THIS REPORT RELATES STIRLING COUNCIL TO ITEM ON THE AGENDA
RESOURCES COMMITTEE TECHNICAL SERVICES
22 February 2001 NOT EXEMPT
SCOTTISH EXECUTIVE CONTRACTS FOR MANAGEMENT/MAINTENANCE OF MOTORWAYS AND TRUNK ROADS
AWARD TO PRIVATE SECTOR – IMPLICATIONS FOR STIRLING COUNCIL
1 PURPOSE
1.1 This report updates members on the outcome of the Scottish Executive’s Term Contracts for the Management and Maintenance of Motorways and Trunk Roads, and the implications for Stirling Council as a consequence of the loss of this work.
2 SUMMARY
2.1 The current arrangements for the management and maintenance of the motorways and trunk roads terminate on 31 March 2001.
2.2 Stirling Council, in conjunction with public/private partnerships, submitted tenders to the Scottish Executive for the three replacement term operating contracts, due to commence from 1 April 2001.
2.3 The procurement process and contractual arrangements raised issues and concerns, with particular regard to the tender assessment criteria, Best Value, and future sustainability / viability of the local Roads Service.
2.4 Over the last 18 months significant efforts were made to retain the management and maintenance of trunk roads within the sphere of Local Government. It is believed that over time this approach would deliver Best Value and provide an integrated management service for both the trunk and local road network; which is particularly important to rural communities.
2.5 The local authority consortia, including Caledonian Roads, Lowland Roads and NEULink, lodged legal actions to challenge and seek a judicial review of the procurement process. The court proceedings were unsuccessful.
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2.6 Following an independent review of the tender assessment, the Scottish Executive formally announced on 2 February 2001 that the term contracts are awarded as follows:-
- North East Unit: BEAR Scotland Ltd - North West Unit: BEAR Scotland Ltd - South East Unit: Amey Highways Ltd
2.7 Loss of these term contracts will result in a reduction of income to the Council of approximately £2m per annum, with a consequential downsizing of the Roads Service operation. This will turn the Roads DLO from a profit to a loss making organisation over the next financial year.
2.8 Approximately 28 full time equivalent posts will be subject to transfer or redundancy.
2.9 The impact on Stirling Council will be reduced capability to undertake management and operational activities on its own roads. There will be a weakening of democratic control and fragmentation of the road network, requiring increased co-ordination effort between Stirling Council, the Scottish Executive, Central Scotland Police, the new Operating Companies and others.
2.10 The loss of motorway and trunk road work is likely to result in increased costs for delivering local road services, due to loss of economies of scale, and the potential loss of a market regulator in the form of the Roads DLO.
2.11 The outcome will have a considerable bearing on the Council’s Best Value delivery of its Roads Services.
3 RECOMMENDATION(S)
3.1 That the Committee agree to:-
3.1.1 Note the contents of the report and the implications for this Authority;
3.1.2 Endorse the remit of the Director of Technical Services to fully consider the impact of losing the motorway and trunk road work and to take all necessary actions to ensure continuous effective service delivery on the Council’s local road network beyond 31 March 2001;
3.1.3 Mandate the Director of Technical Services, in consultation with other Services and bodies, to explore and assess options for future roads and transportation service delivery and to consider the wider implications for Technical Services;
3.1.4 Continue to receive further reports on progress and outcomes of the above. -3-
4 CONSIDERATIONS
4.1 Impact on Stirling Council of Losing Scottish Executive Term Contracts
4.1.1 The implications to the Council of losing the term contracts for management and maintenance of the motorways and trunk roads have been set out in previous reports to the Resources Committee, and are fully explained in the following paragraphs.
4.2 People
4.2.1 During each of the past three financial years approximately 140 employees, equating to 8 staff FTE and 20 manual FTE posts within the Roads Service, have been engaged on motorway and trunk road management functions and maintenance operations.
For each of the existing motorway and trunk road units, the approximate FTEs are as follows:-
Forth Premium Unit: Staff Employees = 5 FTE Manual Employees = 8 FTE
Tay Premium Unit Staff Employees = 1 FTE Manual Employees = 1 FTE
Central Scotland Trunk Road Unit: Staff Employees = 2 FTE Manual Employees = 11 FTE
This is detailed in Appendix 1 of this report.
4.2.2 Therefore, approximately 28 full time equivalent posts will be subject to transfer or redundancy.
4.2.3 The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 1991, are deemed to apply to the term contracts.
4.2.4 The integrated approach to road maintenance by Stirling Council means that many employees spend part of their time engaged on motorway and trunk road work, but not sufficient to qualify for transfer to the successful Operating Companies under TUPE. Generally, TUPE provisions only apply to employees for whom at least 40% of their work is clearly identified to the transferred undertaking.
