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Highways England out to tender on new Area 7 contract this month

Fifteen year deal worth up to £20M a year on offer for winning maintenance and response contractor as company takes more direct control of its roads.

Area 7

First of four new maintenance deals on offer in Highways England’s East Midland’s Area 7 goes out to tender on 27 July. The company is seeking a maintenance and response contractor to do everything from grass cutting to recovering the network after accidents in a potential 15 year arrangement that could be worth up to £20M a year to the winning bidder.

Three more five-year contracts for design, specialist services and construction will be bid in September and October.

“We don’t want an agent. We want to see the organisation we contract with to be the organisation doing the work.” - David Poole

“The new maintenance and response contract will have a review every three years,” explained Area 7 programme director Jenny Moten “but as long as the contractor is performing as intended the contract is for 15 years.”

A longer contract was seen as a better incentive than a pain/gain option to encourage constant improvement over time, she explained. “Pain/gain gives a modest extra margin but it’s the security of workload going forward that’s commercially attractive for our suppliers,” she said.

It was announced in February that Highways England was going to trial contracts that gave it more direct control of the work on its network and which would involve separating the way it runs design, routine maintenance and construction. On the other English Areas all activities are bundled into single Asset Support Contract deals with contractor/designer teams, some of which are still being bid, and will continue.

But the Area 7 contracts will allow Highways England to build up its understanding of the network, the costs of maintenance and how to improve delivery as part of its development as an intelligent client. The new company is now directly responsible to road users and will be judged on customer satisfaction which means it needs to be seen to be more closely in control of the works on the network.

“Pain/gain gives a modest extra margin but it’s the security of workload going forward that’s commercially attractive for our suppliers,” - Jenny Moten

“We have to have more direct control of our asset base,” said Highways England director for network development and delivery David Brewer. “We need to understand how productive the work is that is being done and where the waste is.” Going forward Area 7 will give the company a “more granular level of cost transparency and will enable us to manage performance better and drive improvement here and in the management of all our other contract arrangements.”

Highways England is seeking to contract directly with  companies which will be doing the hands on work for the Area 7 deals. “We don’t want to pay for a management service,” said director for commercial development David Poole. “We don’t want an agent. We want to see the organisation we contract with to be the organisation doing the work.”

Intention with the response and maintenance contract is to help employees closer identify with Highways England. “Many of them have worked on the East Midlands network for 15 to 20 years but have been transferred to different organisations every five and it is unsettling. We wanted to get to a place where they feel as much like our team as possible without being directly employed Highways England employees,” Brewer said.

“However we have no plans to build a direct labour organisation,” Poole said.

As part of the Area 7 contract arrangement Highways England will need to build its own in house management capability and will be hiring in new staff. Significant numbers are expected to come from the Area 7 managing agent contractor Aone+.

“We need to understand how productive the work is that is being done and where the waste is.” - David Brewer

“We have made a couple of targeted hires to help us and we expect to transfer in a significant number of staff from the current contractor,” Brewer said.

The two other contracting contracts – for specialist services and construction – will be let in September and will be for four years because they will be frameworks and under EU rules that is the maximum they can run.

The £5-10M a year design contract will also be for four years but is not limited to firms on existing Highways England frameworks and is open to all as company seeks to flush out smart solutions. “We are expecting a high level of interest,” Brewer said.

The new contracts will start in July next year.

If you would like to contact Jackie Whitelaw about this, or any other story, please email jackie.whitelaw@infrastructure-intelligence.com.