1 THE ISSUE

1.1 Tenders were invited for the Highway Maintenance and Improvement Works Contract which commences on 1 October 2008. Two companies withdrew from the tender process and five tenders were received and have been evaluated. A decision must be made to accept the tender which provides best value to the Council.

2 RECOMMENDATION

The Cabinet member is asked to agree that:

2.1 The tender of Contractor A be accepted.

2.2 The Council awards the Highway Maintenance and Improvement Works Contract (including the provision of winter gritting fleet) to Contractor A for a period of five years and six months with options to extend for up to four years (as stated in the Notice placed in the Official Journal of the European Union and in the Contract).

2.3 The Cabinet Member for Resources and the Cabinet Member for Customer Services are asked to agree virements

(1) £250K from `Resources other miscellaneous budgets' (1057) to Highways Network Maintenance (1006), as provided for in the 2008/09 budget and financial plan.

(2) £44K to Transport & Fleet management (1007) & £7K to Finance for Insurance(1040), from Highways Network Maintenance (1006) representing non-recoverable overhead from outsourced gritting arrangement.

3 FINANCIAL IMPLICATIONS

3.1 The companies tendering were required to complete a Schedule of Rates for a range of work items and a comparative analysis against price and quality made. Contractor A has tendered the lowest rates and scored highest for quality. Affordability of the tendered rates has been assessed against relevant, equivalent and most recent activity.

3.2 The company's tender strategy would appear to have been to recover most of their overhead cost on highways maintenance and winter maintenance and to marginally cost the improvement works. This has been reflected in higher rates for maintenance items and lower rates for improvement works.

3.3 The Council's 2008/09 budget and financial plan acknowledged that the Network Maintenance contract would be changing in 2008/09. £250K was allocated within the 2008/09 budget but held corporately as part of "other miscellaneous budgets" until clarification of contract prices. A virement decision to transfer this to the Network Maintenance Budget is required, and included in the recommended resolutions.

3.4 The base budget was then set on a consistent basis to 2007/08 with an RPI inflationary price uplift only. Contract specific price increases in the present contract were not claimed from the corporate inflation provision. However, due to oil prices in particular these have been ahead of RPI.

3.5 Budget Summary - 2008/09

		£000
	Budget	2309
	Estimated cost	2618
	Net Budget shortfall	309

3.6 This variance this year is attributed to the following factors:-

		£000
	Increase in specific prices on present contract (ie above RPI)	103
	Increase from cost avoidance on capital replacements	105
	Procurement cost (one-off)	100
	Effects of new tenders prices (discounting specific prices above)	1
	Net Budget shortfall	309

3.7 The funding gap will be addressed in the following manner :-

(1) Request for virement of the sum (£250k) set aside corporately in `other miscellaneous budgets' recommended (2.3.1).

(2) Service re-prioritisation: An exercise will be undertaken to identify minimum, essential items of highways maintenance, and the extent that discretionary, piecemeal works will be reduced in-year to absorb pressures (£59K). This will result in slippage of some work to future years.

3.8 Maintenance budgets include costs relating to provision of winter maintenance "gritter" vehicles, both direct running cost and indirect costs recovery of fleet management & insurance overhead. In aligning to the new contract it has been decided that vehicle provision will be undertaken by the contractor as this is a better apportionment of operational risk. Higher costs are included in costs above (1.5/1.6), reflecting no existing replacement budgets, and virements proposed are necessary for neutral impact on other Council budgets

3.9 On-going annual impact of the contract for 2009/08 requires additional funding of £285K (including £59K slippage above and £208K of that identified above and assumed continued inflationary pressures above RPI). Further work is being undertaken within the service to report the condition of the road network and its long term maintenance requirements, as identified in the Transport Asset Management Plan (TAMP). In this context, the service will bring a planned approach, assessing the adequacy of current budget allocation, which currently only passports the DfT LTP formula allocations, to be considered through the Council's capital allocation mechanism, risk management and service planning.

3.10 The contractor has agreed, as part of the quality assessment within the tendering process, to actively work with Council officers to review processes, materials used, etc. to reduce costs wherever possible, to achieve service and Gershon savings requirements.

3.11 The work will be awarded under Institute of Civil Engineering (ICE) 7^th Term Contract conditions. The contract will be subject to an annual indexation for adjusting the Contract Price in accordance with the Baxter index (a national recognised index for civil engineering works).