4.2.5 The Service has started consultations with employees and Trade Unions. Negotiations with the succeeding Operating Companies, BEAR Scotland Ltd and Amey Highways Ltd, have also began to ensure that the provisions of the TUPE Regulations are adhered to.
4.2.6 All employees who have been identified as qualifying for transfer to the succeeding Operating Companies have been notified and their details passed to their prospective employers.
4.2.7 In the North West Unit, it is the Council’s view that the following posts would transfer to BEAR Scotland Ltd with effect from 1 April 2001:- -4-
Post Location No.
Supervisor Callander 1 Storeman Callander 1 Foreman/Specialist Rdman Callander 1 Foreman/Skilled Roadman Callander 1 Driver/Plant Operator Callander 2 Heavy Driver/Plant Operator Callander 1 Storeman Killin 1 Foreman/Skilled Roadman Killin 1 Driver/Plant Operator Killin 1 Driver/Roadman Killin 1 Roadman/Plant Operator Killin 1 General Roadman Killin 1 Total 13
Similarly, in the South East Unit, the following posts would transfer to Amey Highways Ltd:-
Post Location No.
Consortia Co-ordinator Springkerse 1 Area Officer Springkerse 1 Heavy Driver/Plant Operator Springkerse 1 Driver/Plant Operator Springkerse 1 Roadman/Driver Springkerse 1 General Roadman Springkerse 1 Temporary Roadman Springkerse 2 Total 8
There are no employees who are ‘wholly or mainly’ engaged on work within the existing Tay Premium Unit and would qualify for transfer in relation to the North East Unit.
4.2.8 The above employees, who have been identified for transfer under TUPE, possess a considerable amount of road maintenance experience and local knowledge, which will leave this Authority. The loss to the organisation of these highly trained and experienced operatives should not be underestimated.
4.2.9 After the number of employee transfers are finalised, the number and cost of potential redundancies can be evaluated. All possible steps will be taken to mitigate against compulsory redundancies, but these may have to be considered by the Council. -5-
4.2.10 The cost of redundancy payments depends on the number of employees identified, their age, length of service and salary / wage rate. An outline estimate of costs has been calculated (which does not take account of any potential TUPE transfers), as follows:-
8 Staff Employees, earning average £20K - £383.56 per week, with maximum service entitlement would be due 66 weeks pay amounting to £25,315 each = Total £209k.
20 Manual Employees, earning average £193.05 per week, with maximum service entitlement would be due 66 weeks pay amounting to £12,741.96 each = Total £255k.
This equates to a total cost of approximately £464k.
This figure does not include any pension enhancements which the Council may agree to pay for any employee over the age of 50. This enhancement takes account of age, superannuable service, additional voluntary contribution and superannuable pay. This cost would require to be borne by the Council for the time the pension is payable.
4.2.11 The staffing structure within the Roads Service shall require amendment to reflect the reduction in posts and reduced workload. This shall be undertaken prior to the start of next financial year.
4.3 Financial Consequences
4.3.1 Loss of up to £2m income per annum to Roads Service.
4.3.2 Council’s general fund will reduce by a further £100k per annum due to loss of fee income associated with professional services. This will result in an overall annual deficit of approximately £250k, which has become extremely difficult to manage. This cannot be addressed by a further reduction in staff, since only approximately 2 FTE posts are directly associated with the generation of fee income relating to motorway and trunk road work.
4.3.3 There is no direct link between fee income and cost of staff salaries.
4.3.4 Loss of revenue to Council through asset rental and rates for Killin and Balfron Roads Depots, since rural operations are to be concentrated at Callander.
4.3.5 Cost of terminating vehicle leases where surplus to requirements (e.g. gritter with 3 years remaining lease equivalent to £10,600 per annum, cost of termination in excess of £30k).
Type and numbers of surplus vehicles and plant still to be identified. -6-
4.3.6 Inability to recover overheads and achieve statutory rate of return due to reduction in turnover.
4.3.7 In-direct effects on other DLO / DSO support services, including Fleet Management and Maintenance, Purchasing, etc., threatening sustainability of Technical Services as a whole entity.
4.3.8 Implications for Council’s Central Support Services.
4.3.9 Reduced ability to spend Council’s own budgets due to decreased capacity and capability of in-house organisation.
4.3.10 Loss of income from the Scottish Executive is further compound by the proposal to reduce road maintenance capital expenditure and non- inflationary increase of the revenue budget.
4.3.11 The Roads DLO is currently forecasting a year end surplus of £68k for 2000 / 01, and will encounter major difficulties in maintaining any level of profitability next financial year.
