T i t le: Roa d sRe fo rm IANo :D fT 00283 Impa c tA sses smen t( IA ) Da te :[TBC ] S tage :F ina l Sou rceo fin te rven t ion :Dome s t i c Typeo f measu re :P r ima r y leg i s la t ion Con tac tfo renqu i r ies: road s . re fo rm@d f t .g s i .go v .u k Leaddepa r tmen to ragency: Depa r tmen tf o rT ran spo r t O the rdepar tmen tso ragenc ies : H ighw a y sAge n c y HMT rea su r y Summa ry :In te rven t ionandOp t ions RPC :N /A Cos to fP re fe r red(o r mo rel ike ly )Op t ion To ta lNe tP res en t Va lue Bus inessNe t P resen tVa lue Ne tcos ttobus inesspe r yea r( EANCBon2 009p r i ce s) Inscopeo fOne -In , Measu requa l i f iesas OneOu t? £3,2 56m £0m £0m No NA Wha t isthep rob lemunde rcons ide ra t ion? Whyisgove rnmen t in te rven t ionnecessa ry? A c t io n fo rRoad sfound tha tthe in s t i tu t iona lf ramewo r kfo r the ma nageme n to f thes t ra teg i cr oadne two r k (SRN )b y theH igh wa y sAge n c y(HA )c rea te sco s tine f f i c ien c ie sfo r the ta xpa ye ra nddoe sn o tde l ive r the be s to u t come fo rroadu se r s .Rea so n s in c ludea la c ko f lo ng te rmce r ta in tyo nin ve s tme n t in thene two r k ,a wo r k ingcu l tu redom ina te db y thep ro ce s se so fw ide rgo ve rnme n tandnoco n t inuo u se x te rna lp re s su re fo r e f f i c ie n c y .A la rge in c rea se infund ingwa sa nno un ceda tthe la s tSpend ingRoundso theGo ve rnmen t wa n t s toen su re the in s t i tu t iona lf ramewo r kfo r thema na gemen to f theSRNisapp rop r ia teand ma x im i se s va lue fo r mo ne y .Mo regene ra l ly,g o ve rnme n t in te r ven t io n isne ce s sa r ybe ca u seroa d sarea l rea d yw i th in thepub l i cse c to r .Th i s isdue toe leme n t so f na tu ra l mo no po l y, ma jo re x te rna l i t ie sa nd l in k sw i tho the r ob je c t i ve ssu cha shou s inga nde co nom i cde ve lopme n t. Wha ta rethepo l icyob jec t ivesandthein tendede f fec ts? W i thre fo rmwea imtoa ch ie ve :( i )Ope ra t iono f theSRN tha tde l i ve r s mo ree f fe c t i ve lyw i thbe t te rva lue fo r mo ne yfo r the ta xpa ye randroadu se r ,andhen cesuppo r t se co nom i cg row th and( i i )An imp ro ve dse r v i ce to theroadu se ra ch ie ved w i thc lea re ra c co un tab i l i t yo f the ne two r kope ra to r toroadu se r s . Wea l sowa n ttoa ch ie ve the f i r s ts tep s inre fo rmqu i c k l y .Thee v ide n ceba see xp la in s tha taw ide ra ngeo f op t io n s fo rgo ve rnan ceo f thene two r kha vebeencon s ide red ,bu ttha tcu r re n t lywea re fo cu s ingo nre fo rm wh i ch i sa ch ie vab le in thesho r tte rm . Wha tpo l icyop t ionshavebeencons ide red , inc lud inganya l te rna t ivestoregu la t ion?P leasejus t i fyp re fe r red op t ion( fu r the rde ta i ls inEv idenceB ase ) Dono th ing :H ighwa y sAgen c yrema in sa sa ne xe cu t ivea gen c yw i th fund inga l lo ca teda nnua l ly f romD fT ' s budge tandno imp ro veme n t ins t ra teg i cd i re c t io nf romgo ve rnmen t . Op t io n1 :In s t i tu t iona lr e fo rmw i th le g i s la t io n-e s tab l i sh theHAa sago ve rnme n towne dcompa n yw i th g rea te rindepende n ceandf le x i b i l i ty,se to u ta Road In ve s tme n tS t ra te g yw i th fund ingce r ta in t yfo ranumbe r o fyea r sande s tab l isha fo rmo fs c ru t in ya nda c co un tab i l t ysee k ing to imp ro vee f f i c ie n c ya ndpe r fo rman ce . Th i so p t ionwou ldu sele g is la t ion toe s tab l isho rsuppo r tthe semea su re swhe reapp rop r ia te a nd i so u r p re fe r redo p t ionbe ca u se fund ingce r ta in t yunde rp inne db yle g is la t ion w i l lena b le longe rte rmco n t ra c t sand sho u ldse cu resupp l ycha inco n f ide n cea ndhe n cea s so c ia te de f f i c ie n tbeha v io u r . Op t io n2 :In s t i tu t iona lr e fo rmw i tho u t le g is la t ion-thesamemea su re sso fa ra s the yca nbea ch ie vedw i tho u t leg i s la t io n . W i l lthepo l icyberev iewed? I t w i l lbere v iewe d .I fapp l icab le ,se trev iewda te :0 8/ 2018 Doe s imp leme n ta t iongobe yondm in imumEUrequ i remen t s? N /A M ic ro <20 Sma l l Med ium La rge A reanyo f the seo rgan i sa t ion s ins cope ?I fM i c ro sno t e xemp te dse to u trea son inEv iden ceBa se . No No No No No T raded : Nont raded : Wha t i s theCO2e qu i va len tchange ing reenhou sega sem i s s ion s? (M i l l io nto nne sCO2equ i va len t ) N /A N /A IhavereadtheImpac tAssessmen tand Iamsa t is f iedtha t ,g iventheava i lab leev idence , i trep resen tsa reasonab lev iewo fthel ike lycos ts ,bene f i tsand impac to fthelead ingop t ions . S igne db y there spon s ib leSELECTS IGNATORY: Da te : 1 URN11 /1109Ve r .3 .0 Summa ry :Ana lys is&Ev idence Po l ic yOp t ion1 Des c r ip t ion : In s t i tu t iona lr e f o rmw i th leg i s la t ion FULLECONOM ICASSESSMENT P r iceB as e Y ea r 2013/14 PVB ase Y ea r 2013/14 COSTS(£m ) T imeP e r iod 0 Y ea rs 1 Ne tBene f i t(P resen tVa lue(PV) )(£m ) Low :£2 , 027m To talT rans i t ion (Con s tan tP r i ce ) Low Y ear s H igh :£6 ,457m Ave rageAnnua l 2013 / 14to £15m 2014 / 15 £11m B es tEs t ima te To ta lCos t (ex c l .T ran s i t ion )(Con s tan tP r i ce ) £11m H igh B es tEs t ima te :£3 ,2 56 m (P re sen tVa lue ) £10m £100 m £28m £269 m £10m £106 m Des c r ip t ionands ca leo fkey mone t isedcos tsby‘ma ina f fec tedg roups ’(2013 /14p r ices ,non d iscoun ted ) Co s to fo pe ra t ingnew mo n i to randwa t chdo gca pab i l i t ie s :£ 4mp .a .e s t ima te ,nora ngee s t ima te d. Co s ttonewcompa n yo fnews c ru t in yrequ i reme n t s :£ 4mce n t ra lp .a .,range£ 4m -£21m p .a . S ta f fco s tin c rea se –newco rpo ra tes ta f f ;£2 mpe ryea r. T ra n s i t io na lco s to fre fo rmin c lud ing D fT ,HA,co n t ra c te d ,co s t mo n i to ra ndwa t chdo gs ta f f :£11m -£15m. O the rkeynonmone t isedcos ts by‘ma ina f fec tedg roups ’ Re du c ingpo l i c yand le ga lf le x ib i l i t yfo rM in i s te r s tochanger oa di n ve s tme n tp lan sto ta ke in toa c coun tnew c i r cums ta n ce s . Re du c ingbudge ta r yf le x ib i l i tya c ro s sgo ve rnmen t ,po te n t ia l ly lead ing to le s se f f ic ie n ta l lo ca t iono fpub l i c fund s . Po te n t ia lco s t sfo ra d v i cea ndre sea r ch tode ve lo pea chR IS . BENEF ITS(£m ) To ta lT rans i t ion (Con s tan tP r i ce ) Y ear s Ave rageAnnua l To ta lB ene f i t (ex c l .T ran s i t ion )(Con s tan tP r i ce ) (P re sen tVa lue ) Low £0m £258 m £2 ,297 m H igh £0m £740 m £6 ,557 m B es tEs t ima te £0m £380 m £3 ,361 m Des c r ip t ionands ca leo fkey mone t isedbene f i tsby‘ma ina f fec tedg roups ’(2013 /14p r ices ,non d iscoun ted ) Imp ro veme n t s ine f f i c ie n cya ndva lue fo r mo ne y inde l i ve r ing : -Ma jo rca p i ta ls cheme s:£2 75mp .a .