Report of the Director of Economy, Infrastructure and Skills
The Commissioner for Highways and the Built County gave an update on how risk was managed within the Infrastructure+ strategic partnership contract and asked Members to consider whether additional measures would be beneficial in ensuring risk was adequately managed. The background to this was the collapse of Carillion that had highlighted the risks of public sector infrastructure projects, including the financial health of principal contractors.
Infrastructure+ was a 10-year overarching agreement between Staffordshire County Council and Amey LG providing an outcome focused approach to the delivery of highway and non-property infrastructure services across Staffordshire. The contract went live on 1 October 2014 and since this time had successfully delivered £150m of highway operations and projects; achieved over £30m of front-line service cost savings and implemented over £100m of inward investment highway and transport infrastructure improvements to support the creation of over 10,000 new jobs and 8,500 new houses across Staffordshire. The core element of the Infrastructure+ partnership was the Term Service Contract for maintenance, management and improvement of over 6,300Kms of highway network.
The Governance Framework operated at three tiers: The Strategic Partnership Board (SPB) involving Directors, Cabinet Members and the County Treasurer; the Operational Commissioning Board, of which he was a member, and Delivery Project Teams and Outcome Groups (made up of operational managers). The representation on these groups was described. In regard to the Risk Management, details were given at Appendix 2 of the report. This was periodically reviewed and updated. Infrastructure+ Risk Registers were regularly reviewed and updated. Individual call-off contracts had their own specific risk registers.
A significant risk had been identified (PR0015) relating to the financial stability of Amey, particularly considering the recent, now resolved, dispute with Birmingham City Council and the announcement that Amey was also to be included in parent company Ferrovial’s sale of its services business. This risk was identified in the Council’s risk register and was regularly monitored. Additionally, these risks were minimised by payments only being made for completed works or goods received; closely monitoring Amey’s company accounts in terms of Amey’s credit rating and supply chain payment performance to provide early warning of insolvency risks; and suitable Business Continuity Plans being in place. The SPB had requested that operating manuals be developed that set out the necessary step-by-step Business Continuity Plan in the event of Amey becoming insolvent.
Members stated that they found the measures taken reassuring and emphasised the reputational risk, stating that all Councillors had the interface with customers. They asked how customer satisfaction and the impact on reputational risk was managed. Furthermore, they asked if Amey’s financial plans were robust. The Customer Outcomes Group (COG), that included eight local Members, was responsible for managing customer satisfaction and reputational risk. In addition, results of MORI national highways and satisfaction survey, and customer satisfaction surveys were taken into account and these were fed into the COG, and issues were addressed, and concerns mitigated.
Members asked if the drive for value for money and greater efficiencies had caused the collapse of Carillion. The Commissioner for Highways and the Built County stated that Carillion was working in the high-risk PFI market. The Council were operating a service contract and were paying regularly. The Council were monitoring Amey’s financial health and had collaborative arrangements in place with them.
Members asked if Amey was up for sale and what contingency arrangements were in place if Amey suddenly went into administration. The Commissioner responded that Amey was up for sale as part of the Ferrovial’s business decision. The Council had business continuity plans in place to support business critical decisions. If Amey went into administration, the expectation would be that the administrator would continue to operate the contract until an alternative buyer could be found. Amey’s staff could be TUPE transferred back in-house and the contract could continue to be operated in this way for a short period. Alternatively, if a large construction contract was halfway through, the site could be mothballed to ensure that services were safe and secure until an alternative provider could be found. Budget contingency was built into those schemes to allow for this eventuality.
Members asked if the contract could be brought back in-house. The Commissioner explained that this could happen as the contract was flexible and this could be done on a short or long-term basis.
RESOLVED: The report was received.