4.4 Reduction of Assets
4.4.1 Killin Roads Depot would not be financially viable without trunk road maintenance work and would be closed.
4.4.2 Due to the reduced turnover of the Roads DLO, all future operations would be based at Springkerse and Callander, with the closure of Balfron Roads Depot.
4.4.3 Loss of local public amenities at Killin and Balfron, with reduced ability to effectively serve local areas.
4.4.4 Vehicles, plant and equipment would be reduced to compensate for under utilisation
4.5 Impact on Service Delivery
4.5.1 Decreased ability to discharge statutory duties and functions of local Roads Authority.
4.5.2 Adversely affect capability to directly deliver core services, including Winter Maintenance and Emergency Responses (e.g. flooding and road traffic accidents) on the Council’s local road network.
The inevitable reduction of in-house resources will result in an inability to sustain a critical mass of sufficient capacity to effectively fulfill this responsive role.
4.5.3 Reduction of in-house skills base, particularly with regard to safety fencing and traffic management activities, and loss of local knowledge and experience through loss or transfer of employees. -7-
4.5.4 Ineffectiveness in operating local roads separately from trunk roads.
4.5.5 Increased workload for Stirling Council employees as public continue to contact Council with enquiries and complaints which would require to be re-directed to Operating Companies.
4.5.6 Increased co-ordination effort at interface of Council’s own road network with trunk roads, with potential for greater conflict between Council, Operating Companies and Scottish Executive.
4.5.7 Increased co-ordination difficulties with different service providers, particularly for Central Scotland Police.
4.5.8 Alternative service delivery mechanisms for management and maintenance of Council’s own road network would be required to replace the existing Road Maintenance Term Contract (which has been extended to 31 March 2002), and address Best Value.
4.6 Democratic Issues
4.6.1 Impact of job losses in local areas, particular rural communities.
4.6.2 Reduced local democracy and influence
Weakening of community planning process
Centralised decision making with reduced local input (e.g. National Park)
This will particularly affect the Stirling Highland Area served by the A82, A84, A85, and directly impact on communities such as Doune, Callander, Strathyre, and Tyndrum.
4.6.3 Loss of “one-door” service to local communities.
4.6.4 Public confusion over responsibilities of different organisations.
4.6.5 Conflict with integrated transportation approach for rural communities where roads are essential for economic and social activity.
4.7 Review of Service Delivery
4.7.1 In view of the serious impact to the delivery and sustainability of the management and maintenance of the Council’s road network. The Director of Technical Services is currently undertaking a full assessment of the financial, resource and asset implications, with a view to determining the future size, capability and direction of the Roads Service -8-
4.8 Future Arrangements for Delivery of Council’s Road Maintenance Service
4.8.1 The priority in the short term is to ensure continuity of service to manage and maintain the public roads which are within the statutory responsibility of Stirling Council.
4.8.2 There is an urgent need to explore and consider all suitable options for the development of sustainable, effective, flexible and innovative roads and transportation related services, to meet the future needs of this Authority.
4.8.3 This could include assessing the potential of forming partnerships, joint ventures or preferred supplier / sub-contracting arrangements with other service providers from both the public and private sector.
4.8.4 Technical Services will undertake to investigate all solutions and report back to Members the advantages, disadvantages and consequences of the various mechanisms available to the Council, in terms of service delivery, employees, financial and asset management.
4.8.5 If approached by either BEAR Scotland or Amey Highways, Stirling Council may consider entering into sub-contracting arrangements with these Operating Companies for certain operational activities on the motorways and trunk roads, provided the rates and prices for carrying out the work are acceptable and there is no risk to the Council.
4.8.6 The Authority may also consider leasing assets to the operating companies, including depots, should this be beneficial to the Council and generate income.
5 POLICY IMPLICATIONS
5.1 Policy implications in relation to Sustainability, Best Value and Social Inclusion are as described in previous reports to the Resources Committee.
5.2 The democratic influence of those living close to or affected by the trunk roads, particularly the A82, A84 and A85 will be reduced due to the loss of the term contracts, with a consequential weakening of the Community Planning process.
6 CONSULTATIONS
6.1 The full impact of losing the term contracts is currently being assessed and discussed with Council Members, Management Team, Employees, Trade Unions and other local authorities. -9-
7 RESOURCE IMPLICATIONS
7.1 Personnel
7.1.1 As previously reported, since the Council will not have any future involvement in the management / maintenance of the motorways and trunk roads, approximately 8 No. APT&C staff and 20 No. manual posts will be lost through redundancy or subject to TUPE transfer to the successful Operation Companies.
7.2 Financial
7.2.1 Technical Services derives a significant element of turnover from work carried out under current motorway and trunk road maintenance arrangements. As previously reported, the loss of the replacement term contracts for this work, will result in an overall reduction of annual income to the Roads Service in excess of £2M.