4 CORPORATE PRIORITIES

4.1 Addressing the causes and effects of Climate Change

The contractor will have targets to contribute to the Council's objectives:

- to recycle waste and avoid waste being taken to landfill

- to reduce carbon emissions from vehicles and plant

4.2 Improving transport and the public realm

The contractor will deliver highway services such as:

- emergency maintenance e.g. pot holes

- winter maintenance e.g. salting, snow clearance

- improvement schemes e.g. accident reduction schemes

5 THE REPORT

5.1 The Council is responsible for the highways maintenance and integrated transport scheme function. Having previously outsourced front-line highway maintenance, the Council currently has a contract with Ringway Infrastructure Service Limited which expires on 30 September 2008. Some small scale improvement works have been carried out under this contract however the majority of Integrated Transport Board (ITB) schemes have been procured by spot tenders over recent years. The decision was made at the outset of this procurement process to invite tenders for a contract which would enable ITB schemes, of up to £0.25m, to be carried out (subject to satisfactory performance by the contractor).

5.2 North Somerset Council also have a contract with Ringway Infrastructure Service Limited which expires at the end of March 2009. The two authorities agreed to work together to reduce the costs of the procurement process. Each authority will have a separate contract with a contractor which will provide best value to the particular authority. If the same contractor is appointed by both authorities there is the potential for savings.

5.3 Mott MacDonald, Civil Engineering consultants, were engaged using an existing framework contract, to provide advice and assistance with the procurement process.

5.4 The procurement process meets the requirements of the EU procurement regulations, as well as the Authority's contract standing orders and Project Management methodology.

5.5 A two stage procurement process was used. Companies expressing an interest in the contract were required to complete a Pre-Qualification Questionnaire (PQQ) which was evaluated and scored.

5.6 As a result of the PQQ evaluation Matthew Smith, Divisional Director Environmental Services made the decision, on 4.4.2008, to short list seven of the companies who were invited to tender.

5.7 The invitation to tender was issued on Friday 25 April 2008 with a tender return date of Monday 9 June 2008. Two of the companies then withdrew from the tender process for their own reasons (e.g. workload).

5.8 Following requests from tenderers for an extension of the tender period an extension of one week was granted and tenders were returned on Monday 16 June 2008. Five tenders were received.

5.9 The tenders have been evaluated on a 60% price - 40% quality basis. There was a robust process in place for the evaluation (which included external challenge being provided by Mott MacDonald and Roger Webb, Senior Engineer (Contracts) Highways and Transportation, South Gloucestershire Council).

5.10 Appropriate records have been maintained of the procurement process including evaluation.

5.11 After the decision has been made, apart from internal process, it will be necessary to wait 10 days until the contract is awarded (the EU standstill period).

6 RISK MANAGEMENT

6.1 The report author and Cabinet member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance.

A risk log was set out in the Project Brief (Initiation Document) and has been updated to reflect the key risks around the decision making process and the `EU standstill period'. The commissioning period is important for a major contract and every effort is being made to ensure that it is not reduced.

A new contract needs to be in place by 1 October 2008

7 EQUALITIES

7.1 The Pre-Qualification Process included an Equal Opportunities questionnaire which formed part of the evaluation of potential contractors. All contractors invited to tender passed the threshold test.

8 RATIONALE

8.1 The analysis of the tenders submitted has shown that Contractor A offers the Council best value in terms of price and quality of service.

9 OTHER OPTIONS CONSIDERED

9.1 Four other tenders were evaluated but these contractors did not score so highly in the evaluation process.

10 CONSULTATION

10.1 Cabinet members; Section 151 Finance Officer; Chief Executive; Monitoring Officer, Director of Customer Services

10.2 A Project Board was established for this procurement project. Members included the Corporate and Community Law Manager. A Working Group was established which included representatives from Audit, Legal, Highways Maintenance, Design Group, Traffic and Safety. The Transport Board has been consulted throughout the process.

10.3 Guidance and advice was taken from specialist officers e.g. legal, audit over key issues during the procurement process.

10.4 Potential tenderers were consulted on the content, packaging and process of the procurement exercise at informal interviews prior to the commencement of the formal procurement process.

10.5 Companies invited to tender attended a presentation approx two weeks after the Invitation to Tender had been issued. The presentation was designed to help the contractors understand the relevant corporate priorities of the Council, the scope of the contract and the structure of the Council i.e. the parts relevant to the contract.

11 ISSUES TO CONSIDER IN REACHING THE DECISION

11.1 Customer Focus; Sustainability; Property; Corporate; Health & Safety; Other Legal Considerations

12 ADVICE SOUGHT

12.1 The Council's Monitoring Officer (Council Solicitor) and Section 151 Officer (Strategic Director - Support Services) have had the opportunity to input to this report and have cleared it for publication.