Agenda item

(1)       The Chairman welcomed Dean Benson to the meeting and invited him to explain how Amey operated and to answer questions from Members.

 

(2)       Dean gave an overview of Amey which was a Spanish owned company. It acquired Enterprise in April 2013.   Enterprise was awarded the KCC term maintenance contract for highways in Sept 2011. It has 22k staff all over the UK from Scotland to Kent.  The company focused on utilities and term maintenance of highways and railways.  They had been working in Kent since 2011 and had a zero volume contract with KCC which was nominally £50m a year.  They operated from six depots across the County.  Their resource consisted of 323 people; the majority were operatives and supervisors on sites.Process 80,000 orders – no order no work except overarching work like winter maintenance.   Their average order in 2013 was £400+ on a no order – no work basis.  KCC raises the work orders to Amey. The rates are all scheduled. It is a robust system.  This meant that KCC was in control of the amount of work to be carried out and knew what was going to happen and when.   The lowest order amount from KCC was 29p for repainting of a white line.  This gave a flavour of the scope and scale of the work that Amey carried out for KCC.  The majority of SME’s used by Amey were Kent based which gave greater flexibility and reduced travel costs, Dean gave the example of having people out on Christmas Day, Boxing Day etc to deal with the issues caused by the adverse weather.   As the suppliers came from Kent the response time was reduced.

 

(3)       Dean explained that Amey also had access to specialist services which may be from outside of Kent, a lot of these were based in the north of England.  Using these services tended to be the exception rather than the norm.

 

(4)       Amey carried out, for example, drainage, lighting and technical schemes for KCC and Amey has a 5 year contract, which they were in the 3^rd year of, with an option of a year on year renewal up to a maximum of ten years. This length of contract was important to enable Amey to decide how to invest. 

 

(5)       Dean explained that their rates were open book.  Kent inspectors and Amey operative gangs had hand held tablets which contained rates for the work. This allowed orders to be assessed and placed from site which greatly reduced the amount of paper to be processed and reduces the number of site visits.

 

Question – How did Amey decide whether to tender for the contract with KCC?

 

(6)       Dean explained that before submitting a tender, Enterprise looked at whether they had the capacity to undertake the contract and took into account the geographical location, type of work and previous experience. Since the acquisition by Amey the team had the added benefit of being able to draw upon the services of its colleagues in Hampshire if necessary, e.g. localised snow emergency.  Enterprise had a robust process for deciding whether to tender it was less about commercial factors and more about whether they had the practical capacity to carry out the work.  The company had decided recently not to go for certain contracts if they did not feel that they could resource them.  

 

(7)       Dean confirmed that KCC tender documents were very clear with performance measures set out.  The measures were summarised as follows: 6 strategic performance measures, and 30+ operational performance measures with pass marks up to 99%. The measures broadly mirror the company target and align with IS09000 performance requirements. The performance measures were set out in KCC’s tender but Amey also complied with industry safety standards.

 

Question – Your business is carried out in a tight regulatory framework?

 

(8)       Dean confirmed that this was the case.

 

Question – One of the areas that we are investigating is how we can involve more Kent based SME’s, could you tell us more about the how you balance due diligence with sub contractors and the risks involved?

 

(9)       Regarding SME’s – Dean gave the example of tree surgeons and the interface between the Kent Landscape Team and Amey, need small number of good 2 tier companies when the weather forecast indicated that there might be a need for these peoples Amey would contact them and make them aware.  Amey ensured that all specialist local suppliers that they used had the necessary training etc.   Amey focused on approximately a dozen tier 2 providers in Kent who were compliant with Health and Safety and other regulations  Amey made sure that they could access specialist resources, if necessary, taking account of sole traders if they were appropriately trained etc.  Dean confirmed that Amey only used Kent businesses unless the specialist skills were not available in Kent, on a practical level it was easier for them as a company to use local business.

 

Question – do you feel that there are adequate checks and balances in using these suppliers for yourselves?

 

(10)     Dean confirmed that he did and he stated that they were responsible to KCC for the suppliers that they used, if there was a problem with them then it was down to Amey.  Amey had mechanisms to make sure that they carried out due diligence with their supply chain. 

 

Question – The find and fix approach to repairing roads is a different way of working can you tell us about your approach to that and how this is accommodated within the ridged framework of the contract but also allowing a pragmatic approach to the work?