(ra nge£1 52mto£634m ) -Ca p i ta l ma in te nan cea ndre newa ls :£49mp .a . (norangee s t ima te d ) -Re so u r cema in te nan cea ndope ra t io n s :£57mp .a .(norangee s t ima te d ) Sa v ing sa c c rue to ta xpa ye rs . O the rkeynonmone t isedbene f i ts by‘ma ina f fec tedg roups ’ Po te n t ia lfo rbe t te rse r v i ce fo rroadu se r s. Impa c t so nUKe conom i cg row th th rough imp ro v ing theco nd i t io n s fo r thedome s t i csupp lycha in . Redu cedr i s ktode l i ve r yo fH ighwa y sAgen c ycap i ta lp rog rammeon t ime. Keyas sump t ions /sens i t iv i t ies / r isks D iscoun tra te(% ) 3 .5 Le g is la t io nshou ldbesu f f i c ie n ttoa ch ie veasu s ta ine dcomm i tme n ttomu l t iyea r in ve s tme n tp lan s ,wh i ch ca u se s thesupp lycha in tocha ngebeha v io u ra c co rd ing l y ; i f th i s isno tt rue thebe ne f i t sw i l lbes ign i f i ca n t ly lowe r .The Road In ve s tme n tS t ra te g yma y lead toc y c l i ca lspend ingpa t te rn sa so b se r ved inregu la ted se c to r s(e .g . Wa te ra ndRa i l ) .Thepe r fo rman cespe c i f i ca t io nshou lde s ta b l ishc lea ro b je c t i ve s( in c lud ing so c ia la nde n v i ronme n ta lgoa ls ) ,bu t ma yca u sepe r ve r se in ce n t i ve s i faba lan ceda pp roa ch isno tta ken . BUS INESSASSESSMENT(Op t ion1 ) D i rec t impac tonbus iness(Equ iva len tAnnua l )£m: Cos ts : £0m B ene f i ts : £0m Ne t : Inscopeo fO IOO? Measu requa l if iesas £0m 2 No NA Summa ry :Ana lys is&Ev idence Po l ic yOp t ion2 Des c r ip t ion : In s t i tu t iona lr e f o rmw i tho u t leg i s la t ion FULLECONOM ICASSESSMENT P r iceB as e Y ea r 2013/14 PVB ase Y ea r 2013/14 COSTS(£m ) T imeP e r iod 0 Y ea rs 1 Ne tBene f i t(P resen tVa lue(PV) )(£m ) Low :-£ 263 m Tota lT rans i t ion (Con s tan tP r i ce ) Low £11m H igh £15m B es tEs t ima te £11m Y ear s H igh :£3 ,268m B es tEs t ima te :£842m Ave rageAnnua l To ta lCos t (ex c l .T ran s i t ion )(Con s tan tP r i ce ) 2013 / 14to 2014 / 15 (P re sen tVa lue ) £9m £94 m £27m £263 m £10m £99 m Des c r ip t ionands ca leo fkey mone t isedcos tsby‘ma ina f fec tedg roups ’(2013 /14p r ices ,non d iscoun ted ) Co s to fo pe ra t ingnewmo n i to randwa t chdo g ca pab i l i t ie s :£4mp .a .e s t ima te ,nora ngee s t ima te d . Co s ttonewcompa n yo fnews c ru t in yrequ i reme n t s :£4mce n t ra lp .a . ,range£4m£21mp .a . S ta f fco s tin c rea se –newco rpo ra tes ta f f ;£1mpe ryea r ,range£1m£2mp .a . T ra n s i t io na lco s to fre fo rmin c lud ing D fT ,HA,co n t ra c te d ,co s t mo n i to ra ndwa t chdo gs ta f f :£11m -£15m. O the rkeynonmone t isedcos ts by‘ma ina f fec tedg roups ’ Re du c ingpo l i c yf le x ib i l i ty fo rm in i s te r s . Po te n t ia lco s t sfo rre sea r cha ndad v i ce tode ve lo pea chR IS . BENEF ITS(£m ) To ta lT rans i t ion (Con s tan tP r i ce ) Y ear s Ave rageAnnua l To ta lB ene f i t (ex c l .T ran s i t ion )(Con s tan tP r i ce ) (P re sen tVa lue ) £0m Low £0m £0m H igh £0m £380m B es tEs t ima te £0m £106m £3 ,361 m £942m Des c r ip t ionands ca leo fkey mone t isedbene f i tsby‘ma ina f fec tedg roups ’(2013 /14p r ices ,non d iscoun ted ) Po te n t ia l imp ro vemen t s ine f f i c ie n c yandva lue fo r mo ne y inde l i ve r ing : -Ca p i ta l ma in te nan cea ndre newa ls :£49mp .a .( ra nge£0mto£49m ) -Re so u r cema in te nan cea ndope ra t io n s :£57mp .a .( ra nge£0mto£57m ) -Ma jo rca p i ta ls cheme s :ce n t ra le s t ima te£0m p .a .(ra ngeo f£0mto£ 275m ) An ysa ving sa c c rue to ta xpa ye r s . O the rkeynonmone t isedbene f i ts by‘ma ina f fec tedg roups ’ Po te n t ia lfo rbe t te rse r v i ce fo rroadu se r s. Po te n t ia l impa c t so nUKe co nom i cg row th th ro ugh imp ro v ing theco nd i t ion s fo r thedome s t i csupp lycha in . Po te n t ia lredu ce dr is k tode l ive r yo fH ighwa y sAgen c yca p i ta lp ro g rammeo n t ime . Keyas sump t ions /sens i t iv i t ies / r isks D iscoun tra te(% ) 3 .5 Weha vee v ide n ce tha t fund ingce r ta in t ywh i ch i sno tunde rp inne db y leg i s la t i vece r ta in t ya reno tsu f f i c ien t tode l i ve rs ign i f i ca n tcha nge insupp lycha inbeha v iou r ,bu tth is i s theke yun ce r ta in t y . TheRoad In ve s tme n tS t ra te g yma y lead toc y c l i ca lspend ingpa t te rn sa sob se r ve d in re gu la te dindu s t r ie s . Thenews t ru c tu reshou ldapp ro p r ia te lyba lan ceo pe ra t iona lo b je c t i ve sa nde conomi cp r io r i t ie sw i th en v i ro nmen ta la ndso c ia lgoa ls ,bu tr is k th isdoe sno two r ka s in te nded . BUS INESSASSESSMENT(Op t ion2 ) D i rec t impac tonbus iness(Equ iva len tAnnua l )£m: Cos ts : £0m B ene f i ts : £0m Ne t : Inscopeo fO IOO? Measu requa l if iesas £0m 3 No NA Ev idenceBase( fo rsumma ryshee ts ) 1 .P rob lemunde rcon s ide ra t ion 1 .1 Thes t ra teg icroadne two r k(SRN )isthene two r ko f mo to rwa y sandt run kroad scon s is t ingo fa round 2%o fEng land ’sroadsbu tca r r y inga roundath i rdo f i tst ra f f ic .TheH ighwa y sAgen cy(HA) isthe e xe cu t iveagen cyo ftheDepa r tmen tfo rT ran spo r t(D fT )re spons ib lefo rthe ma in tenan ce ,ope ra t ion 1 andenhan cemen to ftheSRNonbeha l fo ftheSe c re ta r yo fS ta te . 