ROAD EFFICIENCY GROUP OF NEW ZEALAND DRIVING VALUE FOR MONEY AND IMPROVED PERFORMANCE OF NEW ZEALAND S ROADING NETWORK

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1 ROAD EFFICIENCY GROUP OF NEW ZEALAND DRIVING VALUE FOR MONEY AND IMPROVED PERFORMANCE OF NEW ZEALAND S ROADING NETWORK Jim Harland, Chair, Road Efficiency Group The New Zealand Transport Agency, New Zealand 1. BACKGROUND The Road Efficiency Group (REG) is a collaborative initiative by the road controlling authorities (RCAs) of New Zealand. Its goals are to drive value for money and improve performance in maintenance, operations and renewals throughout the country. The establishment of the Road Efficiency Group was one of the important recommendations arising from the Road Maintenance Task Force established by the NZ Government in The purpose of the Road Maintenance Task Force was two-fold: To identify opportunities for efficiencies and increased effectiveness in the delivery of operations, road maintenance and renewals, including through innovative services, products and methods of procurement. To use the process, findings and recommendations of the Task Force to encourage the consistent uptake of opportunities throughout the country. The stated expectation of the Task Force findings was that they would encourage better practices and inform decision-making in ways that will achieve value for money. The Task Force had a Governance Group with senior representatives from the New Zealand Transport Agency, Local Government New Zealand, Road Controlling Authorities, contractors and sector experts. Supporting this group was a project manager and support person and a technical working group. (see Appendix 1). The Task Force reviewed significant costs that drive maintenance, operations and renewals in the roading sector and existing business practice. Asset management, risk management and procurement methods sector were also reviewed. The Road Maintenance Task Force, Review of Road Maintenance Regime report, October 2012 and supporting documents can be found at The Task Force identified four general areas for improvement: Adapting the business models used to deliver maintenance, renewals and operations. Improved procurement practices, also in support of new business models. Improved prioritisation and optimisation through level of service differentiation. Consistent introduction of enhanced asset management practices. The Task Force considered current business models used to deliver road maintenance. They noted that there was room for increased efficiency by having road controlling authorities take a one network approach. It also found collaboration between local authorities and in some cases joint management of the network provides significant opportunities for improving efficiency. Such approaches would also drive greater network optimisation. The Task Force also identified significant scope for improving procurement practices. In particular it recognised that some alternative delivery models could reduce costs and enhance effectiveness. These delivery models are able to improve contractual relationships, reduce 1

2 administrative costs and incentivise contractors to cut costs. Prioritising roading investment was seen by the Task Force as providing opportunities to reduce cost. Differentiating the road network to ensure each road is fit for purpose will help focus infrastructure improvements on parts of the network with high economic and social value. This finding resulted in the establishment of the One Network Road Classification (ONRC). The Task Force believed that planning and delivery should be improved to enable greater efficiency and effectiveness, and to better address risk. Asset management was seen as the key to improving capability and providing significant opportunities in this area. Following its review the Task Force made 17 specific recommendations which they believed would provide opportunities to improve the effectiveness of road maintenance with the key ones being: Establish a cross-sector Road Maintenance Task Force Implementation Group to champion the changes. Create a national asset management framework. Establish a national roading classification. Promote high-quality asset management. Communicate expectations that collaboration and clustering is investigated between road controlling authorities and incentivised to occur. Pursue improved procurement methods and delivery models where necessary. To obtain support for these recommendations an Interim Report was published in May 2012 and submissions invited from the sector. A series of road shows were held in nine locations from Whangarei to Dunedin to advise the sector of the Task Force interim findings and obtain further feedback. The final report was amended based on this feedback and an assessment of written submissions that were received. Implementing the Task Force recommendations is challenging. The REG was established to take up this responsibility and has established several working groups to lead implementation based around: 1. A One Network Road Classification (ONRC) developing a national classification system that identifies the function, level of service and performance of road networks. 2. Best Practice Asset Management to share best practice planning and advice among road controlling authorities. 3. Collaboration to share skills, knowledge and management initiatives within the industry and road controlling authorities. Other papers will consider in detail how these recommendations are being implemented 1. The Road Efficiency Group made a conscious decision that these areas would lead to the greatest improvements in effectiveness and efficiency and in the delivery of maintenance and operations. 2. THE NETWORK At a total length of around 94,000 km New Zealand s roading network is diverse. It includes: 1 the roads at the margins of the network that connect us with New Zealand s wilderness rural roads that are the first link in the supply chain between our farms and forests and world markets suburban streets and service lanes that serve those driving cars and trucks, travelling in buses and cycling and walking in order to travel to destinations in their communities The Road Efficiency Group (REG) Presents - The one network road classification - promoting better and nationally consistent decision making for New Zealand s roading network. Vaughn Crowther & Neil Jorgensen The Road Efficiency Group (REG) Presents - Best practice asset management group. Julie Muir & Dawn Inglis The Road Efficiency Group (REG) Presents: Collaboration - how well have we done? Edward Guy 2