 

(11)     Dean stated that the rates within the contract were fixed. In relation to Find and Fix, the costs depended on the size and depth of the pothole.  The work was tracked on a daily basis to give KCC clear feedback on what was being done. 

 

(12)     Dean explained that in relation to developing ideas and best practice, they had a Technical Review group or “dragons den” type process for the workforce and supply chain where ideas could be put forward, this was done on a quarterly basis.  The ideas put forward where all looked at in terms of their practical application.  He gave the examples of a metal gully lock, a smart sponge to soak up hydrocarbons when cleansing gullies;  one supply chain coming up with a type of motorised tree, verge and hedge cutter, ‘like a army knife on wheels’. Amey liked the idea and had possible investment from supply chain to of £250K  into developing this.  A number of the ideas put forward were taken up on a trial basis and if they proved effective in Kent, Amey then rolled them out across their other contracts.

 

Question – Regarding the Social Value Act which should be taken into consideration by KCC when commissioning, do you consider it right for KCC for example to say to Amey e.g. that they must employ apprentices?

 

(13)     Dean stated that the civil engineering industry actively supported this. In the 1990’s this type of training stopped.  This has lead to a knowledge and experience gap in the industry. Need to invest going forward.  As a company Amey supported training, they employed 8 or 9 apprentices and last year ran an Apprentice of the Year award, the winner of that award was rewarded with a permanent job organising all their training.  Dean stated that, all apprentices brought value to contract and the majority end up being employed full time and the approach was worthwhile and builds for the future.

 

Question – Are you happy that the standards in your contract with KCC are monitored fairly?

 

(14)     Dean confirmed the monitoring process was carried out fairly.  It covers at strategic performance measures on monthly basis. These drive behaviours – targets need to challenge and not be too easy. There was a joint analysis between KCC officers and Amey, they checked if orders were placed on time, completed on time and to the agreed quality standard on a monthly basis.  There was a financial penalty attached to not meeting these targets.  He stated that they had a pretty good pass rate, and had achieved 100% compliance, currently lighting maintenance was at 90%, this was due to the weather creating safety issues but he was confident that this would soon be back on track.  He stated that KCC officers who carried out the monitoring were knowledgeable and challenging and he could see nothing wrong with that.

 

Question – What is the relationship between the supply chain and performance measuring.

 

(15)     Amey and Kent have also agreed 2 performance measures for Kent - this is a new initiative and is supported by both parties. Dean suggested that Kent Performance Measure 1 was critical as it allowed the team to monitor order accuracy, including locations, type of work, local risks and expected costs.  This development is testament to a good working relationship and enables commitment.

 

Question – Has the contract increased?

 

(16)     Dean confirmed that the scope and scale of the contract was unchanged.  However, Amey continually looked to see if the way they operated under the contract could be improved e.g. they made sure that KCC’s “confirm” order system was compatible with Amey’s system. Also Dean gave the example of possible innovative ideas - machine recycled tarmac from Kent roads as a commodity could benefit the contract rather than using brand new tarmac. This was an idea that could be taken for consideration with the 7 south east counties to acquire mobile recycling unit and share.  The supplier could possibly invest 350K in unit and create a stockpile but they would need an effective return on investment especially on a zero return contract.  Amey was also able to bulk purchase and negotiate with large suppliers which affected the rate that they were able to charge KCC.

 

Question – can you explain the third of your £50m a year being spent on sub contractor?

 

(17)     Dean stated that some specialist treatments were more expensive and could distort the figures.  Amey used sub contractors to supplement their workforce when volumes of work were higher than normal e.g. find and fix and winter emergencies.

 

Question – Do you allow sub contractors to sub contract?

 

(18)     Dean confirmed that Amey did allow some sub contraction by sub contractors but they looked at this on an individual basis, go to third tier if qualified and can safely operate on network, bring in specialist skills etc.

 

Question – If KCC contracts to you and you contract to a sub contractor who then sub contracts, does KCC’s expectation and standards get diluted?

 

(20)     Dean stated that NEC contracts which had been developed in the 1990’s created a back to back sub contract which had the same conditions but were a scaled down version of the main contract, but retained the essence of the main contract.  Amey made sure that all their sub contractors knew the terms and conditions that they were working under e.g. timescale, rates and quality. 

 

Question – If there is a complaint to the main contractor does this then get passed down the line to the sub contractor with no one wanting to take responsibility for any mistake? 

