PAPER E
Committee : AUDIT COMMITTEE
Date : 17 NOVEMBER
2005
Title : GATEWAY REVIEW – PFI HIGHWAY ASSET
MANAGEMENT
REPORT OF THE COMPLIANCE
AND RISK MANAGER
1.
The
purpose of this report is to bring to the attention of the Audit Committee, the
results of a ‘gateway’ review of the proposed Highways PFI project. This will
give the Committee the opportunity to review progress of the project.
BACKGROUND
2.
The Council’s proposed
PFI scheme, which is intended to address the long-standing and acknowledged
poor condition of Island roads, represents by any standards, one of the
Council’s most significant and strategic projects. As such there should be a
commensurate degree of scrutiny of its progress, and one of the Council’s
processes for undertaking such scrutiny is the requirement for a ‘gateway’
review.
3.
Gateway reviews for the
Council’s most significant projects are to be conducted by external assessors.
This provides the necessary independence and also calls upon a team of experts
who have the required background and experience of large projects. This was in
fact the first gateway review undertaken by external assessors since the
process was introduced, and for this one the ‘4Ps’ organisation was asked to
undertake the review (the purpose of the review – Gateway 0 – strategic
assessment is shown as Appendix A in
the attached report). The Review report itself is attached for members’
consideration.
4.
In the event that the
project proceeds (ie that it gains government approval) it is likely that its
progress will be tracked by further ‘gateways’ at appropriate intervals.
OUTCOME OF CONSULTATIONS
5.
There has been limited
consultation over the outcome of the Gateway report itself but this is
appropriate as the report and its recommended actions are for the Project
Manager and Project Sponsor to action.
FINANCIAL IMPLICATIONS
6.
There are no financial
implications which stem from the report per se. Clearly the size and
significance of any PFI has enormous financial implications.
LEGAL IMPLICATIONS
7.
There are no legal
implications arising from the report. The report is the outcome of a review
which the Council has ‘self-selected’. The Council is at liberty to decide
whether it accepts the findings of the review and whether to implement its
recommendations.
OPTIONS
8.
The Committee may wish to
clarify the findings of the review, to seek assurance that issues raised are
being addressed and that satisfactory progress is being made to deliver the
project.
RECOMMENDATIONS
9.
None, other than to use the opportunity which the gateway report
offers to scrutinise the project’s progress. |
BACKGROUND PAPERS
Office of Government Commerce – Gateway Process
ADDITIONAL INFORMATION
None
APPENDICES ATTACHED
Appendix 1 - 4Ps Gateway Review 0 – Strategic
Assessment (4Ps – July 2005)
Contact Point : Bob
Streets , Compliance & Risk Manager, Tel: 823622,
email
: [email protected]
R J STREETS
Compliance and Risk Manager
APPENDIX 1
4ps Gateway
Review 0 – Strategic assessment
Version number: Final
Date of issue to PO: 1 July 2005
Authority: Isle of Wight Council
4ps Gateway Review dates: 20 June 2005 – 22 June
2005
4ps Gateway Review Team Leader: Steve
Simister
4ps Gateway Review Team Members:
·
Mark Crossfield
·
Paul Bryans
·
Martin O’Regan
This has been derived from OGC’s
Successful Delivery Toolkit which is a Crown Copyright Value Added product
developed, owned and published by the Office of Government Commerce. It is
subject to Crown copyright protection and is reproduced under licence with
the kind permission of the Controller of HMSO and the Office of Government
Commerce.
Background
The aims of the programme:
The Isle of Wight
Council is a unitary authority in the South of England. The Island has a resident population of some
133,000 but this figure is increased several fold during the summer tourist
season.
The Council is
responsible for the management and maintenance of some 792 kilometres of
highway, 827 kilometres of public rights of way and has a revenue budget of
£5.8 million for the provision of the its Highways service and an additional £3
million Capital budget for road structural maintenance through the Local
Transport Plan.
Isle of Wight Council in
its Best Value Review of its Highway Maintenance Service, identified that the
backlog of rehabilitation needed to deliver the required level of service is
well beyond current budgetary resources.
Following the BV review the Council developed a Best Value Service
Improvement Plan, which addressed the issues raised in the review. The Improvement Plan seeks to improve the
level of service in the following areas:
·
the introduction of a whole life costing approach to
improving the highway network asset including street lighting;
·
to seek a major cash injection to remove at least the
backlog of planned highway defects / repairs; and
·
to improve customer care, communication and engagement
especially with the public in order to increase understanding, raise public
perception and be more accountable to local people.