3 roads in urban areas that serve important public realm/ place functions the regional and national routes and state highways that connect our regions, cities, towns and communities the express ways/motorways that accommodate the highest national and regional traffic, while providing access for freight and business into city centres and other significant land uses such as ports and airports. In the past, New Zealand s 76 separate road controlling authorities (RCAs) have tended to take locally appropriate approaches to developing and maintaining roads within their jurisdiction, often based on local needs and affordability. While this approach works well from an individual community perspective, users of the road network may not be as well served as they travel the network experiencing significant variation in service quality as they travel over local government boundaries. Some RCAs were adopting increasingly sophisticated approaches to classifying their networks to optimise transport outcomes within available funding and to better integrate transport and land use planning objectives. However, the absence of a common national framework meant that RCAs were taking a wide array of different approaches. This made it difficult to make useful comparisons between networks, to deliver desirably consistent network wide customer levels of service and ultimately to demonstrate optimal value for money from investment decisions at the national and local level. It is increasingly important to take a one network approach across the roles and responsibilities of RCAs. This better addresses users needs for a more consistent roading network and also offers improved integration between land use and transport planning. The goal is to provide road users, whether they are vehicle drivers, riders on passenger transport, cyclists or pedestrians, with more consistent customer levels of service across the country and to align maintenance and renewals work to support these customer expectations. 3. ADAPTING BUSINESS MODELS There is a trend towards using longer duration contracts and the aggregation and bundling of works and services into fewer, larger contracts. Research commissioned for the Task Force (PricewaterhouseCoopers, 2012) concluded that there is scope for further aggregation and bundling to more effectively and efficiently deliver outcomes, noting that larger contracts do not always deliver better value for money and the need to maintain healthy competition in the market. Other suggestions to improve efficiency included the greater use of standard form contract documents and more discipline around the modification of standard documents to reduce the cost of supplier selection processes and make for better contractual relationships. There was also concern that the smart buyer capability among RCAs is variable and that many procurement practice issues could be addressed by correcting the current thin and uneven spread of capability. Linked to this was a finding that there is limited experience in collaboration amongst RCAs in sharing best practice and benchmarking. In order to lift efficiency and increase value for money, the Task Force identified the most promising opportunity was for RCAs to strongly collaborate and, where appropriate, jointly manage, plan, and deliver maintenance, operations and renewal works. The Task Force technical team was charged with identifying opportunities to improve efficiency and effectiveness through collaboration and clustering and estimated that such joining up may yield efficiency gains of up to 20% depending on the model chosen. Where such one network approaches are taken there is likely to be further benefits, such as greater network optimisation. The Task Force believed opportunities for collaboration and clustering should be explored. A model was been put forward by Task Force researchers to identify different 3

