Procurement rethink signals start of Highways England's bid to build intelligence

Highways Agency suppliers are to meet with the organisation’s procurement heads next week to discuss the transition to Highways England and the impact of its decision to try new methods of procurement for maintenance work.

Jackie Whitelaw
17 February 2015

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The Infrastructure Act creates the arms length government company Highways England as a successor to the Agency and became law last week. Now all eyes are on how the new organisation will be structured to invest the promised £15bn in England’s road network over the next six years.

The Agency also announced last week that it is going to take more direct control and separate the way it runs design, routine maintenance in construction.  At the moment all activities are bundled into single deals with contractor/designer teams.

"This change means they will learn and understand the detail of their own network. We really understand what they are doing and we support them." Roads sector expert.

The new system is to be introduced first in East Midlands Area 7. 

Procurement reform is set to be key to Highways England’s future, in particular for its own understanding of the network and its development as an intelligent client.  The move to direct control of maintenance is seen as crucial to achieving those aims by many in the roads sector.

“The Agency is on record as saying it wants to be an intelligent client as Highways England and this is a move it has to be make if it wants to be that,” said one supplier.  

“And it has to do it– being a government company is going to make it even more accountable than when it was an Agency; it’s going to have to have answers and explanations at its fingertips,” said another expert in the roads sector.

“Creation of the managing agent contracts in 2001 (where contractors were set up as expert providers) meant the Agency lost a lot of its in house expertise and became an auditor of contract performance,” explained another.

“That’s not what an intelligent client needs to be. This change means they will understand the detail of their own network. We really understand what they are doing and we support them. It will be nice to have more regular conversations about residual life with their engineers again.”

Area 7, where the new procurement arrangement is being introduced, was to be the last of the areas to switch from MACs to the Asset Support Contracts which allow incumbent contractor/design teams to plan work against a set of outputs. ASCs have handed over even more control and knowledge to the suppliers – “they’ve taken the Agency down the route of becoming less intelligent in terms of understanding their roads,” said another supplier.

The ASCs have also had a difficult introduction. The Agency is currently querying whether bids for Areas 1, 4, 12, 13 and 14 can be delivered as proposed, particularly to quality targets and has revised the tender timetable.

“Was the idea right in giving contractor’s choice of how to do things, how to prioritise and how best to organise themselves?  Yes. Was it right to make the ASCs more outcome based? Yes," said one supplier. "But that’s not the way they’ve been managed – client and suppliers have not all bought into the contract and it’s been difficult."

“Also the industry was bidding at a terrible economic time and probably bid at a rate it shouldn’t have done,” he added. "“The upshot is that the ASCs are not really fit for purpose.”

According to the Agency the ASCs are not being canned but will be one option in a future procurement armoury. But the suppliers believe that changes in Area 7 are the start of a move away from the arrangements. “I expect we will all work to try and get a sensible answer to the ASC bids but next time round they won’t exist and they will even be retrofitted with different ideas before the end,” was one supplier view.

From within the supply chain the view is that a procurement rethink will create opportunity for Highways England.

“They want to know more about their network but intelligence currently resides in the provider so that would be a good thing to reverse," a supplier explained. "Changing the model also means they can experiment with the supply chain so instead of relying on half a dozen of the biggest companies they can get the basic service done by tier 2s and 3s and go direct to surfacing contractors without having to go through the main contractors.”

However, they added: "The industry is excited about what is ahead for the roads sector, it’s what we have been after for a lifetime. We’ll support Highways England all the way.”