7.2.2 This loss of income to the Council will result in a substantial reduction in generated DLO surpluses, as well as contributions to Service and corporate overheads and support charges. This shall inevitably lead to an increase in charges funded from existing restricted budgets to recover fixed costs, resulting in future service reductions.
7.2.3 Redundancies, including associated costs, will have to be paid for by the Council where TUPE cannot be shown to apply due to integrated delivery of the Roads Service.
8 BACKGROUND PAPERS
8.1 Scottish Office Development Department – National Roads Directorate Consultation Paper (April 1999): “The Road Ahead – A Review of the Management and Maintenance Arrangements for Scottish Trunk Roads”.
8.2 Report to Environmental Quality Committee of 10 September 1998 : Review of Stirling Council’s Commitment to the Central Scotland All-Purpose Unit Consortia Contract.
8.3 Report to Environmental Quality Committee of 4 February 1999 : Loss of Central Scotland All Purpose Unit Contract – Impact on Council
8.4 Report to Resources Committee of 24 February 2000 : Re-tendering of Scottish Executive Premium Unit Contracts.
8.5 Report to Resources Committee of 20 April 2000 : Extension of Current Road Maintenance Term Contract.
8.6 Report to Resources Committee of 15 June 2000 : Scottish Executive Term Contracts for Management / Maintenance of Motorways and Trunk Roads.
8.7 Report to Resources Committee of 15 June 2000 : Technical Services DLO/DSO Near Final Outturn 1999-2000. -10-
8.8 Information Bulletin – Update Paper : Scottish Executive Term Contracts for Management / Maintenance of Motorways and Trunk Roads.
8.9 Report to Resources Committee of 23 November 2000 : Scottish Executive Term Contracts for Management / Maintenance of Motorways and Trunk Roads – Update Paper
8.10 Report to Environmental Quality Committee of 8 February 2001 : Scottish Executive Term Contracts for Management / Maintenance of Motorways and Trunk Roads – Briefing Paper
8.11 Report to Stirling Council of 15 February 2001 : Scottish Executive Term Contracts for Management / Maintenance of Motorways and Trunk Roads – Briefing Paper
8.12 Report to Resources Committee of 22 February 2001 : Technical Services DLO / DSO Financial Monitoring – Period 9
9 APPENDICES
Appendix 1 Summary of Stirling Council – Technical Services’ Employees engaged on Management and Maintenance of Motorways and Trunk Roads (on behalf of Scottish Executive)
Author(s) Name Designation Tel No/Extension
Kevin Robertson Project and Audit Manager, 442872 Technical Services
Andrew Cassells Head of Roads & Grounds 442664
Approved by Name Designation Signature
Arthur Nicholls Director of Technical Services
Date 13 February, 2001 Reference RS220201ScotExec.doc -11-
APPENDIX 1
Summary of Stirling Council – Technical Services’ Employees engaged on Management and Maintenance of Trunk Roads and Motorways (on behalf of Scottish Executive) 1998/1999 1999/2000 2000/2001 1. Forth Premium Unit (Term Operating Contract):
Staff Employees Total No. Engaged = 37 38 30 No. Engaged for 40% or more time = 1 4 2
Full Time Equivalents Engaged = 4.3 5.8 3.2
Manual Employees Total No. Engaged = 73 75 70
No. Engaged for 40% or more time = 0 2 6
Full Time Equivalents Engaged = 6.5 8.3 7.6
2. Tay Premium Unit (Term Operating Contract):
Staff Employees Total No. Engaged = 22 23 16 No. Engaged for 40% or more time = 0 0 0
Full Time Equivalents Engaged = 0.4 0.5 1.1
Manual Employees Total No. Engaged = 54 45 51 No. Engaged 40% or more time = 0 0 0
Full Time Equivalents Engaged = 1.7 0.8 1.0
3. Central Scotland Trunk Road Unit (Local Authority Agency Agreement):
Staff Employees Total No. Engaged = 34 34 22 No. Engaged for 40% or more time = 0 0 2
Full Time Equivalents Engaged = 2.8 1.8 2.6
Manual Employees Total No. Engaged = 66 67 80 No. Engaged for 40% or more time = 10 12 12
Full Time Equivalents Engaged = 11.2 10.3 10.9
4. All Trunk Road Units Combined (i.e. Term Operating Contracts and Local Authority Agency Agreement):
Staff Employees Total No. Engaged = 49 49 36 No. Engaged for 40% or more time = 3 5 5
Full Tim Equivalents Engaged = 7.5 8.1 6.9
Manual Employees Total No. Engaged = 92 89 103 No. Engaged for 40% or more time = 15 15 20
Full Time Equivalents Engaged = 19.4 19.4 19.5