4 stages or models of collaboration. Possible benefits from the different models include: the ability to retain experienced staff with a greater level of knowledge of the whole network (eg Rotorua District Council) enhanced decision-making ability of staff to make the right decisions at the right time for the network, which can result in cost savings (eg Marlborough Roads) the ability to attract suitably qualified staff as the environment created by shared services agreement allows greater career progression for staff (eg Manawatu/Rangitikei District Councils) the ability to adopt long term performance based contracts which have the potential to deliver significant savings (eg Western Bay of Plenty District Council) IMPROVED PROCUREMENT PRACTICES There is also significant scope to employ better delivery models to improve contractual relationships and incentive structures between all parties. Efficiency improvements include greater use of standard form contract documents and more disciplined processes and make for better contractual relationships. 5. IMPROVED PRIORITISATION OF INVESTMENT There is a significant opportunity to further differentiate levels of service on each part of the total road network. Such differentiation must be linked to a classification system that recognises the economic and social value of component parts. The Task Force acknowledged road classification as the cornerstone of any network strategy and recommended that a local road classification system be considered and endorsed by RCAs that: 2 Refer to The Road Efficiency Group (REG) Presents: Collaboration - how well have we done? Edward Guy for more detail. accommodates the State Highway Classification System identifies the level of service, function and road use (including economic, social and cultural aspects) of local road networks is a key component of the national asset management system aligns level of service and maintenance standards LEADERSHIP AND IMPROVED ASSET MANAGEMENT The Task Force concluded that alignment of the levels of service and the economic value of different parts of the network with maintenance, renewals and operational expenditure would improve efficiency and effectiveness and better address risk. They concluded that the cultural and social aspects of the road networks needed to be recognised, with enhanced Asset Management seen as the key to improving this. The critical issue, regardless of the number of asset management organisations, is the need for RCAs to identify the level of service they wish assets to deliver. This then must be related to the investment required on maintenance, operations and renewals over the life of the assets. A key challenge identified was how to ensure RCAs opt in to adopting recommended approaches to activity (asset) management planning. In other words, given that there has been much talk about better asset management, collaboration and integration in the last decade or so, what would it take to make it happen now in order to meet the value for money challenge ahead? The Task Force believed that fiscal constraints will, in themselves, lead to the increased adoption of such value for money practices. However, given the size of the challenge, the Task Force felt such value for 3 Refer to The Road Efficiency Group (REG) Presents - The one network road classification - promoting better and nationally consistent decision making for New Zealand s roading network Vaughan Crowther & Neil Jorgensen for more detail. 4

5 money approaches should be further incentivised by adjusting the NZ Transport Agency s Investment and Revenue Strategy (eg the effectiveness rating) and/or by adjusting the co-investment arrangements (eg funding assistance rates) as required. Successful implementation is also likely to require an innovation-driven transformation in the way that professional services teams operate and perform within RCAs. The Task Force believed that a cross- sector implementation group should be established, with the NZ Transport Agency playing a key leadership and support role, to take these and other recommendations forward. This has taken place with the establishment of a joint RCA/NZTA Best Practice Asset (Activity) Management Group. Strong asset management practices, along with sound long term strategies, are critical to achieving least whole-of-life cost for the network. This includes the use of innovative services, products and methods of procurement that requires: effective planning and delivery to achieve value for money objectives, eg early tendering opportunities, awareness of the annual programme and better timing of works improved knowledge sharing a consistent road classification system and levels of service across the whole network greater collaboration between asset owners. There are opportunities to improve the collective performance of the industry. However, a strategy is needed to improve performance measurement and management in order to better understand the effectiveness of any changes made. There is also an increasing concern around people and capability. This relates especially to an ageing workforce, training and the number of people entering the industry, which is limiting the ability of RCAs to obtain value for money. To build capability, careers in the maintenance and operations area need to seem more attractive. Asset Data: While a large quantity of data is collected on assets and their management, there are consistency and quality issues that limit the ability to inform future decisions and asset management practices. Moreover the existing data does not permit objective benchmarking of good practice performance. A step change is required to the collection of asset and management data and to performance measurement to help ensure that levels of service and funding are appropriate. The Task Force recommended that the NZ Transport Agency convene a user group or an established group (eg a National Strategic Asset Management Group) drawn from across the sector to develop requirements for improved data input, transformation of the data into useful, repeatable and meaningful information, dissemination, and effectiveness in the use of data, focusing on areas such as: requirements for data, data-based systems (eg RAMM Road Assessment Maintenance Management database), dtims (Deighton s Total Infrastructure Management System) and technology platforms measurements to assess the effectiveness of different road maintenance projects and new materials measures of asset consumption and its causes measurement to enable better timing of interventions road classification. 7. IMPLEMENTING THE ROAD MAINTENANCE TASK FORCE RECOMMENDATIONS In order to implement the recommendations the Task Force identified several work streams and their leadership as set out in Appendix 2. These work streams required resources from NZ Transport Agency and RCAs along with input from the industry sector where appropriate. The thinking in Appendix 2 is based on three distinct leadership responsibilities: 1. NZTA Led Work implementing an internal Maintenance and Operations Review for the State 5

