1. After widening the scope of the NRTS project and finding that the telecommunications industry had little interest in commercially exploiting the NRTS systems, the Agency changed the rationale for a PPP. Some projects do change in scope during their developmental stages and this change can affect the choice of procurement route. When this happens, the procuring authority should conduct a full review into the value for money of its options.
2. The Agency invited expressions of interest from potential bidders too early. During the 17-month short-listing period, two well qualified potential bidders dropped out and the Agency reissued its invitation to re-stimulate the market. For market stimulation to work well, an authority needs to know what it requires and what it can afford, so that the procurement process can go forward effectively. The time between advertising a project and short-listing bidders should be no more than a few months.
3. This Committee has expressed concerns in the past about the spurious precision of some Public Sector Comparators but, in this case, the Public Sector Comparator cost was a single figure estimate, rather than a range, which is not good practice. The public sector comparator included a point estimate of £85 million for risk, equivalent to 26% of the non-risk adjusted price. In calculating this risk adjustment, the Agency did not include any explicit allowance for events turning out better than expected. Procuring authorities should always estimate ranges, not single figures, for comparators.
4. The procurement took five years to complete, rather than the original estimate of 21 months, and the procurement process cost five times the original budget. The Agency never had a clear idea about the time and cost needed to complete the procurement. In every updated forecast, the Agency's revised budget and timetable were optimistic, often by considerable margins. Senior Responsible Officers (SRO) need to be wary when their project teams repeatedly report small increases in the budget and slippages in the timetable. SROs need sufficient evidence to judge whether costs and timetables are under control and they need to exercise their authority to review the project's progress if these delivery risks look significant.
5. The Agency did not deploy effective controls over the work of its advisers. The Agency had two staff overseeing a monthly average of £250,000 of expenditure on advisers. These individuals had insufficient time available to implement effective controls to ensure that advisers conducted their work efficiently. In future, the Agency should provide enough staff to ensure that its management controls function as intended.
6. The procurement was marked by careful and thorough production of the bid documents and the draft contract. The Agency decided that, if it were to produce a contract that clearly established and set out the obligations of the parties, each provision had to be considered in detail. This thoroughness, together with access to bidders' pricing models, strengthened the Agency's bargaining position during the preferred bidder stage and contributed to a £2 million fall in GeneSYS's bid price, without substantial changes to the allocation of risks.
7. There were no incentives included in the advisers' contracts that expressly encouraged them to work efficiently. Authorities should incorporate incentives into contracts with advisers that encourage performance, while preserving the importance of the relationship that exists between client and adviser.
8. NRTS provides new opportunities for the Agency to give road users more detailed and helpful information than has been possible in the past, but also the potential for giving confusing messages. The Agency should consult with road users, their representative bodies and other stakeholders to ascertain whether the NRTS-based information that it provides best meets the needs of road users.
9. The ultimate test of the value for money of NRTS will be the benefits that it delivers via linked Highways Agency projects to manage the strategic road network. The Agency values these benefits at £2,800 million, but this is dependent on the programme of associated projects proceeding in full and being delivered on time and to cost. The Agency should conduct a review of the cost and benefits of the NRTS and associated projects half way through the 10½-year life of the NRTS contract.