Response to the Infrastructure UK peer review of flood and coastal risk management. November 2015

Transcription

1 Response to the Infrastructure UK peer review of flood and coastal risk management November 2015

2 Overview Defra and the Environment Agency welcome the recommendations of the Infrastructure UK peer review of flood and coastal risk management (the peer review). As a result of the peer review s support for changes to the asset management programme, the Environment Agency will accelerate existing improvement plans. The Environment Agency estimates that implementing its efficiency plan and the peer review s recommendations will create efficiencies of 15% by April 2021 compared to 2014 to Savings will be seen from 2016 to 2017 onwards and there will be a real terms saving of 25 million a year from April Addressing the recommendations will require investment of around 22 million over 5 years. The Environment Agency has estimated some of the efficiencies since many of the projects required to implement the recommendations do not yet have fully developed business cases. Individual project benefits will be provided as each project s business case is developed. 2 of 32

3 Contents Response to the Infrastructure UK peer review of flood and coastal risk management... 1 Environment Agency's vision for asset management... 5 Transformation Programme... 5 Understanding assets... 5 Managing work... 5 Investing in the right places... 6 Optimising investment... 6 Making best use of investment... 6 Context... 6 Response to recommendations A and B... 7 Summary... 7 Customer involvement... 7 Setting a minimum standard for involvement in flood and coastal risk management (FCRM)... 7 Improving communication of the maintenance programme online... 8 Improved involvement since the 2013 to 2014 winter floods... 8 Customer legitimacy... 9 Funding allocation... 9 Service incentive mechanism... 9 Accountability... 9 Working with Regional Flood and Coastal Committees (RFCCs)... 9 Properties benefiting from maintenance measure (KPI965) Response to recommendation C Summary Improving governance across the capital investment programme Achieving asset management accreditation (ISO 55000) Response to recommendation D Summary Establishing an asset management action plan Creating asset management capacity - phase 2 (CAMC2) Finance systems Long-term investment scenarios (LTIS) Data standards - Business Information Modelling (BIM) Timeline for BIM Response to recommendations E, F and G Summary Accelerating phase 3 of CAMC CAMC3 timeline Risk assessment level Central analytical and modelling of 32

4 Whole-life asset investment Response to recommendation H Summary Current supply chain model Better use of the supply chain Long-term maintenance settlement Response to recommendation I Summary Partnership funding review Simplifying the grant approvals process (grant web portal) Supporting risk management authorities (RMAs) with CAMC RMA capacity building Response to recommendation J Summary Conveyance KPI Dredging locations Channel maintenance handbook Response to recommendation K Summary Dealing with third party asset guidance Low-risk uneconomic assets Asset management efficiency plan Table 2 - Efficiency based on 176m revenue funding Year Total to 2021 Source Activity/project 15/16 16/17 17/18 18/19 19/20 20/21 20/21 AM Programme CAMC AM programme Carbon saving AM Programme CMMS on the cloud AM programme Ops managers efficiency plan AM programme Effectiveness (protocol) AM programme asset inspection ipad app* AM programme Joint T98/PSRA inspections* Operations National Fleet Services AM programme CAMC3 - allocation Peer review CAMC3 - modelling Peer review CAMC 3 - optimisation Peer review ISO Peer review Better use of supply chain Total in year efficiency Culmulative in year efficiency M Explanation of efficiencies Appendix Recommendations in full of 32

5 Environment Agency's vision for asset management Transformation Programme The Environment Agency is transforming how it manages its assets. It is moving from paper-based working and a find and fix approach to a proactive, predict and prevent approach using digital systems. To do this, the organisation needs better information about how different assets work together as a system, along with historical condition data, so that it can make reliable predictions. It will achieve this through the Creating Asset Management Capacity (CAMC) programme. When CAMC is complete, Environment Agency staff will be able to access asset level data and target the most appropriate work to the right place. Getting asset management work right first time will save money and improve the flood risk management service. By 2021 the Environment Agency will be at the forefront of asset management. By implementing the recommendations of the peer review it will bring asset management up to the highest standards, meet asset condition targets and save around 15% ( 26 million) a year from 2021 and have achieved around 80 million worth of efficiencies The Environment Agency will improve the safety and security of people and property protected by flood risk assets. The organisation wants to be more confident when it makes investment decisions, carrying out work in the most critical places and keeping England's flood risk assets in good working order. To make sure this happens, it wants to improve its asset management capabilities by better understanding what assets it has, how they perform and what it needs to do to keep them working well. Understanding assets Asset data is complex and diverse and it is difficult to make it easily accessible to Environment Agency staff and others. The Environment Agency recognises the opportunity that developments in information mobility, mobile technologies and analytics solutions offer. These systems will also provide greater insight into asset degradation, the effectiveness of past work and predicted future actions. Knowing more about assets means the Environment Agency will focus investment where it will be most effective. It will increase knowledge of assets by improving the data recorded and information systems. It will continue to encourage others to manage their assets to the same standards so that there is no weak link in the lines of defence. Managing work Phase 2 of the Creating Asset Management Capacity programme (CAMC2) will improve the organisation's approach to planning maintenance work, generating work schedules and recording work done to an asset. The Environment Agency s central planning team will be able to generate work orders to assets and request when the work is needed by. The team will be able to track progress and record the time and costs of the work. They will know when the work is complete and the final condition of the asset. Fewer people will be managing the work, which will be easier to track and report on. The Environment Agency has already reduced its staff by 180, so this capability is urgently required to support the current workforce. Managing work centrally will allow the Environment Agency to react more quickly during flooding or to respond to an environment incident. Using field technology such as tablets, it will be able to instruct and record work activities, allowing it to better target work where it is needed. CAMC2 will also establish the Environment Agency s efficiency baseline, from which future efficiencies and progress in achieving the 15% savings will be measured. CAMC2 will produce a national maintenance programme based on the same work standards and work activities across the country, ensuring consistency of maintenance service. The Environment Agency will improve data sets such as height and crest level of defences. This will improve risk mapping in the National 5 of 32

