Highways Agency chief executive Graham Dalton has told MPs he anticipates more competition for its Managing Agent Contractor schemes during the recession.
Mr Dalton told the Public Accounts Select Committee this week that it was difficult to explain the shrinking supplier base for MAC contracts highlighted by a National Audit Office report last month.
But he said decreasing opportunities for contractors elsewhere would lead to a higher standard of bids for highways work.
Mr Dalton said: “My hypothesis is that the infrastructure market in 2007/8 remained a seller’s market.
Where commercial had dropped off, infrastructure kept going.
“That has changed and that is seen by bidders as changing in the next two or three years. I think they had not been trying as hard to meet quality thresholds – that wasn’t as business-critical.”
He added that the preliminary figures for MAC contracts currently being procured – Areas 1, 13 and 14 – were showing a higher success rate of contractors meeting the Agency’s quality thresholds.
The NAO report cited an increasing number of contractors failing these quality tests as a barrier to the Agency gaining value for money from MAC contracts.
The report identified an 11 per cent above-inflation increase in the agency’s routine maintenance costs, and said planned maintenance had risen by 5.5 per cent above inflation since 2002/3.
It estimated a 70 per cent increase in road surfacing costs since 2002, while the Highways Agency said the figure stood at 17 per cent since 2004/5.
The NAO said it was unable to validate this and suggested that the figure was likely to lie between the two estimates.
The committee asked Mr Dalton, as well as the Agency’s finance director Stephen Dauncey and network operations director Derek Turner, whether they knew how much they were spending.
Mr Dalton said: “Yes we do. We know job by job what we’re doing. What we do not have is a metric that says pounds per square metre of roads renewal.”
He said that road surfacing was recorded in square metres but other jobs, such as lighting, were not. The committee also questioned the Agency’s representatives about the costs of thin surface material, which varied between £60 and £100 per tonne.
Mr Dalton said that the cost of materials was dependent on haulage distances, which could raise the prices by up to £40 per tonne. But he added: “We should have a handle on this. We need to do more.”
He said that changes to contracts in 2006, which require contractors to disclose more than just tendered rates, would make it easier to monitor details of contractors’ suppliers to keep costs down.
Mr Dalton added that increasing competition would be the best way of getting contractors to lower their costs.