U.S. transportation agencies are facing unprecedented challenges of tremendous proportions.
On the cusp of a historic infrastructure crisis, the Federal Highway Administration estimates that $170 billion in capital investment is needed on an annual basis to significantly improve the conditions and performance of America’s road network. The preservation of America’s roadway network, compounded by new capacity needs, has put additional pressure on agencies across the country that are already resource-constrained. Large numbers of staff are nearing retirement age, creating gaps in leadership and institutional knowledge, while new employees are more difficult to find and retain, particularly craft employees who have significant opportunities supporting private companies focused on oil and gas exploration.
There’s no simple solution to the infrastructure challenge America is facing, but necessity is the mother of invention. Lessons can be learned from our colleagues across the ocean on how to partner with the private sector to manage costs, drive performance-based improvement and maximize public investment.
It’s all on them
The 15,260-mile road network in the United Kingdom (U.K.) is a complex mix of roads supporting the mobility of more than 63 million people. Across the nation, the responsibility for roadway provision and maintenance is divided among a number of highway authorities, similar to the state departments of transportation in the U.S., as well as local/community authorities.
The U.K. Highways Agency, which is an executive agency of the Department for Transport, is responsible for the construction and maintenance needs of England’s road network. The country was facing similar challenges 13 years ago to what the U.S. is grappling with right now. These challenges included budget constraints (i.e., doing more with less); not having defined levels of service such as journey-time reliability; and recognizing the impact of issues within the construction and maintenance industries such as supplier fragmentation and safety performance.
Motivated to rethink construction and maintenance, the Highways Agency sought a new service vision focusing on partnership, quality, value and performance. With these goals in mind, the agency shifted to a fully outsourced procurement model in 2001.
Centered on multiyear, performance-based contracts, private-sector managing agent contractors are awarded sections of the network, which is divided into 14 geographic areas. The contractors are responsible for all routine maintenance. They also self-deliver and/or support the design and construction of major new highway projects, which are attained through various framework contracts and individual contracts, including the use of private finance options where suitable.
To better understand the benefits of this model and how they might translate to the U.S., let’s take a closer look at the A-one+ joint venture, one of the largest suppliers of maintenance services to the Highways Agency, managing 21% of the strategic road network. A-one+ is a joint venture among three companies: CH2M Hill, Costain and Colas.
A-one+ delivers fully integrated highway management and maintenance services under a performance-based contract, which is focused on “safe roads, reliable journeys and informed travelers.” The contract between the Highways Agency and A-one+ is governed by a clear specification of desired outcomes, i.e., performance measurements, at a competitive lump-sum price.
Also, in contrast to traditional maintenance models, which quantify elements such as the numbers of potholes filled, acres of grass mowed or number of miles snowplowed, the Highways Agency takes a more holistic view of performance management, focusing on outcomes such as network availability, defects made safe, incident clearance, QMS performance, severe-weather-event mitigation and reduction in waste to landfill.
Working as a single organization with centralized services, A-one+ assumes all administrative responsibilities associated with the work, such as fleet maintenance, quality and performance management, insurance, health and safety and information technology.
Some of A-one+’s key responsibilities include:
- Performing routine and cyclic maintenance;
- Managing severe-weather events, including keeping highways free of snow and ice;
- Supporting fire and police services to clear accidents, opening roads as soon as possible after accidents occur;
- Inspecting all network assets (e.g., highways, bridges, drainage and barriers) to make sure they are safe, and performing emergency repairs where they are not safe;
- Designing and constructing asset renewal and improvement projects;
- Managing highway-road-space occupancy on behalf of the Highways Agency to ensure road users are not unnecessarily delayed by road projects;
- Processing public claims for any vehicle damage caused by highway conditions; and
- Recovering highway repair costs from motorists where they damage highway assets through their involvement in a traffic accident.
Risk and reward is where the proverbial rubber meets the road for performance-based contracting. The A-one+ team takes on the risk of cost under-recovery if its original pricing proves to be inaccurate. The Highways Agency is able to realize lower overall costs due to the competitive nature of a lump-sum procurement, and the model ensures better cost predictability for the agency. Additionally, A-one+ assumes the risk associated with the guarantee of performance standards. The Highways Agency gathers data and uses a quality-management point system to levy penalties should A-one+ not meet performance standards. Overall, this transfer of risk meets the agency’s goals for better maintenance and construction services as well as heightened accountability.