6 Flood Risk Assessment tool (NAFRA), which, in turn, will improve assessment of flood risk benefit used in prioritising maintenance work. Investing in the right places CAMC2 will replace the current approach to maintenance where the Environment Agency considers the identified and minimum needs of asset systems. Currently the organisation funds all systems minimum needs and those identified needs of the highest cost benefit ratio where possible. Using CAMC2 the Environment Agency will fund maintenance at asset rather than system level and provide higher maintenance standards to assets with greatest risk and benefit. This will make sure that it allocates both capital and revenue funding to the most critical assets, protecting the greatest number of people and property. Optimising investment Phase 3 of the Creating Asset Management Capacity programme (CAMC3) will introduce a simplified approach to capital allocation for the Environment Agency and other risk management authorities. The Environment Agency will optimise its investment programmes using multi criteria techniques and financial modelling. This will include considering factors such as properties protected, benefit cost and partnership funding to identify the most beneficial schemes and prioritise these in a programme. CAMC3 will enable scenario modelling to compare different funding options, changes in criteria and different outcomes. This will allow the Environment Agency to accommodate changes in funding and planning with minimal impact on outcomes and with fewer staff. Making best use of investment Flood risk management is not just a task for the Environment Agency. Local authorities, internal drainage boards (IDBs) and the public contribute. The Environment Agency will use public service co-operation agreements (PSCAs) more widely to share maintenance work between risk management authorities, resulting in savings to both parties. It will make better use of suppliers for maintenance and incident response. It will also use framework contractors more to carry out incident response activities such as closing floodgates, clearing watercourses and trash screens, sandbagging defences and erecting temporary defences. Context The Environment Agency has permissive powers to manage flood and coastal defences with a value of 24 billion and supervise assets worth a further 10 billion across England. The average benefit to cost ratio of maintaining these assets is around 15:1. The Environment Agency's maintenance review document 'Technical and legal background to asset maintenance' shows how the overall benefit cost of asset maintenance has been derived. Investing in asset maintenance makes sure assets operate when they are needed, reduces asset deterioration, extends asset life, and reduces flood risk to people, property, businesses, infrastructure, and agricultural land. In 2014 to 2015 the work of the Environment Agency and other risk management authorities saved the economy 1.95 billion in flood damage costs. 6 of 32

7 Response to recommendations A and B Recommendation A - Improve customer legitimacy and deliver an outcomes focus Recommendation B - Improve customer legitimacy within programme prioritisation Summary The Environment Agency agrees with the need for more customer involvement in decision making and will liaise with and involve communities more, particularly on changes to maintenance programmes and the local impacts of those changes. At present, the Environment Agency consults on maintenance plans with non-government organisations, IDBs and the public before publishing the plans on the GOV.UK website. It is carrying out public opinion surveys to determine how effective its current work with communities is. It will use the results of the surveys to determine how to improve consultation with the public and others in the future. The Environment Agency will continue to publish its plans online and make them easier to follow so that people can readily find the location they are interested in, what work is planned and when it will be done. A longer term funding settlement would enable the Environment Agency to develop longer term maintenance plans. This would improve liaison with customers and give greater confidence in the Environment Agency's ability to implement the plans. Improved customer liaison will allow the Environment Agency to: inform others of the maintenance plans; manage expectations about what maintenance can and can t be done; and make maintenance decisions clearer identify if it needs to make changes to the proposed programme (for example, the timing of maintenance work) involve others to identify possible opportunities for efficiency, improved cost effectiveness and a more coordinated approach with other organisations Greater involvement will also highlight opportunities for local communities, the public, landowners or partner organisations such as IDBs to carry out work where the Environment Agency plans to reduce or stop maintenance. The Environment Agency s river maintenance pilots in 9 locations explored opportunities to let landowners carry out maintenance. The findings will inform the incorporation of flood defence consents into the environmental permitting regime later in Customer involvement Setting a minimum standard for involvement in flood and coastal risk management (FCRM) The Environment Agency s proposed minimum approach to involvement is that all its Areas must involve important interested groups in the annual flood and coastal risk management (FCRM) maintenance programme. Each Area should hold a face to face meeting (during September, October or November) with the main interested groups to inform them of the maintenance programme, discuss any changes needed and look for opportunities to coordinate maintenance work. As a minimum, the Environment Agency will liaise with IDBs (where these exist), groups that have expressed concerns and that have a significant interest in the maintenance programme, and Regional Flood and Coastal Committees (RFCCs) who consent the programme. The Environment Agency work with Natural England, where consent for work is needed. Area teams also involve other risk management authorities, particularly lead local flood authorities, in the maintenance programme. Areas will present a report on the maintenance programme to their RFCC each January. Environment Agency Areas will also consider (subject to the interest and concerns of local interested groups) district and parish councils; National Farmers' Union (NFU) and Country and 7 of 32