1 .2 Imp ro v ingthepe r fo rman ceo fthee x is t ingroadne two r kwa soneo fthetopp r io r i t ie s iden t i f iedb ythe Edd ing tonrepo r t,T ran spo r tandtheE conom y,wh i che s t ima tedin2006tha ta5%redu c t ionint ra ve l t imefo ra l lbu s ine s sandf re igh tt ra ve lontheroad scou ldgene ra tea round£2 .5b i l l iono fco s t 2 sa v ing s–a round0 .2%o f GDP. Inadd i t ion ,man yre cen tsu r ve ysha vefoundtha ttheUKcon t inue s tocompa repoo r ly in te rna t iona l lyonbu s ine s spe r cep t io n so ft ran spo r tin f ra s t ru c tu re :fore xamp le , thequa l i tyo froad s in f ra s t ru c tu rewa srankedtwen ty e igh thi nthe Wo r ldE conom i cFo rum ’sG loba l 3 Compe t i t i vene s sRepo r t. Nea r ly90%o fUKbu s ine s se ssu r ve yedin2008b ytheCB Irepo r tedtha t 4 thepoo rre l iab i l i tyo ftheroadne two r kwasha v inganimpa c tonthe i rp roduc t iv i ty. 1 .3 InJune2013 ,In ve s t ing inB r i ta in ’ sFu tu reannoun cedtheGo ve rnmen t ’sspend ingp lan sfo rroad sup 5 to2020 21 .Theto ta l£28b i l l ionroad spa ckage in c ludedo ve r£17b i l l ionfo rtheSRN . O ve r£6 b i l l iono fth is isfo rrepa i randrenewa ls .6 De ta i lso ve rhowth iswou ldbede l ive redwe ref i rmedupin theCommandPape rAc t ionfo rRoad s,pub l ishedb yD fTinJu ly2013 ,a long s idep ropo sa lsonhow tore fo rmthee x is t ingin s t i tu t iona lse t upino rde rtoen su rede l ive ryo fthe in ves tmen tpa ckagewh i ls t ma x im is inge f f ic ien cy .7 1 .4 Th is in c rea se inin ve s tmen t isa l read yp lanned .Howe ve r ,theGo ve rnmen ta lsore cogn ise stha t the rea rep rob lemsw i ththecu r ren ts t ru c tu reo ftheHAto mo s te f f ic ie n t lyde l ive rfo rta xpa ye r sand roadu se r s .In2011A lanCoo kpub l ishedh isrepo r tAF re shS ta r tfo rtheS t ra teg icRoadNe two r k ( the ‘Coo kRe v iew ’ ) ,wh i ch iden t i f iedthefo l low ingis sue s : “… theun iquepo s i t iono ftheAgen cy ,andi tsre la t ion sh ipw i thgo ve rnmen t ,ha sfa i ledtore f le c tthe w ide r in te re s t so fou re conom y .Thec lo sep ro x im i t yo ftheAgen c ytotheD fT mean stha tthe reha s h is to r ica l lybeen l i t t lep re s su refo rthe Go ve rnmen ttota ke ,o rs t ic kto ,longte rmde c i s ion sfo r in ve s tmen t inthene two r k . Go ve rnmen tsha ve tendedtopu tthe i rownsho r t te rmneed s ,a sse r v ice p ro v ide r sandfunde r s ,aheado fthelongte rm in te re s t so fta xpa ye r sandroadu se r s .Pe r cep t ion so f po l i t ica lp re s su re ,andcon s t ra in t sonc iv i lse r v icere c ru i tmen tandrewa rd s ,ha vea l soc rea tedan o ve rcen t ra l i sedwo r k ingcu l tu r etha t i sunne ce ssa r i ly ‘ r i s ka ve r se ’ .Un l i ke intheregu la tedse c to r s , the rei snocon t inuou se x te rna lp re s su refo re f f i c ien c y .Su c ce s s i vechange so fapp roa chand agendaha vea l soc rea teddup l i ca t ion sand ine f f i c ien c ie sbe tweentheAgen cy , i t ssupp l ycha inand 8 lo ca lau tho r i t ie s . ” 1 .5 Th is impa c tas se ssmen tco ve r sre fo rmswh i ch loo ktoe s tab l ishthebe s tin s t i tu t iona lf ramewo r kto de l ive rtheenhan cemen tandcon t inuedope ra t ionand ma in tenan ceo fthene two r ko ve rthene x t de cade . 1T h ere la t ion sh ipbe tweenth eD fTan dtheH ighwa y sAgen c y isse tou tin :Depa r tmen tfo rT ran spo r t ,S t ra teg icroadne two r kpe r fo rman ce spe c i f ica t ion2013 2015,h t tp s : / /www .gov .u k /gove rnmen t /pu b l ica t ion s / s t ra teg icroad ne two rkpe r fo rman cespe c i f ica t ion 2013to 2015 2 R .Edd ing ton,T ran spo r tandtheEconomy,De cembe r2006 . 3 Wo r ldEconom icFo rum , The G loba l Compe t i t ivene s sRepo r t201314,h t tp : / /www .we fo rum .o rg / repo r t s /g loba lcompe t i t ivene s srepo r t 20132014 4 OECD , Go ing f o rG row th2011,2011&Con fede ra t iono fB r i t ish Indu s t r y,Ta c k l ingconge s t ion ,d r iv ingg row th, M a r ch2010 . 5 HMT rea su ry ,Inve s t ing inB r i ta in ’ sFu tu re ,June2013 , h t tp s : / /www .gov .u k /gove rnmen t /up load s / s y s tem /u p loads /a t ta chmen t_da ta / f i le /209279 /PU1524_ IUK_new_ temp la te .pd f 6 Cap i ta l ma in tenan cea lon e ,re sou r ce ma in tenan ceisanadd i t ion a l£2 b i l l io n . 7 Depa r tmen tfo rT ran spo r t ,Ac t ionfo rRoad s :ane two r kfo rthe21 s tcen tu r y,Ju l y2013 . 8 A .Cook ,AF re shS ta r tfo rtheS t ra teg ic RoadNe two r k,Novembe r2011 ,h t tp s : / /www .gov .u k /gove rnmen t /pub l ica t ion s /af re sh s ta r t fo r the s t ra teg icroad ne two rk,(h e rea f te r ‘CookRe v iew ’ ) .Th isImpa c tAs se s smen td raw shea v i l yon th isrev iewa sthe mos tre cen tpub l ished a s se s smen to fth is issue ; we in c ludere fe ren cestoth erepo r t wh e reth e re isn oo the rp r ima r ysou r ceo fin fo rma t ion. 4 1 .6 Bu i ld ingonthewo r kunde r ta kenb yA lanCoo kanda spa r to fp rodu c ingA c t ionfo rRoad s,weha ve iden t i f iedse venke ywea kne sse s inthes ta tu squoa r rangemen t : I ) Dependence –TheH ighwa y sAgen cy is mu chc lo se rtocen t ra lgo ve rnmen tthano the r o rgan isa t ionsp ro v id ingna t iona lin f ra s t ru c tu re .A l lpowe r sanddu t ie sre la t ingtona t iona lroad sre s ide w i ththeSe c re ta ryo fS ta teunde rtheH ighwa y sAc t1980,RoadT ra f f icRegu la t ionAc t1984and T ra f f ic Managemen tA c t2004 .Asane xe cu t iveagen cy ,andthe re fo reno tasepa ra te lega len t i ty ,the HAa c tsonbeha l fo ftheSe c re ta r yo fS ta te,andinh isname .Th is mean stha tfo rma lre spon s ib i l i ty fo rroads cheme s ,renewa lsand ma in tenan cerema in sw i ththeSe c re ta r yo fS ta te ,wh i ch mean stha t the M in is te r ’scon s ide ra t ion so fw ide r ma t te r s ma y in f luen cetheda y to da ya c t iv i t ie so ftheAgen cy , d i lu t ingtheAgen cy ’sfo cu sonope ra t iona l ma t te r sande f f ic ien c ie s . I I )S t ra teg ic –P re v ious ly ,go ve rnmen tha sno ta lwa ysp ro v idedtheAgen cyw i thac lea rv is ionfo r wha ti tneed stoa ch ie ve–e i the rr igh tnowo ro ve rthe longe rte rm .In s teadi tha sfo cu sedonlo ca l ma t te r s ,spe c i f ics cheme sandp rog ramme s ,andope ra t iona land me thodo log ica lte chn ique s ina rea s su cha s in fo rma t ionse r v ice sandt ra f f ic managemen t .Coo k iden t i f iedala cko fs t ra teg icth in k ing ,a t thena t iona lle ve l ,abou tva luefo r mone y ,o ve ra l lre sou r cea l lo ca t iono rthecu s