Payment of performance bonus has been reduced because DVTA has had difficulty in meeting its formal targets for customer waiting times

2.10  DVTA's business plan contains formal targets for customer waiting times in relation to vehicle tests but does not contain formal targets for vehicle test times. It does contain forecast test times, and these were set at higher levels than the 18-minute target specified in the PFI contract. Although DVTA generally met these forecast times over the period 2002-03 to 2004-05 (except in 2002-03 when the productivity problems were first experienced), it achieved its formal targets for customer waiting times only in 2002-03 (see Figure 2 below).

Figure 2: DVTA performance compared with its business plan forecasts for MOT2 test times and formal targets for customer waiting times 2002-03 to 2004-05

Source: DVTA

2.11  A number of factors contributed to the set-ting of forecast test times that were longer than those specified by the PFI contract:

•  2002-03 - the business plan was finalised just before the roll-out of the new equipment commenced, and was based on an assumption that the introduction of MOT2 would result in a 19-minute vehicle test (see Figure 2 above). This was one minute longer than required by the contract (to allow for examiners to familiarise themselves with the operation of new equipment). Combined with the assumption that tests conducted with the old equipment would take 23 minutes, the overall forecast in the business plan was for an average time of just over 21 minutes;

•  2003-04 - in preparing this business plan, the problems with achieving an 18-minute vehicle test were more evident. Consequently, the plan was based on an assumption of a 23-minute test. However, although this was five minutes longer than the contractual requirement, it still did not contain provision for the diesel/smoke emission test, which had been included in the contract specification (see paragraphs 2.24 and 2.27); and

•  2004-05 - the business plan envisaged an average vehicle test time of 24 minutes, with provision for the introduction of the diesel/smoke test during the year. In the event, the prolonged Civil Service campaign of industrial action during the year, together with the ongoing problems with test times, meant that DVTA was unable to introduce these test items.

2.12  DVTA currently operates a scheme under which each member of staff becomes entitled to bonus when the Agency's key financial performance target (the Standard Hour Cost) is achieved. Payment of bonus is reduced if key business performance targets for waiting times and customer satisfaction are not achieved. As the scheme pre-dates the introduction of MOT2, there are no arrangements for applying deductions to bonus when the test times required by the MOT2 contract are not achieved.

2.13  Consequently, despite the failure to achieve its PFI contract test times in 2002-03, no deduction was applied to the bonus as DVTA achieved its formal business target for vehicle test waiting times (the business target was set at 21 calendar days and an average of 20 calendar days was actually achieved).

2.14  DVTA did not meet its waiting time targets in the subsequent two years. Despite this, in 2003-04, when the average vehicle test waiting time (30 calendar days) was far in excess of the formal business target (21 calendar days), and when DVTA achieved only three of its seven business targets, it paid a group staff bonus of £296,000. DVTA told us that the bonus was based on a pre-determined formula which reflected the fact that it had achieved its key financial performance target, but also took account of the failure to achieve the four business targets. Consequently, bonus was reduced by 30 per cent. No bonus was paid in respect of 2004-05, when the Civil Service-wide strike (see paragraph 2.4) seriously undermined DVTA's ability to meet any of its key financial or performance targets.

2.15  DVTA told us that it is in the process of developing a more broadly based bonus scheme, which balances the requirement for increased efficiency, with the need for a high-quality test and excellent customer service. DVTA envisages that this will deliver improved productivity as a by-product, and that this approach would also have the advantage of addressing the requirement for improved performance across the full range of the Agency's responsibilities, including driver testing. However, in addition to quality and customer satisfaction, we consider that the bonus scheme should provide a more direct incentive for staff to optimise productivity. We therefore recommend that one component of the bonus calculation should be an explicit link to achievement of the optimum test time deliverable with the MOT2 equipment. DVTA will be in a better position to identify this optimum time following the introduction of the full test at the end of 2005-06 (see paragraphs 4.20 and 4.21).