With this assumed risk, A-one+ also has the opportunity to reap reward. Performance-based contracts include mechanisms so a contractor can propose variations in the way the service is delivered to achieve additional efficiencies. If the Highways Agency agrees to a revised method of working, the contract payment schedule is altered, and the cost savings are split between the two parties, providing an incentive for A-one+ to meet its performance standards in a smarter, more efficient manner.
Many innovations have flourished in the partnership, helping the Highways Agency better achieve its desired objectives. The health and safety of road users and A-one+ staff are the top priority for the agency and have proved to be a rich area for innovations. During the course of the contract, the A-one+ team has generated many innovations to enhance safety performance including:
- Intellicone: An easy-to-deploy work-zone safety system for road maintenance, construction and utility sectors enables traffic-management equipment to be turned into an electronic safety perimeter. If the work zone is breached, sensors are activated and alerts are sent to notify work crews;
- Overhead cable markers: A campaign titled, “Look Up, Look Out!” was designed to highlight the risk from overhead electric power lines. A-one+ developed overhead-cable marker posts and cone sleeves that have now been adopted as a national standard across the U.K.; and
- Retriever motorcycle: The retriever motorcycle recovery unit removes stranded vehicles on roads that do not have a hard shoulder, reducing delays and traffic congestion. The innovation won the 2009 Chartered Institution of Highways and Transportation Innovation Award.
With this strong focus on continuous improvement, A-one+ has garnered 27 awards since 2008 for innovations relating to cost savings and safety. Other notable achievements have been realized, such as improved journey-time reliability.
Trying to be more private
The heart of the A-one+ model is partnership. The incentivized, outcome-based approach drives private industry to take on the mindset of an owner, driving better levels of service and innovation. States and municipalities in North America—in locations such as Alaska, Colorado, Florida, Georgia, North Carolina, Oklahoma, Oregon and Texas—are implementing partnership models. They are engaging private companies in performance contracts to manage their road networks, often bringing existing staff into the contractor organization.
Similar to the U.K. model, these partnerships detail service levels for roadway maintenance, traffic management and asset management and include provisions for continuous improvement. Governing these service contracts with desired performance standards—instead of prescriptive tasks or staffing levels—allows for private-sector innovation to bring its strengths to public agencies and to guarantee the performance of the road network.
Case in point: With the goal of increasing the level of focus and service for its citizens, city leaders in Centennial, Colo., selected a private partner to deliver comprehensive municipal services. Under a public-private partnership agreement, Centennial’s public works department delivers a complete range of services, including traffic engineering and operations, permit processing, inspections, administrative services and street and roadside maintenance, including snow removal. Much like the Highways Agency partnership with A-one+, the successful Centennial model has won innovation awards, has saved the city money and has increased citizen satisfaction with a 75% approval rating. In its latest contract, Centennial asked for increased performance standards for responding to citizen requests—an item of importance to residents and city leaders alike.
Innovation and service are paramount to Centennial’s partnership. The contractor devised a method to optimize snowplow routes by using mathematical algorithms and computer modeling to direct snowplows through Centennial’s street network in a more efficient manner, reducing the time involved by 40% and allowing an additional 93 miles of streets to be plowed at no extra cost to the city. The innovation earned a 2012 Institute of Transportation Engineers Transportation Achievement Award for Operations.
As states and municipalities plan for and manage the full continuum of roadway rehabilitation, preservation and expansion, performance-based contracting allows both parties to bring together the best capabilities of public and private agencies, incentivizing each of them to achieve optimal outcomes for the traveling public.
You can learn more about how to structure and pilot performance contracting by visiting the National Council for Public-Private Partnerships website (www.ncppp.org). The nonprofit organization provides questions to help you determine if you are a good candidate for performance-based contracting:
- Does your public sector and your governing body have a culture to support a partnership model?;
- Are your maintenance and construction activities well-planned and managed?;
- Where can value for your money be improved?;
- Can organizational efficiency be improved?;
- Are “worst-first” projects always at the top of your “to-do” list?;
- Are budget overruns a norm for improvement projects?;
- Is an adversarial contracting environment costing you money and time?; and
- Are you making good use of data for planning and management, and do you have sufficient data and the right kind? R&B