tome re xpe r ien ce . I I I )S topgo –TheHA isfundedth roughannua la l lo ca t ionsa spa r to ftheD fT ’sbudge t .Th isc rea te s a la cko fce r ta in ty inthebudge tf romyea rto yea rwh i ch mean stha ttheHA ’ scon t ra c tsw i th i ts supp l ie r sa resho r tte rmand mo ree xpen s ivethanne ce s sa r ya sr is k isp r icedinandthesupp l ie r s canno ten te rcheape r ,longe r te rmcon t ra c tsfo r ma te r ia ls .Ane xamp leo fth is is i l lu s t ra tedinF igu re 5 .1intheCoo kRe v iew .9 I t isno tp r ima r i lythef lu c tua t ion s ino ve ra l lspend ,bu ttheun ce r ta in tyo ve r fu tu refund ingle ve lstha ta f fe c ttheHA ’sandsupp l ie r s ’beha v iou r .Th isa r rangemen tthe re fo re m is se soppo r tun i t ie stode l ive rp ipe l ineso f ma jo rs cheme sa tlowe rco s ttotheta xpa ye r .TheHA ’s supp l ie r sa reba sedth roughou ttheUK ;whenthe yha ve l i t t lece r ta in tyo ve rtheHA ’sfu tu re p rog ramme i t lead stoah ighe rtu rno ve ro fs ta f fto mee tf lu c tua t ingdemand , mean ingthe re is le s s in cen t iveto in ve s tint ra in in gandapp ren t ice sh ip s .The sefa c to r s leadto ine f f ic ien c ie sandlo s se sfo r theHA ,i ts supp l ie r sandtheUKe conomy . IV )Moda l –Roadsspend ingrema in soneo fthefewa rea so ft ran spo r twhe rego ve rnmen tdoe sno t ma ke longte rmspend ingcomm i tmen ts , ma k ingi t mo reva r iab le .Spend ingonra i l ,fo re xamp le ,is 10 de te rm inedtoap re announ cedt ime tab leth roughtheRa i lIn ve s tmen tS t ra teg y andthea s so c ia ted S ta temen to fFund sAva i lab le,bo tho fwh icha reunde rp innedb y leg is la t ion .Th is mean stha t spend ingonro ad s is mo ree xpo sedtosho r tte rmad ju s tmen twhensa v ing sa reneededinD fT budge tso r mo re in ve s tmen tfund ingbe come sa va i lab le ,in c rea s ingthe la cko fce r ta in ty . V ) Budge tf lex ib i l i ty –Un l ikeo the rin f ra s t ru c tu rep ro v ide r s ,theAgen cyha stou se i tsfund ing a l lo ca t ionw i th inf inan c ia lyea rpe r iod s ,ra the rthanp lann ingo ve rthe longe rte rmanda l lo ca t ingspend to ma x im isee f f ic ien cy .Thewa ygo ve rnmen t ’sannua lbudge tcy c le swo r ka lso mean stha ttheHA some t ime sha stospendi tsrema in ingbudge ta s i ta pp roa che sthenewf is ca lyea rinthew in te r mon th s,wh i chis the lea s te f fe c t iveand mo s tco s t lyt imeo fyea rfo rs cheme sand ma in tenan ce . V I ) Pe rsonne l –TheAgen cyo f fe rs i tscon t ra c to r spe r fo rman cere la tedin cen t ive s ,bu tcanno tu se compa rab le mean stoin cen t iv ise i tsowns ta f f .Th is ma ke s in cen t iv is ingpe r fo rman cemo red i f f icu l t . TheHAisa lsod isad van tagedincompe t ingfo rthespe c ia l is tsonthe in te rna t iona llabou r ma r ke tand re ta in ingspe c ia l iseds ta f fduetoc iv i lse r v icere s t r ic t ion sonpa ypo l icy . V I I ) Compa r ison –TheH ighwa y sAgen cy ’spe r fo rman ce isno ts c ru t in isedindependen t lyandthe D fTdoe sno tcu r ren t lyha veaf ramewo r k inp la cetoadequa te ly mea su retheHAaga in s tbe s tp ra c t ice e lsewhe re .Th is mean stha tlea rn ingf romo the rcoun t r ie sa ndo the rse c to r sis l im i tedand ben chma r k ingo freg ionsw i th intheHA isno tunde r ta kento i tsfu l lpo ten t ia l . 1 .7 Asare su l to ftheabo vep rob lems ,the rea re ine f f ic ien c ie s inthewa yroadsa re managed , ma in ta inedandde l ive red . 9 CookRe v iew,p .30 . 10 Fo rme r l yknowna stheh ighle ve lou tpu tspe c i f ica t ion(HLOS ) . 5 1 .8 Thes t ra teg icroadne two r k isc r i t ica ltotheUK ’se conomy . Wh i le i ton lyco ve r s2%o ftheroad ne two r k inEng land ,i tca r r ie s30%o fa l lt ra f f icand60%o ff re igh tandbu s ine sst ra f f ic .85b i l l ion veh ic le m i le swe ret ra ve l ledin201 2a loneandinan yg ivenyea r90%o fthe B r i t ishpopu la t ionw i l l u sethene two r k .11 D fTe s t ima te stha tthed i re c tco s ttotheUKe conomyo ft ime lo s tdueto conge s t ion ,ontheSRNa lone ,is£2 b i l l io nayea randtha tth iscou ldr iseto£10bi l l io nayea rb y 2040 .12 1 .9 The in s t i tu t iona lands t ra teg icp rob lems iden t i f iedabo vecomeontopo fh is to r icunde r in ve s tmen tin theSRN .B r i ton snowd r ivea lmo s t50b i l l ion m i le s mo rethan20yea r sagobu tspend ingon ma jo r p ro je c tsha sno tkep tpa ce .13 Thep rob lemsw i ththene two r ka rese ttobee xa ce rba tedb yr is ing t ra f f icwh i chwee xpe c ttog rowa sare su l to far is ingpopu la t ion ,fa l l ingco s to fd r iv ingande conom i c g row th .D fTt ra f f icdemandfo re ca s tsp ro je c tanin c rea seo f24 -72%ind r iv ingontheSRNb y2040 .14 Th is mean stha ti t is mo re impo r tan tnowthane ve rtota kes tepstha ten su reweha vethebe s t s y s temfo rgo ve rn ingou rroad s . F igu re1: M apo fthes t ra teg icroadne two rk Sou r ce :H ighwa y sAgen c y 11 Depa r tmen tfo rT ran spo r t ,Annua lRoadT ra f f icEs t ima te s :G rea tB r i ta in2012,June2013 ,p .8& ONS O mn ibu sSu r ve y2013 . 12 Th ecos t so fconge s t ionbo tha tp re sen tand in2040a ree s t ima te sa r r iveda tu s in gtheNa t ion a lTran spo r tMode l(2013 ) .The secos t sdon o t in c ludetheimpa c t stha tconge s t ion ma yha veonjou rn eyt imere l iab i l i t y wh ich ma yin c rea sethe cos t sbyu pto50% .Fo r mo re in fo rma t ionon th efu tu re impa c to fr is in gt ra f f icseeAc t ionfo rRoad s,pp .13 15 . 13 Ac t ionfo rRoad s,p .15 . 