“Doubling of workload doesn’t mean charging us double” – Dalton on Highways Agency transformation

Highways Agency chief executive Graham Dalton explains the transformation needed to manage £16.8bn of investment by 2021 and what it means for suppliers.

As the Highways Agency prepares to be transformed from a government agency to a fully fledge private sector company to manage the nation's trunk road and motorway network, chief executive Graham Dalton explains the hurdles to be overcome and the potential prize to be won.

Q. The Highways Agency is to become an arms length public company. What needs to happen to put that in place?

A. For the transition phase of turning the Agency into a properly established company there are some key things that must happen by April 2015. Legislation needs to be in place. But we also need a licence for the company and the directors to be appointed. The final session of this Parliament runs from May/June this year and the plan is for the bill to create a new highways company to be in the final session. 

Q. What then?

A. Then comes ‘transformation’ into the new company - that is all the issues like capability, capacity, mindset, culture change that will have an overall impact on how the new company does business. That is not strictly necessary by April 2015 and could take up to five years. If this was an old fashioned, ‘sell it to someone’ arrangement, we’d just do transition.  

Q. Who is going to run the new company?

A. Me, I hope! I’m tremendously excited about leading the Agency through this period of exceptional change and opportunity, and I am looking forward to leading the new company too. I have been HA chief executive for six years but this will be a different job. I have spent half my career in the private sector – with Mouchel and Bovis Construction - and since then gained public sector understanding with three years at Department for Transport and six at the Highways Agency.

Q. What will be different about the new company in terms of approach?

A. We are setting up a government owned public sector company genuinely working in the public interest but on private sector commercial lines. That involves long term planning, a corporate structure, a board of directors and private sector disciplines and governance. It will require an intense focus on the customer. At the moment my people and I are civil servants and our job is to deliver for government and ministers. All the incentives are around short to medium term aims.  I think the Highways Agency has done a decent job thinking long term about its assets but there’s no doubt that needs more of our attention. We also need to think much more about road user experience. There will be an independent ‘customer champion’ in the new regime to keep us honest; and I expect they will have some harsh realities for us.

Q. Like the rail industry the new company will have a five year spending allocation. Does that get you round annuality rules where you have to spend each year’s budget in that year?

A. The legislation will set up funding for the Road Investment Strategy, similar to the rail industry’s High Level Output Strategy and it will create far more flexibility around annuality rules. But we won’t get carte blanche to leave the money in the bank and spend it all in the last year of the period. The money will still be on the public sector balance sheet. But the RIS will give us the ability to move money between years which we do not have at the moment. A five year plan will have within it a plan for each year’s investment but there will be flexibility to move the money from year to year if needed. For instance at the moment I have a big push at the end of this financial year to get capital work done on a network that is very wet. We’d get better productivity if the work could be deferred to May and June. Flexibility to move money from year to year must not be an excuse for under performance however.

Q. Do you need new staff for a new company?

A. I have a really good senior team and who are focused on outcomes and are generally collaborative.  I am definitely looking at building capacity at most levels below that. And I’m not after all dyed in the wool engineers. We need to have people who understand and think about road user - whose automatic reaction every morning is to see how the network is running; and who understand what incentivises suppliers and therefore can work with them to deliver results.

Q. Are you going to have to pay people more?

A. This is a public interest company. Part of the transfer process will move us to a far more modern progressive structure and a 1% cap on the pay bill is not commensurate with a growing business when so much more is being asked of it. That said, I do the job not because I am one of the highest paid people in transport, because I am not, but because I get a lot more satisfaction than those that are. I enjoy working with my people and running the network. Most of us at Agency and in our suppliers take a real pride and ownership in what we do.

Q. Have you driven on all the HA network?

A. Most of it! I actually have a map and colour in all the parts that I have driven. There is still some to do even though I drive 17,000 miles a year for the Agency in the trusty Volvo – both on Agency business and as a customer. I just recently took in the Sheppey Crossing and I have yet to do the A27 and the coast road to Kent.

Q. What is key to the change between the Agency now and the Company in the future?

A. I am spending quite a lot of my time working with the Department and Treasury on getting the right framework and right incentives in place, making sure the RIS is sufficiently demanding and that we will have the security of money and freedom to take some business decisions. There are lots of laudable Cabinet Office controls but all the time my people spend getting Cabinet Office clearance on the big contracts is time not spent with suppliers working out a better proposition. I haven’t ever had something stopped by the Cabinet Office but it diverts attention. Within the Highways Agency we are running a change programme for collaborative working and busting bureaucracy. Also, being in the civil service, many of the day to day decisions about operating our network are taken on our behalf by ministers. Going forward we will be taking more of those decisions ourselves. Some people are nervous but on the whole everyone is excited.

Q. Will relations with contractors, consultants and the supply chain change?

A. We are currently going through the new collaborative delivery framework appointing consultants and contractors to deliver the next five years of work, in fact we have just gone through the prequalification process for it. The tender process has been about everyone upping their game. There is going to be a large volume of capital spend and also a lot on asset renewals. There are going to be bigger contracts and we want a good, strong working relationship with a decent pool of firms – enough to keep competition edgy but so we don’t have to resort to spot tendering. We want innovation and understanding that if you and doing for example twice as much resurfacing as before that you don’t do it in twice the time. And this is not about loading more people on to a job. If a consultant for example thinks moving from say £1M of work to £2M means twice as many people then they have missed the point. It is about making the same people twice as productive.

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