8 Land Association representatives; representatives from fisheries and angling trusts; the Royal Society for the Protection of Birds (RSPB); Wildlife Trusts; and the Canal and River Trust. Areas will explore ways to involve landowners indirectly through these groups. Improving communication of the maintenance programme online The Environment Agency will improve how it communicates the maintenance programme on GOV.UK to make the language and presentation more accessible. CAMC2 will improve data quality on the maintenance programme, sharing a more detailed and accurate picture in a consistent way that is more meaningful to the public. The Environment Agency will make sure it develops CAMC2 to provide national efficiencies and improve communications, for example, by creating a user friendly national map showing annual maintenance programmes. Improved involvement since the 2013 to 2014 winter floods Maintenance of watercourses became high profile through the media coverage of the winter floods of 2013 to As a result, the Environment Agency has committed to improve how it liaises with and involves partners and communities on watercourse maintenance. It will involve others in making decisions about and carrying out maintenance activities, giving communities confidence that public money is being spent wisely. One of the Environment Agency's main goals is for people and communities to be better prepared for and able to take action to manage their flood risk. The organisation will help communities and partners understand their role and responsibilities and the role and responsibilities of others. For example, it will improve its advice on resilience measures by updating and publishing guidance documents for self-help on GOV.UK. This will help people and communities understand how they can get involved and take action to protect themselves more the risk of flooding. During 2014 to 2015, the Environment Agency carried out a number of initiatives to better understand the evidence from staff and external groups, as well as testing new approaches. These initiatives included: A joint river maintenance project with Defra looking at 9 pilot locations to inform maintenance regulation through the environmental permitting regime and improve involvement with landowners and communities. A desk-top study in consultation with partners including internal drainage boards to identify 1,700 potential locations where dredging could improve river flows. A further review of these sites is being carried out to understand more about the potential flood risk and environmental benefits. A market research based project including Environment Agency staff and external interested groups to better understand current involvement in flood and coastal risk management maintenance and what is and isn t working. Involving internal drainage boards on precept funded programmes and determining the level of general drainage charge for the agricultural maintenance programme in the Anglian committees. Setting up public sector cooperation agreements with internal drainage boards (IDBs) and other risk management authorities to use resources effectively and efficiently to carry out maintenance activities. To date, the Environment Agency has agreements in place with 22 IDBs, with a further 31 agreed in principle. Planning to implement the effectiveness programme in National Environment Agency teams will lead this programme that will help manage and better plan resources for involving and supporting communities where the maintenance protocol is being applied. Field services benchmarking. This work has focused on reviewing the management information the Environment Agency currently has and what it needs in the future to effectively measure field services activity. 8 of 32