14 Depa r tmen tfo rT ran spo r t ,RoadT ra f f icFo re ca s t s2013,Ju l y2013 ,h t tp s : / /www .gov .u k /gove rnmen t /pu b l ica t ion s / roadt ran spo r t fo re ca s ts 2013 6 2 .Ra t iona lefo rin te rven t ion 2 .1The rea re man ygoodrea son swh ythebu s ine s so f mo to rwa y sandt run kroad sshou ldhave 15 d is t in c t ivefea tu re s .Th isbu s ine s s istoa la rgee x ten ta ‘na tu ra l monopo ly ’ , ope ra t ingan‘open ’ ne two r ktha tfo rmsanin teg ra lpa r to faw ide rt ran spo r ts y s tem .Thebu s ine ssg ive sr isetose r ious sa fe tyandenv i ronmen ta lis sue s ,andrequ i re save r ylong te rmapp roa chtop lann ingand in ve s tmen t .Howe ve rwh i lethe serea sonsp ro v ideac lea rrea sonfo rin te r ven t ion ,noneo fthem p ro v ide sacompe l l inga rgumen tfo rthebu s ine s stoberund i re c t lyb ycen t ra lgo ve rnmen t,compa red toana rm ’ s leng thbod yo ra no the r mode l. O the rbu s ine s se sw i thsomeo ra l lo fthe sefea tu re s ope ra tesu cce s s fu l lyunde raw iderangeo fbu s ine s s mode ls. 2 .2 T hes t ra teg icroadne two r k isd i f fe ren tinano the rre spe c tf rom mo s to the rin f ra s t ru c tu rene two r k s wh i che x is tso le lytop ro v idease conda rycommod i tyo rse rv icetocon sume r s(wa te ro re le c t r ic i ty ) . Fo ru se r so froadne two r k s ,the in f ra s t ru c tu re isthese r v ice .Howe ve r ,a sroadu se r sha venod i re c t re la t ion sh ipw i ththe in f ra s t ru c tu rep ro v ide ra tthepo in to fu se ,the y mu s tin s tea dre lyon demo c ra t ica l lya ccoun tab lepub l icau tho r i t ie stoen su rethe i rneed sandconce rn sa reta kenin to a ccoun tb ythe in f ra s t ru c tu rep ro v ide r .Th is is impo r tan t ,bu t i tdoe sno tfo l lowtha tthepub l icau tho r i ty andthe in f ra s t ru c tu rep ro v ide r mu s tbepar to fthesameo rgan isa t ion .Fo re xamp le ,t he rea reaw ide va r ie tyo fa r rangemen tsa c ro s s lo ca lgo ve rnmen twhe reh ighwa y sse r v ice sa rede l ive redb yd i f fe ren t compan ie sunde ranag reedpe r fo rman cecon t ra c tw i ththeau tho r i ty . 3 .Po l icyob jec t ive s 3 .1Re fo rmshou ldenab leco s tsa v ing so ve rthes ta tu squoandmo ree f fe c t ive de l ive r ya c ro sstheHA ’s a c t iv i t ie s.E f f ic ien cysa v ing sshou ldbeappa ren tbo thfo rtheHAandi tssupp lycha inth roughou tthe d i f fe ren ts tage so f ma jo rp ro je c ts , ma in tenan ceandrenewa ls . 3 .2 O neo ftheGo ve rnmen t ’so ve ra r ch ing na t iona lob je c t ivesisboo s t inge conom icg row th . Wea imto suppo r tth isth roughth ispo l i cya sacon sequen ceo fe f f ic ien cysa v ing s .Th i s isbe cau se lowe rco s ts andimp ro vedcon f iden ceshou ldenhan cethesu s ta inab i l i tyandcompe t i t ivene sso ftheUKsupp ly cha in ,con sequen t ly lead ingtoaboo s tinemp lo ymen tandt ra in inginUKcompan ie s ,a soppo sedto in te rna t iona lcompe t i to r s .Add i t iona l ly ,g rea te rva luefo r mone y inimp ro v ingand manag ingtheSRN wou ld meanta xpa ye rs ’ moneygo ingfu r the randpo ten t ia l lyre lea s ingfund sfo rfu r the rroad imp ro vemen tso ro the rspend ing . 3 .3Econom i cg row thshou lda lsobeboo s tedb ytheh ighe rle ve lso f in ve s tmen tannoun ceda tthere cen t Spend ingRound ,howe ve rwedono ta s se sstheca sefo rth is in ve s tmen the re .Theca sefo rroad s in ve s tmen tw i l lbea s se ssedth roughthefo r th com ingNa t iona lNe two r k sNa t iona lPo l icyS ta temen t , theRoadIn ve s tmen tS t ra teg y( thep ro ce ssfo rwh ichisd is cu s sedinth isdo cumen t )andspe c i f ic 16 s chemeapp ra isa ls inl inew iths tanda rdD fTgu idan ce . 3 .4W i than y in s t i tu t iona lchange stothego ve rnan ceo fthes t ra teg icroadne two r kthe Go ve rnmen ta ims to imp ro vethecu s tome rfo cu so ftheope ra to rth roughb r ing ingabou tc lea r e ra ccoun tab i l i tyo fthe road sope ra to rtoroadu se r s .Thep re fe r redop t ion mu s ten su retha tu se rscon t inuetore ce iveagood se rv icef romthes t ra teg icroadne two r kandtha tthe rea rep rope rpe r fo rmancesa fegua rd s inp la ce . 3 .5Thede s ignandbu i ld ingo froad scanha veenv i ronmen ta l ,so c ia landhea l thimpa c ts .I t is impo r tan t tha tan yf ramewo r kfo renhan c ingand manag ingthene two r kcon t inue stog ivep r io r i tyto con s ide ra t iono fthe se impa c tsandp ro v ide sfo rs t r ic ts c ru t in yo fthebu s ine s sca sefo randde s igno f s cheme sbe fo rethe yen te rtheroadsp rog ramme . 3 .6TheGo ve rnmen tha sannoun ceda ma jo rin c rea se inin ve s tmen tonthes t ra teg icroadne two r k , ta k inge f fe c tbe tweennowand2021 .I t is impo r tan ttha tan yre fo rmcanta kee f fe c tqu ick ly ,sotha t 15 Th eke yfa c t sabou tthe ma rke t wh ich leadtoth ischa ra c te r isa t iona retha tth en e two rkh a sh ighsun kcos tsan dlowva r iab leandf ixedcos t s . Th eSRNhadane s t ima teda s se tva lua t iono f£110 b i l l io nin2013 ,compa redtothe201 2 -13n e tope ra t ingcos to f£2 .1bi l l io n(H ighway sAgen c y Annua lRepo r tandAccoun t s2012 /13 ,June2013 ) .Th is w i l l leadtode c rea s inga ve ragecos t stos ca leove rala rgerange ,ake ych a ra c te r is t ico f na tu ra l monopo l ie s . 16 h t tp : / /www .d f t .gov .u k /web tag / 7 imp ro vemen ts ine f f ic ien cyandspeedo fde l ive r ysuppo r tth isnewp rog ramme .Th isIAthe re fo re loo k sa tre fo rmde l ive rab ledu r ingth ispa r l iamen t . 4 .De sc r ip t iono fop t ion s 4 .0Thecu r ren tSRNgo ve rnan ces t ru c tu reope ra te srea sonab lywe l ltoda y;a sA lanCoo kshowed ,the HAisno tafa i l ingse r v icetha tneed stobere s cued .Howe ve r ,arangeo fs t ra teg icoppo r tun i t ie sfo r imp ro vemen te x is ttha tcou ldp ro v idea mu chbe t te rdea lfo rroadu se r sandta xpa ye r s .Th reeop t ions a rese tou t : • do ingno th ingand ma in ta in ingcu r ren tin s t i tu t iona landbudge t inga r rangemen tsf romthe2013 Spend ingRoundonwa rds ; • imp lemen t ingthere fo rms in A c t ionfo rRoad s –co rpo ra t is ingtheHA ,c rea t ingas tab lefund ing ba s isandimp ro v inga ccoun tab i l i ty–imp lemen t ingo runde rp inn ingpa r tso fthe sep ropo sa lsw i th leg is la t ion ;o r • imp lemen t ingthesamere fo rmsth roughnon s ta tu to ry mean son ly. 4 .1Dono th ing 4 .1 .1 TheHAisre spon s ib lefo rope ra t ing , ma in ta in ingandimp ro v ingtheSRN ,thene two r ko f mo to rwa y sandt run kroad sapp ro x ima te ly4 ,300 m i le s in leng th .A ttheendo f Ma r ch2014 ,the re we re3 ,350pe rmanen t ,fu l lt imes ta f fwo r k ingd i re c t lyfo rtheHA ,1 , 400o fwhoma spa r to ftheT ra f f ic O f f ice rSe r v ice . 