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Highways marketplace review - report by Proving Services

Category: Proving Services / FHRG

Date: 17 September 2020

Summary

New technologies, modal shift and an increased emphasis on sustainability, accelerated by COVID-19, are combining to present the highways sector with an unprecedented series of challenges and opportunities. The consequences of COVID mean there is likely to be an economic impact on capital and revenue local authority budgets.

Against this backdrop, within the next five years, twenty-four local highways authorities will be coming to the end of their current highways delivery arrangements. Seven of these authorities (who are also members of the Future Highways Research Group (FHRG)) have commissioned Proving Services to undertake a review of the marketplace and evaluate future service delivery options. A key objective of the review is to better understand how authorities and their partners can improve contractual and collaborative relationships to deliver mutually beneficial outcomes.

Thirteen private sector providers were interviewed, including director level representation from each organisation. All participants provided honest, open and constructive views. The following subject areas were discussed:

  1. Highways Market & Sector Commitment
  2. Procurement & Contract Arrangements.
  3. Financial Management & Services Funding Models.
  4. Performance Management & Provider Remuneration.
  5. Future Challenges.
  6. Relationships & Behaviours.
  7. Political & Citizen Needs & Satisfaction.
  8. Other Strategic & Operational Considerations.

The local authority highways sector is still an attractive market for the private sector. All providers interviewed indicated their intent to continue to offer their services to local authorities, although specific organisations have indicated that might be seeking to divest their UK Highways Service businesses.  The majority also stated they would be increasingly selective as to which contracts they bid for.

Many challenges, opportunities and suggested changes were identified by the interviewees and these are documented in this report. However, a key theme ran through all interviews. Providers are seeking to work with authorities that are willing and able to build truly collaborative and strategic partnerships; based on trust, and for the benefit of all parties. This was described as the ‘golden thread’ of success that runs through the process from early market engagement, through procurement and contracting, and on to delivery.

This relationship would ideally be manifest in an outcomes-based rather than a transactional agreement, with a fair and proportionate allocation of risk and reward, agreed through the contract terms and conditions. If successfully established, such a relationship will help ensure the agility and commitment of all partners, such that the current and emerging sector challenges can be jointly and promptly addressed, and the opportunities presented by new technologies and innovation fully realised.

As part of the consultation, providers were asked to express their views as to the broad ‘pros’ and ‘cons’ of various service delivery models. As to be expected, the comments reflected the respective model that each provider is structured to deliver. However, there was general consensus that an integrated or small number of single providers, working as a collaborative partnership, provides the best opportunity to realise efficiencies, exploit innovation and new technologies, and access specialist skills and additional capacity.