9 Customer legitimacy Defra and the Environment Agency note the use of public consultation, and in particular, customer challenge groups, in the water industry to gain support for business plans and gauge willingness to pay. Defra and the Environment Agency will encourage RFCCs to consider how they can use the views of local communities in making decisions about funding raised locally, particularly local levy. This will need to be balanced with a clear rationale for central government funding, which will be allocated to maximise the benefits at a national level. The Environment Agency publishes its commitments in its corporate plan and scorecard: which it reviews each year. The scorecard currently includes a measure of percentage of assets maintained at target condition. Defra will agree and establish a new risk based measure of its expectations for the Environment Agency s asset management in line with the recommendation in the peer review. The Environment Agency routinely carries out public opinion surveys after significant flooding. The surveys capture the views and experience of people who were flooded and their assessment of the performance of the Environment Agency and other Category 1 responders 1. Surveys include questions to determine public opinion on maintenance and flood protection. The Environment Agency will use the responses to inform future involvement and maintenance practice from Funding allocation The Environment Agency allocates maintenance funding based on a benefit cost ratio of a flood risk system. This is done centrally through a national allocation team using national criteria. This ensures that funding is distributed to the Areas in the most cost effective way possible, is in accordance with HM Treasury Green Book guidance and provides fair and transparent allocation based on risk and value for money. Defra and the Environment Agency believe that this is the right approach as it is consistent across the country, avoids local bias and achieves the best overall return on public investment. Service incentive mechanism While Defra and the Environment Agency note that the service incentive mechanism is useful for monitoring water company customer satisfaction, as this focuses on telephone and other interactions between customers and water companies, they believe that public opinion surveys are the best way to gauge local community satisfaction with the Environment Agency. Accountability Defra is accountable for how floods funding is spent and is held to account by the National Audit Office, the Environment, Food and Rural Affairs (Efra) Committee and the Public Accounts Committee. Communities, through local flood action groups, are able to influence local choices through Regional Flood and Coastal Committees. The Environment Agency takes local choices and other local preferences into account when developing the national programme. Working with Regional Flood and Coastal Committees (RFCCs) RFCCs are an important link to the wider community in their areas. They bring together representatives of lead local flood authorities (LLFAs) and independent members to plan flood risk management in each region, consent to Environment Agency investment programmes and to provide a link between the Environment Agency, LLFAs and local communities. 1 A category 1 responder is defined in the Civil Contingencies Act 2004 and includes local authorities, emergency services and the Environment Agency 9 of 32

10 Defra and the Environment Agency continue to work with RFCCs to make decision making clearer. Defra will ask representatives of the water industry to explain how they use customer challenge groups to RFCC chairs, so that they can consider using similar community forums. The Environment Agency is discussing with RFCCs how local representation could be improved through Committees and whether there is scope for more transparency and public accessibility to Committee proceedings. Some suggested improvements include: allowing RFCCs to develop a web based community of practice, where the RFCC, the public and partners can liaise on particular issues, exchange ideas and gauge local opinion, encouraging liaison and interaction with public and partners; giving clear identities/brands for RFCCs where people know who they are and what their role is allowing involvement with the public where comments/questions/concerns could be raised with the Committee to consider and respond to. Properties benefiting from maintenance measure (KPI965) Following a piloting exercise, undertaken during 2015, the Environment Agency will introduce an outcomes focused measure of risk (KPI965) during 2016 to KPI965 takes into account the potential damage, as a result of an asset's condition, to residential property, non-residential property, major roads, railways, arable land and grassland. The Environment Agency currently use KPI965 as an operational measure for assessing the risk associated with asset failure. It is in the process of developing another KPI to measure channel conveyance. When complete, this measure will enable comparison of the benefits of work on defences and structures and the benefits of channel conveyance work. This will improve evidence for investment decisions on assets and channels and help develop future coherent watercourse maintenance plans. Response to recommendation C Recommendation C - Improve governance and accountability Summary The Environment Agency is clarifying accountability for the FCERM investment programme and has introduced the 5 case HM Treasury business case model for all major projects and programme management. This applies to projects within the capital programme, the majority of which include repairs or replacement of existing assets. The Environment Agency will pursue ISO and aim to achieve accreditation by April This will help to improve clarity in governance and help support the introduction of Building Information Modelling (BIM) standards. Work on these initiatives has already begun. By improving governance and accountability and introducing ISO 55000, the Environment Agency estimates that it will make an annual efficiency saving of up to 0.5 million a year by 2021 and a total saving of 1.3 million between now and Improving governance across the capital investment programme The Environment Agency will make capital programme governance and accountability clearer and work with Defra to simplify the approvals and governance of major projects. To do this, the Environment Agency is carrying out the following activities: a national project assurance service, which went live on 1 December 2014, covering the role of project assurance boards (PABs) that is radically simplified simplifying the PAB assurance process, which includes aiming to complete assurance in 2 to 4 weeks and provide clear assurance to nominated scheme of delegation approving officers. 10 of 32