4 .1 .2 Th iswo r k fo r ce issp reada c ro ssEng land ,in c lud ingse venreg iona lo f f ice s ,se venreg iona l re sponsecen t re sand32ou ts ta t ions .Thecu r ren tin s t i tu t ionalf ramewo r k is i l lu s t ra tedinf igu re2 be low .17 4 .1 .3 TheAgen cywa se s tab l ishedin1994 .AstheCoo kRe v iew sa id ,the reha vebeensome s ign i f ican tchange sto i tspu rpo seandp r io r i t ie ss in cethen : • “ theAgen c y ’ sco repu rpo seha ssh i f tedf rombe inga‘p red i c tandp ro v ide ’roadbu i lde rw i tha fo cu sonc rea t ingnew mo to rwa yandt run kroadconne c t ion s ,tobe ingane two r kope ra to rand a sse t manage r ,p r ima r i l ycon ce rnedw i the f fe c t ive managemen tandenhan cemen to fthee x i s t ing ne two r k ; • a sthee x i s t ingne two r kbe came mo rein ten s i ve l yu sed ,theAgen cye s tab l i shedarangeo fnew t ra f f ic managemen tse r v ice sandp rog ramme s–in c lud ingaded i ca tedT ra f f i cO f f ice rSe r v i ce , in t rodu cedin2004 ,wh i chnow manage sandc lea r sana ve rageo f26 ,500 in c iden t sea ch mon th ; and • thes iz eo ftheAgen cy ’ sne two r kha sde c rea sed ,w i th mu cho fi tsne two r kbe ingt ran s fe r redto lo ca lau tho r i t ie s–thecu r ren tne two r ko fa round7 ,000kmcompa re stoapp ro x ima te ly10 ,000km 18 in1998 . ” 4 .1 .4 Fo l low ingthef ind ing so ftheCoo kRe v iew ,theGo ve rnmen tha sa l readybeguntoimp lemen ttwo impo r tan tre fo rm mea su re sw i th inthecu r ren tin s t i tu t iona lse t up : • Pe r fo rmancespec i f ica t ion :inAp r i l2013 thef i r s tpe r fo rman cespe c i f ica t ionfo rtheSRNandHA wa spub l ished .Th isse tou tthes tanda rd swh ichtheAgen cy ise xpe c tedto mee tin i tswo r k , aga in s tase r ie so fke yc r i te r ia .19 • Rou te S t ra teg ies :th is isanewwa ytop lanthe managemen tandenhan cemen to ftheSRN , ta k ingin toa ccoun tlo ca la sp i ra t ion sandp r io r i t ie sfo rg row th ,ba lan c inglo ca landna t iona lneed s 20 onthene two r k . 17 H ighwa ysAgen cy ,Annua l Repo r tandAc coun t s20122013,p .35 18 CookRe v iew ,p .17 . 19 Pe r fo rman cespe c i f ica t ion20132015 . 8 F igu re2: C u r ren tins t i tu t iona lf ramewo rko ftheH ighwaysAgency Sec re ta ryo fS ta tefo rT ranspo r t O the r gov e rnmen t depa r tmen ts& s takeho lde r s HMT reasu r y Depa r tmen tfo r T ranspo r t Pe r fo rman ce spec i f i ca t ion Co rpo ra te fun c t ion s suppo r t Budge t De lega tedpowe r s toope ra te , ma in ta inand imp roveroads H ighwaysAgency Ne two r k De l i ve ryand Deve lopmen t T ra f f i c Managemen t Ne two r k Se r v i ces Comme rc ia l and P rocu remen t Ma jo rP ro jec t s F inan ceand Bu s iness Se r v i ces S t ra tegyand P lann ing Supp lycha in 4 .1 .5 Theke ya spe c to ftheba se l ine isthean t ic ipa tedspend ingle ve l .Thetab lebe lowshowsthe ba se l inespend ing ,andbe low wesumma r isetheke ya s sump t ion s . Tab le1 :H ighwaysAgencyan t ic ipa tedspend ing2015 /16to2024 /25 £m(F igu resinnom ina lp r ices ,nond iscoun ted ) 15 /16 16 /17 17 /18 18 /19 19 /20 20 /21 21 /22 22 /23 23 /24 24 /25 10Y rTo ta l Cap i ta l Cap i ta l HA Ma in tenance-Renewa ls 440 451 462 474 485 497 506 514 523 532 4 ,884 HA Ma in tenance-Resu r fac ing 289 297 304 312 319 327 - - - - 1 ,848 To ta lHA Ma in tenance 729 748 766 786 804 824 506 514 523 532 6 ,732 HA Ma jo rs&o the rnon ma in tenancep rog rammes 1 ,071 1 ,120 1 ,609 1 ,960 2 ,508 3 ,450 3 ,707 3 ,736 3 ,753 3 ,817 26 ,732 To ta lHACap i ta lInves tmen t 1 ,800 1 ,869 2 ,376 2 ,746 3 ,313 4 ,274 4 ,213 4 ,250 4 ,276 4 ,348 Resou rce 33 ,464 Resou rce HARoadsPF ISe rv icePaymen ts 426 458 479 467 474 567 515 545 550 643 HA O the rnonPF ISe rv icePaymen tsp rog rammes 538 548 557 566 576 586 596 606 616 627 5 ,124 5 ,815 To ta lHAP rog rammeResou rce 964 1 ,006 1 ,036 1 ,034 1 ,050 1 ,152 1 ,111 1 ,151 1 ,166 1 ,269 10 ,939 No te :Th istab lerep resen t scomm i t tedfund ingfo r15 /16ona l l l ines ,comm i t tedcap i ta lin ves tmen tfund ingupto2020 /21 ,w i th a l lo the r l ine son l yrep resen t ingan t ic ipa tedfund ingba sedonas sump t ionsa sde sc r ibedbe low. 20 H ighwa ysAgen cy ,Rou teBa sedS t ra teg ie s,h t tp : / /www .h ighwa y s .gov .u k /pub l ica t ion s / rou teba seds t ra teg ie s / 9 4 .1 .6 Thea ssump t ion su sedtogene ra tetheba se l inespend ingle ve la re : • F rom2015 /16to2020 /21th isre f le c tsthean t ic ipa tedH ighwa y sAgen cybudge ta sannoun ceda t Spend ingRound2013andIn ve s t inginB r i ta in ’ sFu tu r e: a . Cap i ta lfund ingannoun cedfo rpe r iodf rom2015 /16to2020 /21. b . Re sou r cefund ingfo r2015 /16 ,kep tcon s tan tinrea lte rms(u s ingtheGDPde f la to rto in c rea sefo rin f la t ion )ande s t ima tedfu tu refund ingba sedonPF Icomm i tmen ts . • Be yond2020 /21 : a . Re sou r cef igu re skep tcon s tan tinrea lte rms(u s ingtheGDPde f la to rto in c rea sefo r in f la t ion )fo rnonPF Ise r v icepa ymen tsp rog rammea rea s b . Re sou r cePF Ise r v icepa ymen tsa rean t ic ipa tedspendonse r v ic ingthe secon t ra c ts c . Cap i ta l ma in tenan cerenewa lsa rea s sumedtocon t inuea tthesamerea lle ve l ,bu tthe re su r fa c ingp rog ramme isa s sumedtobecomp le teb y2020 /21sonofu r the rspend in c luded d . Ma jo rs cheme s(non ma in tenan cecap i ta lp rog ramme s ) re f le c t stheGo ve rnmen t ’s amb i t ionfo rupg rad ingtheSRNb y in ve s t inginto ta lbe tween£30b i l l ionand£50 b i l l iono ve ra1015yea rpe r iod ,a ss ta tedinIn ve s t inginB r i ta in ’ sFu tu re . 4 .1 .7 Th isba se l inea l ready in c lude s man yan t ic ipa tede f f ic ien cy mea su re swh ich theH ighway sAgen cy w i l la imtode l ive rwhe the rthe sere fo rmshappeno rno t.Howe ve rthere fo rm mea su re sd is cu s sed be lowwou ldin c rea sethece r ta in tythe ycou ldbede l ive red . Wed is cu s sth is intheana ly s iso f op t ions . 4 .2Op t ionone –Ins t i tu t iona lre fo rm w i thleg is la t ion 4 .2 .1 Weha vebu i l tonthere commenda t ion s inthe Coo kRev iewto iden t i f yapa ckageo f in te r conne c tedre fo rm mea su re s ,a l lo fwh ichcou ldbeunde rp innedo rsuppo r tedb y leg is la t ion . Man y o fthe se mea su re scou ldintheo rybede l ive redsepa ra te ly ;howe ve rtheapp ra isa lse c t iono fth isIA e xp la in showthere fo rmsa redeep lyin te r re la ted .Hen ceweha veana lysedthepa ckageinthe round ,andwhe repo s s ib lep ick edou twhe retheco s tsandbene f i tsapp lytothepa r t icu la re lemen ts. Re fo rmo ftheH ighwa y sAgen c y 4 .2 .2 Unde rth isop t iontheHAwou ldbeco rpo ra t ised–tha tis ,anewpub l ic lyownedcompan ywou ld bec rea tedto managetheSRNandta keo ve rthero le so ftheHA . 