PUBLIC / PRIVATE SECTOR PARTNERSHIP WORKING TO DELIVER HIGHWAY MAINTENANCE & CONSTRUCTION SERVICES

1. DorsetWorksOrganisation “Building A Better Dorset” PUBLIC / PRIVATE SECTOR PARTNERSHIP WORKING TO DELIVER HIGHWAY MAINTENANCE & CONSTRUCTION SERVICES ANDREW MARTIN HEAD OF DWO DENIS CURRAN REGIONAL DIRECTOR HCP

2. DorsetWorksOrganisation “Building A Better Dorset” THE INNOVATION • ESTABLISHMENT OF PARTNERSHIP WORKING BETWEEN PUBLIC & PRIVATE SECTOR CONSTRUCTION ORGANISATIONS • INVOLVEMENT OF PRIVATE SECTOR IN L.A. PROCUREMENT PROCESS • ACCURATE COST PREDICTABILITY OF LARGER CONSTRUCTION SCHEMES • BENCHMARKING OF DSO RATES WITH PRIVATE SECTOR • USE OF PRIVATE SECTOR EXPERIENCE TO ASSIST DCC IN MEETING CORPORATE OBJECTIVES

3. OUR PRESENTATION TODAY • BACKGROUND • DRIVERS FOR CHANGE • APPROACH TO PROCURING PSP FOR DWO • ACHIEVENTS TO DATE AND FUTURE OBJECTIVES • BENEFITS OF PARTNERSHIP

4. DORSET WORKS ORGANISATION • Dorset CC in house contracting unit • 250 Employees • £17 Million annual turn over • Four operating divisions Highway Maintenance Grounds Maintenance Vehicle Maintenance Sign Manufacture • 6 Operating depots • Demo project 206 Public/Public Partnering

5. Hanson Construction Projects • 300 Directly employed staff • 8 regional offices covering mainland UK • Turn-over for 2002 in excess of £85 m • Largest UK purchaser of Hanson products (eg 1.2 m tonnes coated material 2001)

6. The Supply Chain Area

7. DORSET HIGHWAYS TERM MAINTENANCE CONTRACT • All works up to 100k included • Traditionally schemes exceeding 100k procured by:- - Spot tender or- Negotiated discount on TMC rates • Due to terminate in 2004

8. DRIVERS FOR CHANGE • Central Government Ten year transport plan • Dorset LTP settlement- Additional £3-4 million P.A. • Governments 10/99 Advice Note - (PSP’s) • Market forces > Increase in works costs • 5 Year tender cycle for all highway maintenance works - is there a better way

9. ADDITIONAL LTP FUNDING • Additional £3-4 million p.a. for Maintenance and Improvement Programme • DWO can increase their resources to meet 50% • Additional resources required to deliver remainder • Do we resource by - Spot tendering ? - Partnership working ?

10. Option 1SPOT TENDERING IN DORSET (Schemes > 100k) • Additional contract documentation prep costs plus 10% • Traditional contract awards - lowest costs • Adversarial working arrangements • Higher supervision costs plus 10% • Higher out-turn costs • Volatile market forces - budget prep inaccurate

11. Option 2APPOINTING PSP WOULD ; • Address the Governments Best Value agenda • Secure a long term service provider • Secure maximum price for capital programme • Increase resource base available to DCC and DWO • Identify other areas of possible joint working and innovation

12. APPROACH TO SECURING PRIVATE SECTOR PARTNER • Informal workshop held with potential partners to : - Establish level of interest - Invite suggestions on procurement and service delivery options • Model of Contract Administration procedures agreed

13. DCC MODEL FOR PROCUREMENT OF HIGHWAY PROGRAMME DCC HIGHWAY MAINTENANCE CAPITAL WORKS PROGRAMME SCHEMES EXCEEDING 100K IN VALUE (Increasing in number due to LTP settlement) SCHEMES LESS THAN 100K IN VALUE PROCURED THROUGH TMC CAN DWO RESOURCE INDIVIDUAL SCHEME YES NO Joint working to supplement any gaps in resources EXECUTED BY PRIVATE SECTOR PARTNER EXECUTED BY DWO

14. KEY CONTRACTUAL ISSUES • Two year agreement with option for further five • Memorandum of Understanding to overarch • MOU Developed with successful partner • Three month “Opt Out” option • Individual schemes receive formal order • Linked to TMC contract documentation • OJEC “Negotiated Process” notice • Invite Expressions of Interest

