National Roads Maintenance Review Phase 1 Report

2 Overarching themes: areas for further development

These themes have been developed from the work contained in Appendices A, B and C of this report.

2.1 Effective Asset Management

Budget priorities over recent years have left a legacy of under-investment in road maintenance and an asset management approach is expected to deliver a range of benefits. The Audit Scotland report reaffirms the importance of effective asset management as a means of helping to improve the condition of Scotland's roads.

''The proper maintenance of Scotland's roads is vital for economic prosperity and for the quality of life of its people. It is disappointing, therefore, that our findings show limited progress has been made to improve the situation since our report six years ago. ''

Audit Scotland, 2011

However, road maintenance requires budgetary and management improvements to get best value out of a whole life asset management approach. Budgets are under severe pressure, however roads authorities in Scotland have made significant progress in implementing asset management plans:

  • local authorities have been developing Road Asset Management Plans (RAMPs) based on a common framework developed by SCOTS;
  • Transport Scotland and 30 of the 32 Scottish local authorities now have a RAMP in place.

A recent CIPFA study[16], argues that the key to effective asset management planning lies in whether the development and implementation is given sufficient priority by the most senior levels in the organisation and whether it is viewed as a core activity or an 'add-on tool'.

CIPFA also argues that whilst the cost of developing better information and systems needed to set meaningful output and outcome targets may be perceived as high, the returns delivered in both the rail and water sectors[17] are worthy of scrutiny.

Implementing Transport Scotland's RAMP costs approximately 1% of its annual maintenance budget (c. £1m) and has delivered savings of around three times that amount in Year 1. The SCOTS RAMP project has one year left to run under current funding provisions and will require further support to realise long term benefits. Current consultancy support for the project costs around £100k per annum.

2.2 Prioritisation

SCOTS recommends that all authorities employ a carriageway and footway repair prioritisation methodology. The SCOTS RAMP programme has developed a consistent and transparent prioritisation method which allows local adaptations to meet local political and geographical priorities.

Emerging examples of best practice in Scotland can be seen where the movement is away from treating 'worst first' in preference of undertaking preventative spend, aimed at arresting further deterioration. This aligns with the recommendations of the Christie Commission.

Whilst effective prioritisation of spend is achievable when determining which works take place on particular assets (eg. which works are given highest priority within a funded programme), none of the authorities have a well developed methodology for prioritising spend between asset types (eg. how much to prioritise between lighting, footway or road assets).

It is also important to note that annual affordability constraints, ie. cash available, may mean that lower value for money options need to be adopted, or that the standards or levels of service expectations might have to be lowered.

In effect, the reductions in available budgets could mean existing standards need to be reviewed to determine a more acceptable and affordable delivery level.

2.3 Benchmarking and Monitoring

The power of measuring and monitoring suitable outcome focused key performance indicators (KPIs) is their ability to encourage change. Targeting the right KPIs and ensuring the structures are in place to foster the necessary changes, suggested by these KPIs, can help deliver greater efficiencies without damaging quality.[18]

"Only seven councils reported using indicators relating to customer service, such as satisfaction levels or third party liability claims."

Audit Scotland, 2011

SCOTS and the Association for Public Service Excellence (APSE)[19] have developed and implemented a number of KPIs. There are seven key, and 15 secondary, indicators on roads maintenance and 10 key, and seven secondary, indicators for winter maintenance. Each Community Planning Partnership, which includes the local authority, has a joint single outcome agreement with the Scottish Government. These set out high level outcomes to which road maintenance contributes.

At a more operational level, work is ongoing by SCOTS to develop a wider suite of KPIs and unit cost benchmarks, and Transport Scotland's Operating Company contracts include a range of KPIs. However it is not clear if the current KPI regime is driving the necessary change as quickly and as effectively as is needed.

National agencies can have more direct influence on the performance monitored in KPIs, whereas local authorities are working within a more complex environment, taking into account the needs of numerous local partners.

Transport Scotland contributes to a range of international benchmarking projects to measure its performance against others and to learn from international experience. The recent 'Roads to Excellence' benchmarking project[20] sponsored by the Swedish transport agency compared performance across eight international roads agencies. It recognised Transport Scotland's approach of delivering roads maintenance through Operating Companies as international best practice, where the contracts include KPIs which are independently monitored by the Performance Audit Group.

2.4 Delivery models

There are five basic contracting models in operation across the Scottish roads network[21]:

  • In-house delivery with integrated services;
    1. In-house delivery with client/ contractor split;
    2. In-house delivery with horizontal integration with other services;
    3. Shared delivery of works;
  • Externalisation

(contracting works to external delivery organisations/ contractors).