In order to develop
partnerships and promote closer working and harmonisation, there needs to be a
continuation of the organisational and cultural shift away from traditional
service boundaries. The Council
believes this will deliver real benefits to the public in the future. The level of deterioration and backlog in
the highways infrastructure stock has also been determined as part of this
process.
A preliminary options
appraisal and qualitative assessment has been undertaken and this indicates
that a holistic approach to the provision of the highway service appears to
offer the best value. It is therefore, anticipated that the scope of the
proposed reference project will include rehabilitation of the highway network,
replacement of life expired street lighting columns, strengthening of bridges
to current assessment criteria, life cycle maintenance, routine and cyclic
highway maintenance, network management, decriminalisation of parking,
maintenance of coastal protection and landscape management.
This initial evaluation
suggests a project cost of £793 million against a Public Sector Comparator of
£832 million and a benefit Cost ratio in excess of 3.5. The PFI Credit required would therefore be
£213 million.
The driving force for the programme:
There are currently 7
roads on the Island with weight restrictions, mostly in connection with
structures but a large number of roads have 6’ 6” width restrictions. The length of road affected is some 156
kilometres. Without funding, an
additional 9 roads, with a total length of 24 kilometres will either have to be
closed or restrictions placed upon them.
These weight and width restrictions are seriously inhibiting the
economic growth of the island and without further funding the number of weight
restrictions will have to be increased causing increased pressure on businesses
and the communities they support. Of
the 13,300 street lighting columns some 2,500 are over 30 years old and in need
of replacement.
The procurement status:
The
project has procured an external technical advisor.
The primary purposes of a
4ps Gateway Review 0 are to review the outcomes and objectives for the
programme (and the way they fit together) and confirm that they make the
necessary contribution the authorities overall strategy.
Appendix
A gives the full purposes statement for a 4ps Gateway Review 0.
This 4ps Gateway Review 0
was carried out from 20th to 22nd June 2005 at Enterprise
house, St Cross Business Park, Newport, Isle of Wight. The team members are listed on the front
cover.
The
people interviewed are listed in Appendix B.
The Review Team would like
to thank Steve Matthews and his Team for their support and openness, which
contributed to the Review Team’s understanding of the Programme and the outcome
of this review.
The Review Team finds that
the PFI Highways Asset Management project has been progressed purely to repair
and make structural improvements to the existing Highways infrastructure. The need for the repair and improvement of
the existing Highway infrastructure is widely acknowledged. However, in undertaking such a project there
is some recognition that there are potential wider benefits that could be
realised.
It would be appropriate to
review how the current PFI project would fit into the wider strategic
regeneration aspirations that the Council has developed under the 2020
Vision. The window of opportunity to
undertake such a review is narrow.
The Highways service
team have diligently developed a solution to the historical problem of the poor
condition of the Highways asset.
1: Policy and organisational context: preconditions for
success
There is strong
support from the ruling majority of members who have taken over and endorsed
the previous administration’s project.
There appears to be cross party political will for the PFI project. There is evidence of wide spread support for
the project within the business community.
A corporate vision for the
Isle of Wight has been developed and encompassed in the Council’s ‘2020
Vision’. As yet a detailed programme to
deliver the 2020 Vision has not been developed.
An updated Local
Transport Plan (LTP2) is currently being written. It is envisaged that the PFI Highways Asset Management project
will form an integral part of LTP2.
There is evidence to suggest how the PFI Highways Asset Management
project will deliver benefits both via the LTP2 and 2020 Vision. However, there does not appear to be a
programme in place to support such linkage.
Currently, focus is on the
PFI Highways Asset Management project.
The project was developed out of a need to identify how the highways
asset could be maintained in the future.
The remit relates wholly to highway maintenance and because of the
funding arrangements cannot include non maintenance projects, e.g. Ryde
Transport Interchange which will be funded from the integrated transport
allocation.
Develop a detailed
programme which links the PFI Highways Asset Management project and LTP2 to the
2020 Vision. This should involve
consultation with stakeholders outside the Council.
The current project
owner is Steve Matthews, Head of Engineering services. There is recognition that the demands of
such a large project requires a high level of time commitment which a service
head cannot devote. Additionally, best
practice dictates that the project owner should have a strategic focus and
should therefore be at a hierarchical level above that of a service head e.g.
Director. For a project of this size
and complexity it would not be unusual for the project owner to be the Chief
Executive.
There is currently no
project board and this has led to a lack of strategic input that a robust
governance structure brings to any project.
A project board and
governance structure should be established for the project as a matter of
urgency. As a priority the board should
consider transferring the role of Project Owner to a more strategic post e.g.
Director of Environmental Services.