4 .2 .3 Thecompan yw i l lbecon s t i tu tedunde rtheCompan ie sAc t ,w i thgo ve rnan cea r rangemen ts in p la cetode l ive rthene ce ssa r yba lan ceo ff le x ib i l i ty ,go ve rnmen tcon t ro landpub l i ca c coun tab i l i tya s de s c r ibedintheapp ra isa lo fop t ion sbe low . 4 .2 .4 Thecompan ywou ldbeg ivenarangeo fdu t ie sandpowe r sfo radm in is te r ing mo to rwa y sand t run kroad sunde rtheH ighwa y sAc t1980(ando the rapp rop r ia te leg is la t ion ) .L eg is la tionw i l lenab le theSe c re ta ryo fS ta tetoc rea tea l icen cewh ichw i l len t i t lethebod yco rpo ra te(a s l icen ceho lde r )to u ses ta tu to r ypowe r s ,andp la cece r ta inre spons ib i l i t ie sanddu t ie suponi t .Th iswou ldenab le i tto ope ra teandsub con t ra c toni tsownau tho r i ty ,w i thou tapp ro va lf rom m in is te r s in mo s tca se s . 4 .2 .5 Ba sedonthele ve lo fpub l icse c to rcon t ro l ,thecompan y is l ike lytobec la s s i f iedtothecen t ra l go ve rnmen tse c to rfo rna t iona la ccoun tingpu rpo se s .U sua l ly ,th is mean s i twou ldbesub je c tto s ta nda rdcen t ra lgo ve rnmen tcon t ro lsontheu seo fpub l ic mone y .Insome in s tan ce s ,theHA cu r ren t lyha sde lega t ionstha ta l lowi ttoe x ceedno rma ll im i ts ,fo re xamp leonte chn ica lse r v ice sand somec r i t i ca lte chno log y ;the sewou ldcon t inue .Asde s c r ibedintheop t ion sapp ra isa l ,fu r the rwo r k w i l lbeunde r ta kentof indthebe s tcon t ro lsa r rangemen t . RoadIn ve s tmen tS t ra teg y andfund ingce r ta in t y 4 .2 .6 Fo l low ingre commenda t ion s intheCoo kRe v iew,theGo ve rnmen tag reedthef i r s tpe r fo rman ce spe c i f ica t ionfo rtheHAandtheSRNtoco ve rthepe r iod2013to2015 .Ba sedonou tpu tse xpe c ted, th isapp roa chw i l lcon t inuetofo rmtheba s isfo raRoadIn ve s tmen tS t ra tegy(R IS ) .TheR IS w ou ldbe bu i l ta roundfou rco ree lemen ts : 10 • AS t ra teg icV is ionco ve r ingthef i r s tth reeRoadsPe r iods(w i thea chpe r iode xpe c tedtobe5 yea rs long )ou t l in ingtheGo ve rnmen t ’s med iumte rme xpe c ta t ion s( i .e .thef i r s to fth reepe r iods ) , andlongte rma sp i ra t ion sfo rtheSRN( the la t te rtwope r iod s ,andbe yond ) . • AS ta temen to fFund sAva i lab le ,se t t ingou tandgua ran tee ingtheamoun ttha tcanbespen tb y thecompan y . • Afund ingandin ve s tmen tp lan ,se t t ingou thowth isfund ingisa l lo ca tedtode l ive rthe Go ve rnmen t ’se xpe c ta t ion s .Among s to the rth ing s ,th isw i l lco ve r ma in tenan ceandenhan cemen t wo r k s ,a swe l la s iden t i f y ingsomespe c i f ic ma jo rs cheme stobede l ive red . • Ape r fo rman cespe c i f ica t ionfo rtheSRNandthecompan y ,a r t icu la t ingtheGo ve rnmen t ’s amb i t ionfo rthes t ra teg icroadne two r kandse t t ingou tspe c i f ice xpe c ta t ion sfo rfu tu rede l ive ry , in c lud ing me t r i csandke ype r fo rman ce ind ica to r s .Inadd i t iontoco ve r ingissue sa roundne two r k pe r fo rman ce ,th isw i l la lsoneedtose tc lea rrequ i remen tsa roundc ru c ia lcon s ide ra t ionssu cha s sa fe tyandtheenv i ronmen t . 4 .2 .7 The in ten tistha tthe in ve stmen tp lanw i l ld rawone v iden cef rom Rou teS t ra teg ie s( wh i chfo cu s onspe c i f ics t re tche so froadso rjun c t ion sw i th intheSRN ,e va lua t ingp rob lemsandiden t i f y ing so lu t ions ) ,a s se tcond i t ion ,andg o ve rnmen t ’sp r io r i t ie s.There su l twou ldbeacomm i tmen tto in ve s tmen tinthere le van tRoad sPe r iod ,se tw i th ina longe r te rmv is ion .I t i s im po r tan ttono tetha t an ys chemeo rp rog rammeo fwo r kwou ldneedtopa ssanyre le van tte s ts(e .g .bu s ine s sca seand en v i ronmen ta lte s ts )be fo rede l ive r ycommen ced . 4 .2 .8 Ween v isagetha tthep ro ce s sfo rde ve lop ingtheR ISw i l lre semb lethep ro ce sstode ve lopthe f ive yea rfund ingse t t lemen tfo rtheRa i lse c to r ,w i thanob l iga t ionfo rgo ve rnmen ttop ro v idea s ta temen tabou tob je c t ive sfund ingcomm i tmen tsen sh r inedinleg is la t ion ,a ndsuppo r tedb yo the r do cumen ta t ionsu cha stheL icen cefo rthenewcompan y.Th is mean sthe rewou ldbeas ta tu to r y ob l iga t ionontheSe c re ta r yo fS ta tefo rT ran spo r ttopub l ishaR ISw i thap reannoun ced–mo s tl ike ly f ive yea r–cy c leo fre v iew(a s inthera i lse c to r ) .Thes cheme s ,pe r fo rman cespe c i f ica t ionand fund ingse tou tintheR ISwou ldon lybere v isab lew i th intho secy c le sb ywa yo fane x ten s iveand t ran spa ren tre v iew .The rewou ldbesomechange me chan ismintheca seo fe x cep t iona l c i r cums tan ce s . 4 .2 .9 A tthe2013Spend ingRoundi twa sannoun cedtha tthenewcompan yw i l lbeg ivenf le x ib i l i tyto manage i ts f inan ce sbe tweenyea r s .I tw i l lha vetheab i l i tyto mo veupto10%o f i tscap i ta lbudge t be tweenyea rstoen su retha tthecap i ta lspend ingp ro f i le isef f ic ien t .Th isdoe sno trequ i re leg is la t ion tobede l ive red ,bu tisane ce s sa ry mea su retorea l isebene f i tsf romthece r ta in tyo ftheR IS(a s e xp la inedintheop t ion sapp ra isa l ,be low ) .Endyea rf le x ib i l i ty isuno r thodo x ingo ve rnmen t a ccoun t ing ,andHMT rea su ryha s madec lea rth is isdependen tono the rre fo rm mea su re sbe ing ca r r iedou t ,the re fo re i ton lyfo rmspa r to fop t ionone . Co s t mon i to randroadu se rwa t chdog 4 .2 .10Toen su rethea ccoun tab i l i tyo fthecompan ytobo ththeta xpa ye r ,fo ri tsu seo ffund s ,androad u se rs,fo rthese r v icep ro v ided ,the rea retwoco rero le sneeded : • Awa tchdog ga the r ingthev iewso fa l lroadu se r sabou thow we l lthenewcompan y ispe r fo rm ing . Th is in vo lve swo r k inga long s idebu tindependen t lyf romin te re s tg roup sandu s ingna t iona lsu r ve ys to in fo rmcon c lu s ion s ,andp ro v id