The strategic road network in England, consisting of 4,800 miles (7,700 km) of trunk roads and motorways, is managed by the Highways Agency (the Agency), an Executive Agency of the Department for Transport. Since 1998, the objective of the Agency has been to reduce traffic congestion through improved traffic monitoring and travel information.
In September 2005, the Agency signed a 10½-year Public Private Partnership (PPP) contract for the National Roads Telecommunications Services (NRTS) with GeneSYS Telecommunications Ltd. The contractor agreed to upgrade, operate and maintain the telecommunications systems along the English motorway network. The deal was structured so that upgrading and operating the systems were part of a PFI-type contract, but the Agency could also order changes to the systems from a pre-priced schedule of additional services. The eventual life time cost of the contract therefore depends on the number and value of additional services ordered from GeneSYS. At contract award, the Agency expected that the contract would cost £385 million (present value in 2004 prices).
The Agency aimed to complete the procurement in 21 months for a cost of £3 million. The actual procurement took over five years to complete and cost £15.5 million in advisers' fees. Most of the additional time and cost was incurred in meeting the Agency's requirements for high quality bid documents.
Following a false start to the tendering process, subsequent loss of interest by good potential bidders and the early withdrawal of two out of the four short-listed bidders, the Agency had just two bidders interested in the project. One of these bidders, however, consistently bid considerably more than the other, and after prompting by the Agency withdrew just before selection of preferred bidder. The Agency managed to avoid deal drift during negotiations with the remaining bidder, and secured contractual arrangements close to the terms it wanted. At contract award, the Agency's estimate of the cost of the Public Sector Comparator (PSC) (£415 million) was marginally more than the PPP deal (£385 million). The PSC included an allowance of £85 million for risks, but the calculations underpinning this allowance did not follow best practice. The Agency also justified the PPP approach because it transferred the risks of major cost and time overruns inherent in large telecommunications projects, which are not a core Agency expertise.
From October 2007, following a two-year upgrade of the telecommunications systems, the new services became operational and benefits for road users from other Agency projects dependent on the NRTS are beginning to be realised.
On the basis of a Report by the Comptroller and Auditor General,1 we examined the Highways Agency on the procurement of, and potential benefits from, the National Roads Telecommunications Services.
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1 C&AG's Report, The Procurement of the National Roads Telecommunications Services, HC (2007-08) 340