An organisational change
programme is envisaged which should enable strategic connections between
individual projects/initiatives within different service plans/departments to
occur more readily. An external technical
advisor has been appointed and has been advising the project team for some 18
months. As the project moves forward,
specialist financial and legal advice will also be required. There is recognition that the Council
currently do not have the necessary skills and capacity to deliver the PFI
project. Plans to acquire/procure these
skills and capacity will need to be developed.
RECOMMENDATION 3
The project team
should continue to consult with and utilise the skills and expertise available
within other service areas of the Council.
A review of the resources required to take the project forward should be
undertaken and acted upon. The impact
of any change programme implemented by the Council should be taken account of
by the project board.
2: The business case: scope and stakeholders
A draft Expression of
Interest (EOI) has been prepared and approved by the previous Administration in
April 2005. The new Administration has
agreed to take the EOI forward.
The project scope is
currently being developed as a focussed provision of asset management on the
existing highway infrastructure. Some
individuals outside the highways service area believe the scope of the project
to be wider than this. This ambiguity has led to differences of opinion over
what the project will deliver.
As yet, the benefits that
can be derived from the PFI project have not been formally considered at a
strategic level in the context of a wider programme to deliver elements of the
2020 Vision.
RECOMMENDATION 4
A strategic level
review should be undertaken as to how the Council maximises the benefits and
opportunities that an investment of this scale could bring. This review should also ensure that the
expectations of stakeholders are considered and then managed to provide a clear
understanding of the benefits the project will accrue.
3: Review of current phase
A timetable for the
delivery of the PFI project has been set out in the draft EOI. There is a desire at both a political and
officer level to maintain this timetable.
The timetable appears challenging and more development work needs to be
done to confirm it is achievable. Any
review of the project’s resource requirements needs to be considered in the
context of the necessity to achieve the timetable.
RECOMMENDATION 5
A comprehensive
programme should be developed which takes account of all relevant drivers and
factors on the PFI project e.g. political desire, resources, external decision
making process, and the procurement process.
The external technical
advisor has performed a financial evaluation of a range of options for securing
the management of the Highways Asset.
However, there is a disparity in the costings between the prudential
borrowing and PFI approach for which the Review team were unable to obtain a satisfactory
explanation.
RECOMMENDATION 6
As part of developing
the Outline Business Case (OBC), the PFI project team will need to perform a
more robust options appraisal and associated financial modelling.
The review team could not
find evidence that a project management methodology, such as PRINCE 2, was
being applied to the project.
RECOMMENDATION 7
A project management
process needs to be adopted for the project.
This is necessary, inter alia, to assist in applying a proper governance
process.
4: Management of intended outcomes
The PFI Highways Asset
Management Project is currently focussed on repairing the existing highways
infrastructure. There is a clear
expectation both internal and external that this will be key in assisting
regeneration and improved tourism.
The
linkage between a good highways infrastructure and economic regeneration are
outside the scope of the PFI project.
RECOMMENDATION 8
The Council must
consider at a strategic level the additional transportation elements that will
be required to achieve the aims of the 2020 Vision.
5: Risk management
The project is the highest
risk project on the Council’s corporate risk map. There is a limited risk register for the delivery of the
project. The identified risks are not
being actively managed in a manner which reflects the strategic importance of
the project to the Council. The Review
team are concerned that the serious nature of the risks at a corporate level
have not been fully identified.
Alternative provisions for
the delivery of the project have been considered but not formally set out.
RECOMMENDATION 9
A risk management
process should be designed and implemented such that risks are managed both at
a project and corporate level.
6: Readiness for next phase
The PFI project is at a
point in its life cycle where consideration must be given as to how it fits
into the wider corporate strategy and delivery of the 2020 Vision. A number of issues should be considered in
this context:
·
Project board, governance;
·
EOI – What PFI bidders are expected to deliver;
·
Project team composition;
·
Skills and capacity of team;
·
External advisors appointment;
·
Strategic fit with other projects within 2020 Vision
programme;
·
Project management;
·
Budget and timetable;
·
Benefits realisation and expectation management;
·
Stakeholder management and communication plan; and
·
Risk management.
The next 4ps Gateway
Review is expected in January 2006 when the Gateway team understand an OBC will
have been developed and an indication of support received from the DfT.
APPENDIX A
·
Review the outcomes and objectives for the programme (and
the way they fit together) and confirm that they make the necessary
contribution to Authorities overall strategy.
·
Ensure that key stakeholders support the programme.
·
Confirm that the programme’s potential to succeed has been
considered in the wider context of the Authorities delivery plans and change
programmes.