11 simplifying the FCERM appraisal guidance and supplementary appraisal guidance notes and making them more accessible using the HM Treasury 5 case model for major projects - the Environment Agency is extending this best practice approach to all projects, standardising business case documentation to be consistent with the rest of government. Major projects already follow the 5 case model and full implementation across the capital programme is expected by the end of the year reinforcing the use of the short-form application for risk management authority projects up to 250,000, simplifying the assurance processes for smaller projects There are some modest efficiency savings from these pieces of work, with an average annual saving of around 300,000. By simplifying the processes, taking a risk-based approach and simplifying project assurance and approval, the Environment Agency will spend less time managing project approvals and more time on implementing projects. The Environment Agency estimates that 150 projects (based on a typical programme in 2013 to 2014) progress through formal approvals processes each year, with an average saving of 10 days per project. Achieving asset management accreditation (ISO 55000) The Environment Agency carried out an assessment of performance against ISO in The results showed that it needed to develop asset management further before it could gain accreditation. Since then, the organisation's development plan has included the recommendations from the peer review and other improvements required to meet the standard. The Environment Agency believes that by implementing the current plan and the recommendations of the peer review that it would be able to achieve accreditation within 2 years. The Environment Agency has allowed for the costs of achieving accreditation within its business plans for the next 2 years. These are mainly staff costs in the region of 100,000 ( 50,000 a year for 2 years) and will yield a modest saving of around 200,000 a year. Achieving accreditation will increase the status of the Environment Agency as a professional asset management organisation, bringing it in line with other infrastructure operators such as Network Rail, Transport for London and the Highways Agency. ISO accreditation will also help introduce standardised processes, with clear accountability and responsibility for implementing them. This will increase awareness of how everyone contributes to the organisational goals and will help: improve clarity of accountability (the line of sight) through the organisation embed a risk-based approach to managing assets improve long-term asset maintenance and replacement planning improve value for money and statutory compliance, giving interested groups more confidence 11 of 32

12 Response to recommendation D Recommendation D - Improve asset management datasets Summary The Environment Agency needs to improve the quality of asset data. To achieve this, the organisation is introducing an asset data improvement plan to focus on improving and collecting the most critical asset data. It aims to have 90% of these data requirements completed for the highest risk assets by April 2017 and 100% completed by April The process will depend on future systems such as CAMC2 and CAMC3, which will enable improved data storage and access. CAMC2 will be key to capturing and using future data and will become operational from April CAMC2 has an approved business case, which identifies significant savings totalling around 8.8 million a year. Some efficiency has already been claimed as part of the recent reorganisation within the Environment Agency. The remaining efficiencies amount to around 5 million a year from 2017 and include the benefits of improving asset data. The CAMC2 efficiency plan shows that the 2 main areas of efficiency will be reduced whole life cost of maintenance (reduced rates for doing work), with a saving of 3 million a year, and improved investment decision in maintenance (better targeting of where the Environment Agency carries out maintenance work), with a saving of 2 million a year. This means that the total savings from implementing recommendation D are 5 million a year by 2021 and a total of 19 million by Establishing an asset management action plan The Environment Agency will make asset information widely available and clearer to support decision making. Supported by national modelling systems, the organisation will continue to develop an asset focused approach, using asset performance as an important factor influencing investment. It is developing a data improvement training programme for staff so that they understand the need to continually monitor and improve data and keep records up to date with the latest information. In the long term the Environment Agency will ensure data quality through the Building Information Modelling (BIM) programme, which will define standards and determine future information handling systems, resources and processes. Some asset data improvements are underway through the State of the Nation work This work includes capturing recent flood outlines, updating the flood map and capturing specific asset information such as crest height, which is essential for flood risk modelling.there is a backlog of such data which is being captured centrally and made available to update national processes. A longer term plan for improving and ensuring asset data quality is underway through the CAMC2 project, including a focus on data and information skills and system needs. The medium-term asset data improvement plan will identify important asset datasets and work to improve the quantity and quality of asset data. Important data that is needed to improve assets includes height of defences, repair history, condition history, asset owner and asset maintainer. Future data requirements will include maintenance/repair costs, asset performance measurements, serviceability metrics, flood impact history and records of near misses. 12 of 32