6 Highway network. To ensure this work aligns to the REG work as far as possible a representative from the NZTA Governance Group for its ongoing Maintenance and Operations work will also sit on the REG. 2. Shared Work around the core recommendations of the Road Maintenance Task Force. 3. RCA/Local Government Led Work, especially around collaboration and clustering, and network opportunities based on procurement. The Road Efficiency Group was established to govern delivery of these shared work streams in Membership consisted of four senior members from NZ Transport Agency, three senior members of Road Controlling Authorities and the Chief Executive of Local Government NZ with an independent chair (a total of 9). This group has recently been refocused to now have three senior NZ Transport Agency staff and four from Local Government (a total of 7) including the Chief Executive of Local Government New Zealand. 8. CONCLUDING COMMENTS A key focus of the work is based around implementing enhanced activity (asset) management plans, new business models, and overseeing transition plans to deliver the One Network Road Classification. The remaining papers in this series outline how this is being undertaken. The Road Efficiency Group has been a successful collaboration between Road Controlling Authorities including the NZ Transport Agency. It has successfully lead the introduction of new business models and best practice. Since New Zealand has focussed on these opportunities the historical growth of maintenance, operations and renewal costs has been halted (see Appendix 3). High level data suggests that (at least for sealed roads) the network condition as measured by the pavement integrity index appears to be stable. By continuing to improve the quality of activity (asset) management plans, implementing the One Network Road Classification and collaborating (including benchmarking) the Road Efficiency Group believes further value for money will be achieved and customer levels of service met. 6

7 Appendix 1 Road Maintenance Task Force Structure Governance Group Convenor Jim Harland (NZTA) Dave Adamson (Southland DC) Cos Bruyn (Roading NZ) David Fraser (Hastings DC) Mark Kinvig (NZTA) Murray Noone (Auckland Transport) Tony Porter (ACENZ) Jeremy Sole (Contractors Fed. NZ) Geoff Swainson (LGNZ) Project Manager Lynley Hutton (NZTA) Project Support Bernie Cuttance (NZTA) Technical Working Group BETTER ASSET MANAGEMENT, PLANNING & DELIVERY COLLABORATION AND CLUSTERING COST DRIVERS DOCUMENTATION, PROCUREMENT & MARKETS TASK MANAGER Janice Brass (NZTA) TEAM Adam Bevins (Downer) David Darwin (NZTA) Mark Edwards (NZTA) Ian Greenwood (OPUS) John Sutton (NPDC) Matt Hendry (NZTA) TASK MANAGER Niclas Johansson (NZTA) TEAM Chris Allen (HCC) Dawn Inglis (WDC) Jamie Cox (WDC) Murray Clarke( NZTA) Ray Edwards (Higgins) Rob Gilmore (GHD) TASK MANAGER Ian Cox (NZTA) TEAM Damon Norden (Fulton) Dave Wilson (Roading Co) Gavin Gribbens (GHD) Jim Paterson (WBDC) Martin Taylor (NZTA) Matt Hendry (NZTA) Peter Higgs (GDC) TASK MANAGER Bernie Cuttance (NZTA) TEAM Bruce Buxton (MWH) Bruce Fox (HWR) Chris Russell (Russell Roads) Grant Borrie (Fulton) Ian Gooden (WDC) Malcolm Abernathy (Contractors NZ) Martin Taylor (NZTA) Phil Harrison (Downer) 7

8 Appendix 2 Road Efficiency Group Structure 8

9 Appendix 3 NZ Pavement and Seal Maintenance, Operations and Renewal Costs per Lane_Kilometre All NZ Pavement and Seal maintenance, Operation and Renewals ($ per lane kilometre) Annual expenditure $