·
Review the arrangements for leading, managing and
monitoring the programme as a whole and the links to individual parts of it
(e.g. to any existing projects in the programme’s portfolio).
·
Review the arrangements for identifying and managing the
main programme risks (and individual project risks), including external risks
such as changing business priorities.
·
Check that financial provision has been made for the
programme (initially identified at programme initiation and committed later)
and that plans for the work to be done through to the next stage are realistic,
properly resourced with sufficient people of appropriate experience, and
authorised.
·
After the initial review, check progress against plans and
the expected achievement of outcomes.
·
Check that there is engagement with the market on the
feasibility of achieving the required outcome.
APPENDIX B
|
NAME |
ROLE |
|
Steve Matthews |
Head of engineering services, Isle of Wight Council (Project
Owner) |
|
Malcolm Smith |
Policy & Strategy Manager, Isle of Wight Council (Project
Manager) |
|
Derek Rowell |
Director of Environment Services, Isle of Wight Council |
|
Shaun Elvers |
UNISON Representative, Isle of Wight Council |
|
John Vosper |
PFI Project Officer, Isle of Wight Council |
|
Chris Wells |
Senior Transport Planner, Isle of Wight Council |
|
Steve Boswell |
Operational Manager (Maintenance), Isle of Wight Council |
|
Susan Lightfoot |
Service Manager (Adult & Community Services), Isle of Wight
Council |
|
Chris House |
Isle of Wight Chamber of Commerce |
|
Councillor Roger Mazillius |
Scrutiny Chair, Isle of Wight Council |
|
Nigel Smith |
Head of Tourism, Isle of Wight Council |
|
Mike Fisher |
Chief Executive, Isle of Wight Council |
|
Councillor Tim Hunter-Henderson |
Cabinet member for Economy, Regeneration, Tourism & Leisure,
Isle of Wight Council |
|
Inspector John Gedens |
Roads Police Unit, Hampshire Constabulary |
|
Councillor Andy Sutton |
Leader of the Council, Isle of Wight Council |
|
Gareth Hughes |
Financial Services Manager, Isle of Wight Council |
|
Avril Holland |
Human Resources Manager, Isle of Wight Council |
|
Andrew Ashcroft |
Head of Planning Services, Isle of Wight Council |
|
Councillor Ian Ward |
Cabinet member for Environment, Transport & Planning, Isle
of Wight Council |
|
Ken Dueck |
Project manager, Isle of Wight Economic Partnership |
|
Forbes Johnson (Phone) |
Technical Advisor, Mott McDonald |
|
Bob Streets |
Compliance & Risk Manager, Isle of Wight Council |
APPENDIX C
Red
– Take action immediately.
Amber
– Take action before further key decisions are taken
Green
– Take action as required.
|
|
|
Status
|
|
Ref. No. |
Recommendation |
R/A/G |
|
1 |
RECOMMENDATION 1
Develop a detailed programme which links the
PFI Highways Asset Management project and LTP2 to the 2020 Vision. This should involve consultation with
stakeholders outside the Council. |
R
|
|
2 |
RECOMMENDATION 2
A project board and
governance structure should be established for the project as a matter of
urgency. As a priority the board
should consider transferring the role of Project Owner to a more strategic
post e.g. Director of Environmental Services. |
R |
|
3 |
RECOMMENDATION 4 A strategic level
review of how the Council maximises the benefits and opportunities that an
investment of this scale could achieve.
This review should also ensure that the expectations of stakeholders
are considered and then managed to provide a clear understanding of the benefits
the project will accrue. |
R |
|
4 |
RECOMMENDATION 7 A project management process needs to be adopted for the
project. This is necessary, inter
alia, to assist in applying a proper governance process. |
R |
|
5 |
RECOMMENDATION 3 The project team should continue to consult with and utilise the skills and expertise
available within other service areas of the Council. A review of the resources required to take
the project forward should be undertaken and acted upon. The impact of any change programme
implemented by the Council should be taken account of by the project board. |
A |
|
6 |
RECOMMENDATION 5 A comprehensive programme should be developed which
takes account of all relevant drivers and factors on the PFI project e.g.
political desire, resources, external decision making process, and the procurement
process. |
A |
|
7 |
RECOMMENDATION 8 The Council must consider at a strategic level the
additional transportation elements that will be required to achieve the aims
of the 2020 Vision. |
A |
|
8 |
RECOMMENDATION 9 A risk management process should be designed and
implemented such that risks are managed both at a project and corporate
level. |
A |
|
9 |
RECOMMENDATION 6 As part of developing the Outline Business Case (OBC),
the PFI project team will need to perform a more robust options appraisal and
associated financial modelling. |
G |