13 Creating asset management capacity - phase 2 (CAMC2) The Environment Agency has a detailed business case 2 for CAMC2, which shows significant revenue and capital expenditure efficiencies of 8.8 million a year by 2016, when the system and business change is fully embedded. Some savings have already been made by reducing the number of asset management and field team staff by 180 as part of the FCRM review. For this reason, the Environment Agency has not included all the benefits from CAMC 2 in the projected efficiency savings realised by implementing the recommendations of this review. The Environment Agency relies on implementing CAMC2 for the long-term sustainability of its organisational structure and the resources committed to work planning and management. It is currently operating with higher risk, and diverting staff from other activities (such as withdrawing from maintaining some assets, supporting the operations efficiency plan and keeping asset records up to date) to support maintenance planning, while waiting for CAMC2 improvements to be implemented. CAMC2 will provide a work management system. This will provide centrally generated work orders for field staff to carry out asset inspection and repairs. It will also allow field staff to record in the field their work, which assets they have worked on and the time itaken to complete the work. As well as saving time, this information will allow improvements in estimating costs, which will improve planning using recorded evidence. As asset information improves, it will enable better prediction of asset performance, allowing asset interventions before failure occurs. This will reduce the risk of asset failures during flood events. CAMC2 will also provide a significant data management capability. Current Environment Agency systems are limited in the data they hold and access to that data is also restricted. CAMC2 is designed to hold significantly more asset information, essential to support business processes. For example, if records show significant repeated repair of a particular type of floodgate, the Environment Agency may decide that the floodgate is the wrong design and replace it rather than continue to maintain and repair it. The long-term future benefits of this are reduced spend on asset repair and reduced flood risk from asset failure. These benefits will be realised in approximately 3 to 5 years once the asset data is good enough to support this type of decision making. Finance systems The Environment Agency has upgraded its Integrated Business Information System (IBIS) finance system as part of the integration of finance IT across government. The new system includes the capability to manage multiple funding streams for FCRM projects. Further integration with the finance system will be possible through the introduction of CAMC3. The Environment Agency is also developing a grant web portal in response to feedback from the partnership funding evaluation, which identified improvements to the approval and payment processes. The grant web portal will simplify the grant application process, removing the paper based system allowing grant application and award through the internet and allow tracking of the process by Environment Agency finance systems. Long-term investment scenarios (LTIS) The Environment Agency s long-term investment scenarios (LTIS) study was published alongside the 6-year capital investment plan early in LTIS was produced to provide a long-term estimate of future investment in flood risk based on various future climate and funding scenarios. There are some short-term estimations in LTIS, which are based on the capital funding available in the Environment Agency's 6-year capital investment plan. LTIS uses the estimated state of flood and coastal erosion risk management (FCERM) assets at the end of the 6-year programme as the starting point for the long-term scenarios. Moderate changes in maintenance funding over the next 6 years, as estimated by Environment Agency efficiency plans, and the impact of this on asset condition are within the scenarios assessed in LTIS. Creating asset management capacity (CAMC), Phase 2 full business case, version 4.0, Environment Agency, January of 32

14 Data standards - Business Information Modelling (BIM) The Environment Agency is introducing Business Information Modelling (BIM) standards. This will provide more consistent information needed to manage projects and support asset management decisions. Using BIM the Environment Agency will, for example, move from the current system of storing asset maintenance instructions in manuals to having maintenance instructions on tablets in the field. BIM will also help the Environment Agency in its quest for PAS 55/ISO accreditation. Timeline for BIM The Environment Agency has introduced BIM standards into supplier framework documents and developed high level processes to align project and asset management practices to BIM and GSL. Plans are in place for the roll out of BIM, which include: April 2015 to April Review current standards and minimum technical requirements. From April Procure BIM driven projects and introduce the use of digital plan of works on all new projects and those going into detailed design. From April Expand and enhance data management and modelling capability within projects and asset management. Response to recommendations E, F and G Recommendation E - Develop asset analytical and modelling capability Recommendation F - Develop risk-based programme optimisation capability Recommendation G - Optimise on the basis of whole-life cost and benefits Summary The Environment Agency is planning, through the Creating Asset Management Capacity (CAMC) programme, to improve data quality and IT supporting systems. This recommendation encourages acceleration of CAMC2 and bringing forward work on CAMC3. The Environment Agency has considered accelerating Phase 2 but, as CAMC2 is in progress, with already ambitious implementation dates linked to commercial arrangements with IT suppliers, it cannot introduce CAMC 2 sooner without unacceptable risk to the business. CAMC2 will continue to be implemented as a matter of priority. CAMC3 is a major business change programme that will help address recommendations E, F and G. As well as improving data quality CAMC3 will help provide a capability for allocation (capital and revenue), scenario modelling, and analysis and programme optimisation. In response to the review, the Environment Agency has brought forward plans for CAMC3 and will work towards a business case approval early in 2016, enabling system procurement during 2016and the use of some system components such as allocation from CAMC3 will allow the Environment Agency to consider different scenarios for implementing both the capital and maintenance programmes, which will help identify the most effective programmes to minimise costs and maximise outcomes. CAMC3 will also help identify the optimum balance of capital and maintenance to support the Environment Agency's asset base. By using factors such as asset lifespan and deterioration rates, the Environment Agency will be able to plan asset replacements and major asset repairs before failure occurs. Such interventions will reduce the risk of flooding from asset failure and the additional costs of emergency asset repair. 14 of 32