15. EVALUATION PROCESS Four Phases PHASE ONE: PRELIMINARY • Involve Audit • Evaluation Panel appointed - Officers across Highway Maintenance service • 50% Quality 50% Price assessment

16. EVALUATION PROCESS PHASE TWO: QUALITY • Quality submissions received • Select list of four contractors finalised • Presentations to selected audience - Evaluation Panel - Key members - Audit Officers - DWO Employees • Final two candidates proceed to phase three

17. EVALUATION PROCESS PHASE THREE: FINANCIAL EVALUATION • Existing DWO TMC rates supplied to both candidates • Invitation to offer % adjustment for price bands < 100k 100k - 200k 200k - 500k > 500k • DWO obliged to match most competitive submission • Compare submitted rates against “spot tender” returns to prove best value of PSP option

18. EVALUATION PROCESS PHASE FOUR: POST TENDER NEGOTIATION • To develop proposals within submission in relation to; - Reciprocal working - Sharing resources - Identify possible areas ahead of joint working

19. OUTCOME OF EVALUATION PROCESS • Partnership Board formed - 4 DWO members - 3 PSP members - DCC Capital Works Manager • Hanson Construction Projects successful • Prior to commencement, staff workshops held to - Enable PSP to address staff - Gain staff input into further initiatives - Compile action plan for year 1 - PARTNERSHIP CHARTER SIGNED

20. House of Lords Partnership Signing

21. ACHIEVMENTS TO DATE • Annual action plan produced and progress monitored monthly • Dorset LTP delivered on time and to budget • Contract document prep costs reduced • Contract supervision costs reduced • Recycling targets being jointly developed

22. Recycling of Materials TONNES

23. ACHIEVMENTS TO DATE • Annual action plan produced and progress monitored monthly • Dorset LTP delivered on time and to budget • Contract document prep costs reduced • Contract supervision costs reduced • Recycling targets being jointly developed • Reciprocal working established

24. TOTAL WORKS RECEIVED FROM HANSON Highways Division £79,963 Grounds Division £67,722 Sign Shop £ 7,027 Vehicle Workshop £ 1,100

25. ACHIEVMENTS TO DATE • Annual action plan produced and progress monitored monthly • Dorset LTP delivered on time and to budget • Contract document prep costs reduced • Contract supervision costs reduced • Recycling initiatives being jointly developed • Reciprocal working established • Joint tendering for projects introduced • Discounts offered on all schemes >100k

26. Discountson Schemes >100k returned to DCCTotal for 2002/03 = £223,000

27. ACHIEVMENTS TO DATE • Dorset LTP delivered on time and to budget • Contract document prep costs reduced • Contract supervision costs reduced • Recycling targets being met Recycling initiatives being jointly developed • Reciprocal working established • Joint tendering for projects introduced • Discounts offered on all schemes >100k • Supply chain KPI’s developed

28. Supply Chain KPI’s

29. FUTURE DEVELOPMENT OBJECTIVES • Accurate measurement of cost benefits in relation to design and supervision costs • Develop jointly managed recycling facility • Develop open book / value engineering initiatives • Continue complete works programmes on time • Maintain levels of investment and increase reciprocal working • Reduce unit rates over 5 years to demonstrate continual competitiveness and VFM

30. BENEFITS OF PRIVATE SECTOR PARTNERING IN DORSET For Dorset County Council • Guaranteed maximum price for works carried out • Not susceptible to market force • Private sector involvement in Best Value Review • Increased resource base available • Private Sector involvement in value engineering • Address recycling issue - Corporate objectives of DCC

31. BENEFITS OF PRIVATE SECTOR PARTNERING IN DORSET For DWO • Reciprocal trading with Partner • Additional storage areas available • Recycling issues can be addressed • Evidence of Best Practice to BV Inspectorate • Access to PSP’s procurement systems :- Vehicles, materials etc • Cross secondment of staff • Exchange of Best Practice • First option on schemes >100k - no “spot tendering”

32. BENEFITS OF PRIVATE SECTOR PARTNERING IN DORSET For Hanson Construction Projects • Additional workload from DCC schemes • DWO surfacing works within TMC carried out exclusively by Hanson • Access to Private Sector markets in Dorset • Raised national profile as a partnering organisation • Increased length material supply contracts