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Why the Highways Agency isn't spending


With the expected work still not coming through from the Highways Agency, and its funding levels uncertain, competition for roadwork is fierce. Tom Cullen investigates the implications for contractors

'WHEN THE Highways Agency says jump, without hesitation we say 'how high?', ' says one estimator.

And that's how it works.Most estimators would rather get on the wrong side of a bear with a sore head than the construction industry's biggest client. But biggest, as we learn at an early stage in this business, is not always best.

Now that it's September, contractors are relying on work from the Highways Agency to give them a boost in the winter months.But how is the HA, once construction's favourite client, currently being received?

'At the moment the Highways Agency has one major flaw, ' says Jim Turner, chief economist at the Civil Engineering Contractors Association.'It's not letting enough work.'

A quick glance at what is on offer would lend support to the claim. For the financial period 2004-05, the HA has committed to just 13 schemes in total.Thirteen, unlucky for some - in this case, perhaps, unlucky for all.

Project numbers are low and the competition is up, almost to the point of fever pitch.

'I haven't known battles for road deals to be as hard fought as they are now, ' says one veteran estimator.'It's tooth and nail each time and the effect knocks on to local government schemes too.'

But as far as major faults go, the HA can take comfort in the fact that it cannot be held responsible for this flaw. It is shackled by being exactly what it is - an agency of the government.Mr Turner adds: 'We can't drag the HA over the coals for lack of funding. If it is not budgeted for more projects then the finger of blame needs to be pointed elsewhere.'

The Department for Transport (DfT) can, perhaps, be partially held to account for this but to receive the brunt of the finger-wagging, step forward the Treasury: the HA was not exactly showered with riches in Gordon Brown's spending review in July.The DfT received a 4.5 per cent increase - hardly a bumper rise.

At a recent HA seminar on Early Contractor Involvement, hungry estimators were told by the HA's procurement director Steve Rowsell that, 'In broad terms the settlement for roads will match the level of spending set out in the 10-year plan.' It was a non-committal offer that saw a few heads go down and a groan or two go up.And two months on, little else can be added to that.

A spokesperson for the HA says: 'The strategic figures from the spending review show an increase in the amount of money for transport, which is good news.The detailed implications for the roads spending is currently being assessed and the results of that will be known in the next few months.'

Those pessimistic, or perhaps realistic, contractors are concerned that roads will miss out on even this.One source says: 'There is a lot of talk going around that the DfT is going to sacrifice road expenditure to up the amount it can designate to rail.'

It appears that, although these may not be darkest times yet, contractors are forecasting a storm soon.The spending review 2004 and the Transport White Paper have cast an aura of uncertainty over civil engineering.

Business development managers wait patiently to hear how much roadwork the future holds - even the immediate future - and the ambiguity is spreading.'A lack of certainty of financing for the HA has a negative knock-on effect to civil engineering contractors and in turn the construction industry as a whole, ' explains Mr Turner.'The HA remains a lynchpin to the industry.'

The Agency has introduced two well publicised initiatives in recent years on which it must be assessed: ECI, and the capability assessment toolkit (CAT) scoring system. Its ECI initiative is now the basis under which every major improvement contract is awarded and it appears to be a success.

'It had teething problems, ' says Mr Turner, 'and the early pilots were a little rusty. But ECI is now a healthy and mature method of contracting.'

An estimator also praises the system: 'The earlier we can get involved, the more we can understand our clients needs, 'he says.'We can sit down and explain what can and can't be done to meet the requirements of the project.'

But the picture is not so rosy for everyone. ECI, for all its merits, does have a downside.As one business development manager explains: 'The problem with ECI is that you could well have landed six deals all with a potentially big windfall, but you have to commit to employing a vast amount of people to them all from a very early stage.

'A good deal of time and money will go into the schemes and there is no immediate financial gain. It could be two years before the coffers swell.'

One of the largest ECI packages that's been let to date was the Great Barford and Caxton Common works in Bedfordshire and neighbouring Cambridgeshire.Nuttall eventually took the £79 million deal but not without a painstaking wait.

The project was first advertised in August 2003 and the bidding process lasted eight months.One estimator who tendered the project said: 'If I have one criticism of the HA it's that we're kept in the dark for lengthy periods.Great Barford was real agony - we nicknamed it the Great Bastard bypass!'

Such is the success of ECI on roads, however, that the rail industry is thought to be considering a similar system for contracting work.The first such scheme has been awarded north of the border.The £40 million job in Scotland will open up a commuter route between Stirling and Kincardine via Alloa.Again, Nuttall landed the deal.

The introduction of the second initiative, CAT, was not without controversy. Firms rounded on the HA, claiming that those with the best scores had self assessed to their own interest.

Those with the lower figures bemoaned their own honesty and the fact that they must wait a year to improve their grade.Mr Turner said: 'Once you've got your score there's only so much you can do and this can be extremely aggravating; however, the purpose of capability assessment was to make pre-qualification more consistent and transparent and to be fair that has been achieved. But CAT is still young and it needs to be given more time.'

And time is exactly what it will get.The first major roadworks to be carried out under CAT have been shortlisted.Costain, AWG, Balfour Beatty, Alfred McAlpine and Laing O'Rourke are all in the mix for the £35.1 million M62 junction six improvement. Laing O'Rourke will have been assisted, no doubt, by its score of 62 out of a possible 72. Skanska topped the table with 66 points.

One estimator said of the assessment: 'As a client the Highways Agency could do with getting a few more jobs out rather than delaying spending, extending tender validity deadlines and making us jump through hoops.'

It appears to be open season on public sector clients. Speaking at the Office of Government Commerce conference in August, former Construction Confederation chairman Trevor Walker said: 'A climate of consistency encourages investment and innovation - but it's a message public sector clients fail to grasp. I believe Sir Christopher Kelly's report on Government procurement showed that public sector clients need to improve significantly.

Governed by political masters, they fall prey to short-term, opportunistic, politically focused drivers.'

But sources suggest that, of the bodies to come under the microscope, the Highways Agency is shown as one of the better examples of a public sector client.

As for the future? Well, there are certainly ambitious plans for major new works nationwide.Whether they happen depends on whether the Treasury is prepared to release its grip on the reins.