15 Estimated efficiencies from CAMC3 are 7 million a year by 2021, with benefits realised from 2017 when CAMC3 will be used for capital and maintenance allocation. Total efficiencies are estimated at 14 million by The 7 million annual efficiencies will be achieved by the following: Centralising programming teams into a national service and providing a combined programming service, reducing the number of people involved in this activity as well as making the processes more efficient. Estimates show a saving of about 0.5 million a year. Optimisation will enable the right balance between capital and revenue investment in the FCERM asset base. For every pound invested in maintenance, there is a return of around 15 and for capital investment there is a return of 8. By achieving the right balance in capital and maintenance funding a greater return on overall investment can be achieved with more efficiency. Estimates show that the Environment Agency could achieve around 3 million benefit from optimisation each year. Targeting investment allows the Environment Agency to direct funding at the most cost beneficial assets (currently done at a system level which is not as targeted). The Environment Agency will prioritise asset repair or replacement by knowing the assets with the greatest benefit cost ratio and by investing in these to optimise benefits. Estimates show around 2 million benefit each year. By understanding asset performance better (knowing when assets might fail and therefore when they might need repairing or replacing), the Environment Agency can plan and carry out work in a more measured way before assets fail rather than through inefficient emergency works. Assuming a 20% saving per project on 5 failures a year at an average cost of 1.5 million each, the Environment Agency estimates around 1.5 million benefit from this approach each year. Accelerating phase 3 of CAMC The Environment Agency will accelerate CAMC3, running concurrently with CAMC2 for a time, and aims to have CAMC3 operational and realising the full benefits by Where possible, it will implement some aspects of the system during 2017 in order to realise benefits earlier. CAMC2 will provide business processes and IT support to carry out asset maintenance work more efficiently. CAMC3 will introduce business processes and IT systems to support capital and revenue allocation and manage the capital and maintenance programmes. Phase 3 will also include improvements, based upon operational experience, to the Asset Information Management System (AIMS) or asset inventory, planning systems and future proofing the IT infrastructure that supports asset management. The main areas of work supported by CAMC3 will be: the transition of risk and data between operational asset management and capital projects, for example, the handover and assurance between scheme and operations when works are completed managing partnership funding contributions, for example, tracking financial contributions and contributions 'in kind' for maintenance tracking and reporting scheme metrics, for example, project and programme level outcomes, milestones, efficiencies, operational and embedded carbon, financial accounting and whole life operational cost savings tracking project gateway processes and the assurance and the approvals between gateways the process, tools and support for main project roles such as senior user, project sponsor, project executive and project manager tools and support for schemes implemented by local authorities and IDBs storing, transmitting and managing important asset data and information financial and outcome modelling and scenarios, for example, assessing the impacts of changes in funding on outcomes 15 of 32

16 analysis and optimisation tools to help with achieving the right balance between capital and maintenance investment on assets CAMC3 timeline Key Project Milestones Evaluation of current IT and business processes to support future process and agreement of scope Date Complete Strategic outline case Jan 2016 Outline business case. April 2016 Final business case. October 2016 Implementation Jan 2017 December 2017 Risk assessment level The Environment Agency currently uses an asset system risk matrix to target investment in asset maintenance. To improve investment decision making and targeting, it plans to focus on individual assets, identifying the most critical assets within a system. Once asset risk is known it will enable targeted maintenance and investment to the most critical assets. Identifying low risk assets will help develop a programme for reducing maintenance or of encouraging others to maintain assets. The asset system approach for maintenance planning and scheduling will be retained. Central analytical and modelling The Environment Agency s recent reorganisation and ongoing investment in IT systems will enable a single central programming team to carry out analysis and modelling to support local decision making. This programming team, working with local project teams will manage programme risk, programme contingency and ensure programme optimisation using the tools provided through the CAMC3 programme. Whole-life asset investment The Environment Agency will continue to invest in assets based on their whole-life benefit costs. At present it does this using system asset management plans (SAMPS), which include estimates of future asset maintenance costs and replacement costs. These costs are estimated locally and there is no national cost data to help consistent estimating. CAMC2 will be able to generate future maintenance and replacement costs based on unit rates and historic costs, providing more consistent and reliable cost estimations. The overall costs of maintaining the Environment Agency asset base remains more or less stable. This is because approximately 70% of the capital programme replaces existing assets. As these ageing and inefficient assets are replaced with newer assets, their maintenance needs are reduced, which counters any additional maintenance costs from newly built assets. New asset design is also subject to passive design principles, which reduces or removes the need to operate an asset, helping to reduce whole life costs. 16 of 32