Within the local authority delivery models above, there is a constant requirement to link to local communities and the democratic process, whilst also ensuring Value for Money. Around 50% of local authority revenue spend on maintenance[22] is already subject to competitive tender and about half of this is won by in-house Direct Service Providers (DSPs). Therefore around 25% minimum is delivered via the private sector, which provides a benchmark for individual authority costs.

Transport Scotland maintains budget and programme management in-house whilst contracting-out design and delivery to four Operating Companies, with monitoring and audit services outsourced to the Performance Audit Group (PAG).

Evidence gathered from across the sector at UK, European and international levels[23], suggests that there are a number of delivery model options, which offer varying degrees of benefits. Some of the lessons that are relevant when assessing how best to manage a performance based model, for example, include:

  • when considering the use of outsourcing, contracts should be of a sufficient size and duration to provide more opportunities for the private sector to gain from economies of scale in their tender bid;
  • strong emphasis should be put on effective and appropriate data collection and management as they are critical to performance monitoring. [24]

This suggests that even if contracting-out is a preferred option, having the right in-house skills remains a critical factor to ensure effective management of any contract.

2.5 Incentivising Innovation

Innovation in roads maintenance - across all aspects of the roads maintenance sector - can be incentivised if the risk/reward structure is correct[25].

The Scottish roads maintenance sector is highly regulated by standards on safety, performance and design, etc. The more these drive what is to be delivered, the lower the opportunity to innovate. Many current standards are based on policy rather than legislative requirements. There is opportunity to review/ update these standards, to reflect the needs of Scotland's roads, without the need for legislation. This could encourage innovation and better value for money.

Evidence from other sectors indicate that allowing contractors to determine the 'how' to meet pre-defined and agreed outcome and output targets opens up the opportunity for innovation to deliver significant efficiency savings. Linking payments to performance means the contractor is incentivised and able to innovate whilst ensuring quality and safety are not at risk.

There is also no single, agreed method for seeking and gaining approval for new techniques and materials across road authorities in Scotland. Consequently, the approvals process requires an innovating organisation to approach each road authority individually to undertake trials and seek approval for use on each authority's road network. This can be costly and repetitive and could lead to a number of roads authorities simultaneously trialling the same product.

"Lean" management is a methodology designed to remove waste from processes to improve efficiency. The sector is beginning to adopt Lean techniques as a means of delivering more cost savings through operational delivery. Best practice in Lean management applies at both the strategic as well as operational levels. Widespread application of Lean techniques, at a more strategic level, may assist in addressing issues of over-specification (eg. standards/ regulation), contract performance and identification of more efficient trial and approval processes.

2.6 Enabling Faster Change

The shared services agenda and collaboration are both options that local authorities have been assessing and costing, across all their activities, for some years. All local authorities, and their key partners, have made submissions to the Christie Commission on how they currently work collaboratively, and their proposals for moving forward[26].

'...councils should respond fully, as a matter of urgency, to the recommendations made in our 2004 report and, in particular... ..seek to develop a costed model for shared services.'

Audit Scotland, 2011

Whilst the increased use of consortia to deliver services has not advanced significantly, individual local authorities have looked closely at their service delivery. Various approaches that have emerged have focused on increased efficiency, whilst also seeking to maintain flexibility at a local level. These approaches include formalised shared services, which aim to deliver economies of scale and efficiency savings such as Tayside Contracts (Angus, Dundee City and Perth & Kinross Councils). Other developing partnerships include the Ayrshire local authorities, ELBF Forum (Edinburgh, the Lothians, Borders and Fife), Clyde Valley, Forth Valley GIS and the Pan Lanarkshire Parking service. Glasgow City Council has implemented horizontal integration of services within its Land Services which is reported to have achieved significant efficiency benefits.

There are also developments on sharing maintenance capabilities between local authorities and the trunk road Operating Companies. Transport Scotland's new 4G contracts have been developed to actively encourage closer collaboration between Transport Scotland and other public sector organisations including local roads authorities.

The Audit Scotland report strongly indicates that the current speed of change is not sufficient given the rate of asset deterioration combined with the sharp decline in available budgets. Given this recommendation, there is a case for all roads authorities to examine how they can work together to deliver a better service.

2.7 Communication

The sector faces two key issues which must influence its communication strategy:

  • increasing competition for scarce resources, as a consequence of rising demand for public services, within the Scottish public sector budget; and
  • growing public concern about the deterioration of the road network.

Dealing with these issues requires not only compelling evidence on what funds are needed to achieve an acceptable steady state, but also evidence to show?? that what is being allocated is used as efficiently and effectively as possible.

Similarly, political leadership and strong direction will be needed to ensure the step changes that may be required are realised.