Octavius Regional Civil Engineering Contracts Manager, Nick Brooks assesses Somerset Council’s decision to replace its Highways term maintenance contractor with five specialist partners.
Somerset Council’s progressive approach to highways is making headlines. “Somerset signs £140m trio of deals to deliver ‘new era’”, reported Highways Magazine; which continued, “In a change to the way it delivers services, the council divided up the existing contract into separate contracts covering different areas of service delivery.”
In a departure from local authorities’ and councils’ typical highways procurement route Somerset has, instead of appointing a Term Maintenance Contractor (TMC), let its highways contracts to a wider pool of specialists.
Dealing with multiple specialists, rather than a monolithic TMC, changes significantly the dynamic of the relationship between the council and its highways partners, giving Somerset more visibility of when and how projects are being undertaken – and much greater granularity with regard to costs and payment schedules. The level of touchpoints between the council and those delivering its highways programme has increased significantly, with greater interaction between subject matter experts on both sides.
Cutting fee-on-fee inflation
Somerset’s progressive approach removes fee-on-fee cost inflation because the client is dealing directly with specialist contractors, rather than through the medium of a TMC. There are financial rewards for early contractor involvement, and an uplift to make the very smallest contracts viable to deliver. Contractual checks and balances to ensure value for Somerset’s communities, however, see the council retain a percentage of the fees for the largest value projects.
To a meaningful degree, a blunt instrument has been replaced with a more precision tool; and Somersets’ approach is gaining traction with other councils. For example this more commercial stance is being adopted by Herefordshire Council and Bristol City Council who are breaking down their highway programmes into lots by value or discipline; or adopting mini tenders.
The anticipated benefits, for Somerset Council, include greater cost certainty, increased programme flexibility and enhanced value. With regard to cost certainty, for example, the Award Decision Report notes “The move to a set of agreed rates for items of work will now allow more surety of outturn costs for each scheme;” further the report states, “A lessons learned review has also concluded that seeking to achieve artificially low rates at the outset of a new contract can lead to a challenging commercial relationship and significant cost claims once in-contract.”
In terms of flexibility the report observes, “The new contracts do not have any minimum spend thresholds, so the amount of activity delivered through the contracts can be tailored to available budgets at any point in time.”
Collaboration contractually embedded
The benefits will be realised primarily because the approach embeds collaboration between the council and its partners, as well as nurturing innovation from the contractors. “A contract that is commercially sustainable for the contractor is more likely to lead to a collaborative and innovative relationship that can add real value to the delivery of highway services,” according to the Award Decision Report.
Octavius self-delivery Regional Civil Engineering business is among five companies to win one of Somerset Council’s new highways contracts. Starting in April 2024 the four-year term includes the option for a four-year extension, Octavius is responsible for the New Assets Framework.
The scope includes safety and traffic calming measures, infrastructure associated with active travel, electric vehicles, public transport, and mobility hubs. Early completions include safety improvements at the Miner Arms accident blackspot.
In addition to Octavius New Assets Framework Somerset Council’s highway contracts are: Kiely Bros, surface treatment services; Heidelberg Materials, resurfacing services; Kier Transportation, core maintenance; and Volker Highways, electrical services.
First hand experience
Octavius’ first hand experience, one year in, is that this is a contract based on collaboration. The approach to early contractor involvement (ECI) is second to none, and facilitates the bundling of work – under single task orders – into packages that will yield efficiency savings. Criteria for bundling work packages can include scope, location and synergies with other projects – whatever approach leads to the most effective use of time spent out on the network or yields the most efficient way to achieve the outcome desired.
This is in contrast to the more common TMC delivery model which does not typically strategise efficiencies in an effective manner. Another significant difference with the TMC model is that work is awarded directly on a Schedule of Rates (SoR) NEC4 Option B contract, rather than Option E: billing for labour, plant and materials, a change that further incentivises efficient delivery and contractor accountability.
This genuine approach to ECI begins at the point a need is identified, rather than at the point a solution has been arrived at, which drives dialogue at the earliest stages to identify the most efficient way to deliver work. We are constantly collaborating to maximise benefit, seeing what looks good and what looks bad.
Uncommon opportunity
The opportunity for this level of input is uncommon, typically for work of this nature the contractor only gets involved when the project is ready to build. The effect of the change brought about by Somerset Council’s approach is that work on site progresses with much greater efficiency because the need to raise technical questions is reduced significantly. A further effect is that the contractor is much more accountable for the outcome because the responsibility to iron out challenges in the project’s formative stages now rests to a much greater extent with us.
Construction is carbon intensive, so involving a progressively minded contractor at the feasibility stage also expands the opportunities for Somerset to build carbon savings into its highways programme. As the Award Decision Report recognises, “It is hard-wired into the contract that there will be up to a 50% reduction in carbon emissions over 4 to 8 years.”
The approach Somerset Council has adopted for its highways contracts will not be suitable for all. One year into the contract, however, Octavius’s experience is that this way of working – replacing a blunt instrument with a more precision tool – puts us on a collaborative journey with the client rather than being a passenger. The combination of progressive contractor, progressive client and progressive contracting model is driving collaboration and resulting in efficiencies and transparency which should ultimately benefit communities across the county; and it looks as though others are following suit.
Get in touch
Contact us at tenders.ORCE@octavius.co.uk to learn more.