17 Response to recommendation H Recommendation H - Develop contractual partnerships Summary The Environment Agency spends around 50% of its total operating costs with third parties to achieve business objectives. This includes routine maintenance work, incident response, asset refurbishment, and supplying supporting labour plant and materials. This model is very similar to that operated by many large private sector organisations. The Environment Agency already uses the supply chain to support routine maintenance work, for example, the majority of mechanical and electrical instrumentation and control assets (MEICA) work is provided by external contractors. In order to provide a reliable and effective incident response capability, the Environment Agency has made a business decision to retain an intelligent client capability and a core workforce. Outside of incidents this workforce maintains the organisation's flood risk assets. The Environment Agency uses the supply chain and partners to supplement this resource in both incidents and asset maintenance. This core workforce decreased from 1357 in 2005 to 1076 in 2012, supplemented by 319 (23%) from contractors, consultants and the wider business. The size and make up of this resource is regularly reviewed and adjusted accordingly to continue to provide further efficiencies, while maintaining a critical incident response service level and intelligent client capability. Of the 171 million spent on asset maintenance last year (2014 to 2015), the Environment Agency spent approximately 68 million (40%) on contract costs, of which around 40 million was on maintenance work provided by its supply chain partners. The Infrastructure UK route-map recommendations also suggested that the Environment Agency could use its supply chain more efficiently. The Environment Agency will implement these recommendations, reviewing existing supplier contracts to establish the scope for increasing the use of the supply chain. Where there are clear benefits and the risks are acceptable, the Environment Agency will use the supply chain more to support emergency response. This may include, for example, operating floodgates, clearing blockages or laying sandbags under the direction of the Environment Agency's command structure. With the support of a longer term revenue settlement, the Environment Agency estimates that by 2021 it could make a saving of 2.3 million a year and a total of 7.5 million by using the supply chain on maintenance contracts and incident response more efficiently. The organisation estimates that it would save around 0.5 million a year on its 30 million a year maintenance contracts; a saving of around 1.5%. It could negotiate these savings by offering 3 to 5 year contracts instead of single year contracts. Current supply chain model The Environment Agency has 25 geographic operational teams based in 16 operational areas, with another supporting the Thames barrier, whose main role is to operate and maintain flood risk assets and respond to flood incidents. The organisation uses national frameworks to procure plant and small tools. These contracts are supplemented by more local contracts where greater flexibility is required, mainly in flood risk locations such as market towns that may not be served as well through major suppliers. This approach reduces transportation costs, carbon emissions and supports local contractors and the government targets on using small and medium-sized businesses (SMEs). While some ad hoc local arrangements using local suppliers at short notice do take place, the Environment Agency has national frameworks in place for supplying aggregates and sandbags around the clock to meet incident response demands. The scale of the procured services depends very much on the annual asset maintenance funding secured in a given year and the challenges the Environment Agency deals with in incident 17 of 32

18 response. Incident response is a 24/7 business and therefore in a major event more supply chain partner resource is used to supplement the Environment Agency's own resource in order to maintain the level of response. In 2013 directors agreed that the Environment Agency workforce would meet 100% response needs for river flooding together with 50% of coastal flooding needs for the first day of the incident. This meets about 80% of the Environment Agency's overall short-term incident needs, with the remaining 20% supported by contractors and the wider business. The Environment Agency already uses the supply chain extensively in the flood recovery stage, and has further provisions in place for supply partners to support during incidents. For example, the supply chain was very much part of the successful integrated team approach that allowed 135 million of recovery works to be carried out efficiently following the flooding during the winter of 2013 to 2014, ensuring communities were protected by autumn Better use of the supply chain If longer term funding was more certain, for example for the next 3 to 5 years, the Environment Agency would be able to enter into partnership contracts for more than 1 year at a time and include work that is less frequent. This would build working relationships and trust, which would be essential if contractors were to support incident response. The Environment Agency has developed the Water and Environment Management (WEM) framework to support the implementation of the capital programme and other programmes of work such as the organisation's environment programme and water management programme. The Environment Agency will seek to use suppliers within this framework to carry out more maintenance work and consider the possibility of these suppliers supporting incident response. For example, in the winter 2013 to 2014 floods contractors were used to supply pumps, transport, plant and provide supplies such as sandbags and aggregates. These were arranged locally using local suppliers at short notice. Since the nature of incidents is unpredictable, ideally longer term contracts with suppliers would guarantee a certain amount of work and enable more competitive rates. Potential efficiencies can be made by forward planning over longer time periods and by sharing plans with partners and the supply chain. Where possible, the Environment Agency will work with other operating partners alongside internal staff to operate as a single team. Long-term maintenance settlement The peer review recommended a longer term settlement for maintenance funding. The Environment Agency supports this, as it would provide greater stability in maintenance planning and believes there are many benefits and efficiencies from this approach A long-term funding settlement for maintenance would bring about efficiency savings. In total the long-term settlement contributes about 8.5 million to the efficiency plan and would provide a range of benefits such as: Certainty for the supply chain would enable longer term contracts with suppliers. This certainty will allow suppliers to plan and invest to improve efficiency. They will be able to offer greater cost savings and innovation and reflect this in their rates. Certainty for communities When liaising with communities there is uncertainty of maintenance funding from 1 year to the next. This means that there is a need to repeatedly liaise with communities and interested groups each time funding is confirmed. This also reduces the opportunities and incentive for communities to plan and carry out work themselves where funding is uncertain. Although a longer term settlement would not guarantee funding, it would give some reassurance and allow maintenance plans to be developed with greater certainty, reducing the amount of consultation required on those plans. Reduced administrative burden the current funding arrangement requires an annual cycle of maintenance assessment and funding allocation. A longer term settlement will reduce the amount of analysis and allocation required each year as plans become more stable. 18 of 32