 

(21)     Dean replied that Amey would make sure that they knew who was responsible and if it was Amey then they would deal with it internally, if it was the supplier then Dean would speak to the managing director of the company.  Amey could not pass the buck down the supply chain, because the OPM’s relate to Amey and the main contract.  Specific sub-contract penalties do exist and are employed if performance falls below agreed standards.

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Question – Can you explain the impact that performance has on the renewal of the contract after the initial 5 year period?

 

(22)     Dean stated that at the end of the 5 year period there would be a review of the performance level. If the level had dropped then KCC could go out to tender and Amey could submit a bid.  If Amey had met the agreed performance criteria at the end of the 5 year period then the contract could be renewed on an annual basis. There were about 6/7 audits a month but they were not representative in relation to amount of work.  Amey suggested changes a) poor performance go to process to disciplinary b) if learning points  need them to come back (is it equipment or systemic problem).  Now typically do 100/150 audits depending on level of work. Way of working with Kent allows positive working with subcontractors. It is measured on Amey if not deliver. 

 

Question – I assume that the contract needs to be a minimum of 5 years to justify your investment in capital equipment and that the sub contracts can be for a shorter period?

 

(23)     Dean confirmed that this was the case.   He gave the example of the investment of possible £350k that supplier interested in making in mobile plant for recycling materials, if the contract had been for up to 3 years there would not have been a sufficient return on their investment.  With a contract of 5 years even though it is a zero volume contract Amey were still taking a risk but it would give them a reasonable chance of getting a return over the 5 year period.  Dean also gave the example of gritters which they had procured/long term hired at £60k each, they needed a 5 year contract in order to be able to make this type of investment.

 

Question – Is it possible for you to sub contract to the “voluntary” sector?  For example the Ramblers Association for clearing of Public Rights of Way (PROW)?

 

(24)     Dean stated that it was possible for Amey to sub contract work like this to for example, the Probation Service, as part of rehabilitation, but not work normally carried out under contract. There were a lot of rules around with probation service and PROW. It was necessary that the people that commissioned the worked with were happy with this arrangement.  PROW was ideal for this type of sub contracting but, it had proved challenging to engage them.

 

Question – what makes a contract go wrong?

 

(25)     Dean explained that one of the ways that a contract can go wrong is if the specification was not well briefed/understood, or the wrong contract was used – all parties need to understand operational performance measures. We understand the 30 performance measures in our contract with KCC and agree with them.     It also comes down to the people involved, you can have the best specification and the best contract but if the people in the contractual relationship are not geared up to work together then it will fail.

 

(26)     Dean referred to the whole TUPE mechanism which was difficult.  Amey had TUPE’d  200+ people from the previous contract were only used to working with a cost plus contract rather than a SOR contracts, it took time for them to adjust to the new way of working.

 

Question – Is there anything that you feel that Kent County Council can do better in terms of commissioning and procurement?

 

(27)     Dean stated that he had attended one of KCC’s Facing the Challenge sessions so was aware of the financial situation that Kent was in.  He stated that if there was a mature relationship between the contactor and the commissioner then trust was built.  Dean gave the example of gully cleaning, KCC believed that it had 340k gullies – gully cleaners are expensive to hire/buy so a full survey was agreed and it was concluded that KCC has only 250k gullies in the county.  As a result, a more focused service could be developed with the potential for cost and performance efficiencies to be developed.

 

Is the public happy is the ultimate measure!

 

Question – What can be done to balance the need to have detailed instructions/invoicing and reducing costs?

 

(28)     Dean confirmed that KCC’s costs were going down.  Last year there was a business process review as better order quality and process was needed.  This led to a refined process and sharing resources, e.g. use of electronic devices to place orders on site. In practical terms processing paperwork could cost £500k over 10 years compared to use of hand held devices at a one off cost of £44k.  This brought the inspectors together with the workforce. This generated a saving in paper and time by being able to order work or download information on site, using current information and photographs as necessary, this was being introduced by Amey to their own staff.

 

(29)     Dean stated that Amey/KCC carry out rate reviews annually and looked at every single rate to assess cost reduction opportunities.

 

Question - In relation to the current contract is there one element that your company would showcase?

 

(30)     Dean highlighted the HMC and Work Manager system used throughout the contract.  It allowed the team to automatically plot each order on a county map.  This in turn allows crew deployment to be optimised and public disruption to be minimised.  It also allows more effective countywide planning of works.

(31)     The Chairman thanked Dean for attending the meeting and for assisting the Committee with their work.