Option 30 Report

6 Other Matters

Whilst all of the following matters have not been subjected to assessment during this research study, they have been recognised as potential constraints or opportunities which will need to be looked at in more detail in future work on any of the options.

6.1 Contract Types

There are various delivery models for roads services covering both operational and contractual arrangements. They all involve a client and contractor relationship.

Some examples include:

  • Managing Agent Contracts (MAC)
  • Managing Agent / Term Maintenance Contract
  • Construction Management Partnerships e.g. North Lanarkshire Public Private Partnership
  • Highways Maintenance Private Finance Initiative (PFI) and Public-Private Partnership (PPP).

These need to reflect the location, geographic areas covered, and any existing contracts. Where contracts are already in place, consideration would need to be given to their type and term and how these impact on any proposed change to service delivery.

There is merit in reviewing the relative benefits of each contract type in any future work.

6.2 Legislation

A review was carried out by Dundas & Wilson on current legislation covering roads, local government, EU procurement and employment which informed the assessment process on the likely need for any legislative change and human resource implications.

6.3 Application of VAT

Local authorities currently benefit from a special refund mechanism under section 33 of the 1994VAT Act. This allows local authorities to reclaim VAT on "non-business" activities. The same regime does not operate for central government, of which Transport Scotland is part. There is a considerably more restricted list of activities for which central government can reclaim VAT in full. In practice, this means that while central government can reclaim VAT paid on maintenance costs for the existing roads network, the same is not necessarily the case for roads capital works. Indeed Transport Scotland has confirmed that VAT on roads construction costs can only be recovered where land has previously been used for a road scheme. In the event that the land has not previously been used for roads, VAT cannot be recovered. This is a significant difference in the VAT regime between local and central government and is therefore an important financial consideration for any future models. As part of further work to develop feasible options, consideration would need to be given to the tax position (both direct and indirect) of any change from current arrangements.