dangerous Occurrences/Near Misses; RIDDOR; SEPA Reportable Incidents; Client Perception)
- Improvement in Road Condition Index
It is anticipated, however, that significant achievements shall be made against the KPIs targets set, which all having meaningful outcomes to the Council and the communities it serves.
Councillor Duncan MacIntyre, Argyll and Bute Council’s spokesperson for Transport and Infrastructure said: “This is a ground-breaking initiative which is generating very real benefits both for the Council and for the communities covered by the Contract. In remote, rural and island communities, there are significant benefits to the joint use of resources and planning of activities through regular communication, and that’s what is happening here. This project has not only led to obvious efficiencies, but also to improved standards and confidence. This has become increasingly apparent – particularly with our customers, the general public – who have been extremely positive about the initiative and the changes they have noticed.”
Looking to the future, this contract has been built upon the foundations of continuous improvement. Indeed, it is a condition that savings achieved cannot be claimed again in future thereby ensuring that there is no complacency in the partnership or let-up in the pursuit of positive results. Inevitably, savings shall continue to be key to the contract but not at the expense of whole life cost of the asset. Innovative road treatments shall be investigated as well as securing sustainable opportunities (reduction in carbon footprint associated with road maintenance activities, employment of local people, participation in school road safety initiatives etc.). The Council also expects to achieve a year on year reduction in the percentage of its revenue budget spent on reactive maintenance as a direct result of this Contract.
The possibility of replicating the contract model not only to other areas of roads operations but also to other civil engineering construction projects shall be investigated. Can we work in partnership with other strategic contractors to deliver strong results in these tough economic times, removing barriers and overcoming obstacles to bring benefits to all involved?
COSLA EXCELLENCE AWARDS 2012 Page | 1