ingad v icetogo ve rnmen tonke y me t r icsandKP Iso fthe pe r fo rman cef ramewo r k ,ind i ca t inghowfa rthe yre f le c troadu se rs ’p r io r i t ie sandneed s. • Amon i to ra sse s s ingtheco s tpe r fo rman ceandde l ive ryo fthenewcompan yandre spon s ib lefo r app ly ingregu la to r ytoo lstod r ivepe r fo rman ce.Themon i to rwou ldben chma r kde l ive r y pe r fo rman ce ,pa r t icu la r lyonco s tande f f ic ien cy ,in c lud ingaga in s tdome s t icandin te rna t iona l compa ra to r swhe rea va i lab le ,che ck ingtoseetha ttheSHCisde l ive r ingwha tisrequ i redunde r theRoadIn ve s tmen tS t ra teg yandu s ingth istop ro v ideadv icetogo ve rnmen tone f f ic ien cyta rge ts andpe r fo rman cea s se ssmen t .The mon i to rw i l lbere spon s ib lefo rta k ingregu la to rya c t ionto en cou rage imp ro vedpe r fo rman ce-in c lud ingis su ingd i re c to rde r so rsan c t ion swhe reapp rop r ia te 11 –andwou lden su rethe re isac lea rd is t in c t ionbe tweent ruee f f ic ien cy ,a soppo sedtoredu ced qua l i tyo rs copeo fde l ive ry . 4 .2 .11The rea reanumbe ro fwa y s inwh i chthe setworo le scou ldbede l ive redandthe ycou ldbe d is cha rgedb y mo rethanonebod y(wh ich isa l read ythep ra c t ice ino the rse c to r s ) .Ine xam in ing po ten t ia lop t ions ,weloo keda ttho setha tcou ldbe imp lemen tedint imefo rwhenthecompan y is c rea tedandwesough ttoa voiddup l ica t ionandtota kefu l lad van tageo fs k i l lsandknow ledgewh i ch a l read ye x is tbe yondcen t ra lgo ve rnmen t .Th iscou ldbeth rough : • Anex is t ingD fTsponso redpane l –Th iscand rawone x is t inge xpe r ien ce ,know ledgeands k i l ls o ftho se intheroad sse c to r ,in c lud ingd i re c tl in k sw i the x is t ingu se rande xpe r tg roups . One e xamp le isthe Mo to r is ts’Fo rum–ag roupse tupb ytheDepa r tmen twhe rethehead so fg roup s l iketheRAC ,AAandFTAregu la r ly mee ttod is cu s stheG o ve rnmen t’s roadspo l ic ie s . • Anex is tingregu la to r–Th isw i l lha vea cce s stoarangeo fe xpe r ts k i l ls ,a swe l la sa la rge amoun to ffo rma lindependen ce .TheO f f iceo ftheRa i lRegu la to rcu r ren t lyben chma r k sco s t pe r fo rman cea tNe two r kRa i landha sregu la to rypowe rs ;o the rregu la to rsca r ryou ts im i la rwo r kfo r the i rre spe c t ivese c to r s .Th isop t ionwou lda l lowasha r ingo fe xpe r t isew i th inthewa tchdogo r mon i to r. • Anex is t inguse rbody –Th iswou ldp ro v idebo thindependen ceande xpe r ien ceo frep re sen t ing pa ssenge rin te re s tsw i thin f ra s t ru c tu recompan ie s .Fo re xamp le ,Pa s senge rFo cu scu r ren t ly rep re sen tsthe in te re s tso fra i l ,bu sandcoa chpa s senge rs ,andregu la r lydea lsw i tht ra inope ra to r s andbu scompan ie s . 4 .2 .12Ou rp re fe ren ceha sbeentota keadvan tageo f in cumben te xpe r t ise ,redu cepo ten t ia lt ran s i t iona l co s ts ,andtosuppo r ttheGo ve rnmen t ’ss ta tedpo l icyonl im i t ingthenumbe ro fnewa rm ’s leng th bod ie s .Fo rthe serea son s ,theGo ve rnmen tannoun cedtha ti t in tend stog ivethero leo fwa tchdogto a‘RoadU se rFo cu s ’un i tw i th inPa s senge rFo cu sandthero leo fthemon i to rtoa ‘ S t ra teg icRoad Ne two r kMon i to r ’un i tw i th intheO f f iceo fRa i lRegu la t ion(ORR ) .Toensu ret ran spa ren cytothe pub l ic ,e f fe c t ives c ru t in yo froad sanda vo idpo ten t ia lcon f l ic ts ingo ve rnan ce ,the sefun c t ion sw i l l ha vead is t in c te x is ten ceandgo ve rnan cet rea tmen tw i th inthe i rpa ren to rgan isa t ions . 4 .2 .13Regu la to rsp la yava luab lero le ind r iv inge f f ic ien cyands t ronge rpe r fo rmanceandweha ve de c idedtota kethe mo s tre le van te lemen tsf romthewo r ldo fregu la t ionandapp lythemdi re c t lyto road s .Thee xamp le sse tb yanumbe ro fregu la to r sha vebeencen t ra ltothede s igno fthe mon i to r and ,wh i ls ta la rgepa r to f i tsro lew i l lbetoad v isetheSe c re ta r yo fS ta teonthepe r fo rman ceand e f f ic ien cyo ftheSHC,the mon i to rw i l lha veanumbe ro fs ta tu to r ypowe r sa va i lab le.The mon i to rw i l l ha ves ta tu to r ypowe r stono t i f yandSHCo fanycon t ra ven t ionso ftheR ISo rthe l i cen ceandto iden t i f ythes tep srequ i redtore so lve them .S im i la r ly ,the mon i to rw i l lha vethepowe rtorequ i rethe compan ytopa yaf inetotheSe c re ta r yo fS ta te ,depend ingonthese r iou sne sso fan y con t ra ven t ions .The sesan c t ion sw i l len cou ragetheSHCtofu l f i le xpe c ta t ion sanddea lw i thpoo r pe r fo rman ce ;en fo r cemen ta c t iondoe sno trep re sen tapun ishmen t,i tshou ldbe ta kena san in cen t iveontheSHCtochange i tsbeha v iou rsotha ti tbe come scomp l ian tw i ththe mon i to r ’sand sha reho lde r ’se xpe c ta t ion s . 4 .2 .14Toen su rethecompan yp ro v ide sthewa tchdogand mon i to rw i th in fo rma t iona srequ i red ,the mon i to rw i l lha vea lega lrigh ttorequ i rethecompan ytod is c lo se in fo rma t ionunde rs ta tu te .Th isw i l l enab letheben chma r kingo f co s tsbe tweend i f fe ren tSRNreg ion sandcompa rab le lo ca lau tho r i t ie s , o rin te rna t iona l ly.Bo ththeroadu se rwa tchdogand mon i to rw i l lu seth is in fo rma t iontoa c ta sa sou r ceo fe xpe r tad v icefo rgo ve rnmen t ,he lp ingtode te rm inetheR IS ,andtopub l ishrepo r tsonthe compan y ’spe r fo rman cetha twou ldbea va i lab letothepub l ic . 4 .3Op t iontwo –Ins t i tu t iona lre fo rm w i thou tleg is la t ion 4 .3 .1 There fo rm mea su re sou t l inedabo vecou ldfea s ib lybe imp lemen tedw i thou tleg is la t ion .Theke y d i f fe ren ce swou ldbe : • Acompan yunde rpub l icowne r sh ipcou ldbec rea tedunde rtheCompan ie sAc tbu tw i thou tan y t ran s fe ro fs ta tu to r yfun c t ion sf romtheSe c re ta ryo fS ta te . 12 • TheR IScou ldbec rea tedw i ththesamecomponen ts ,bu tw i thou tas ta tu to r yp ro ce sswh i ch in vo lve sac lea rcomm i tmen ttothede l ive r yo fs cheme sandthea s so c ia tedfund ingcon ta inedin theR ISse t t lemen t . • Asd is cu s sedabo ve ,the rea rese ve ra l mean sb ywh i chtoc reatetheco s t mon i to r ingandroad u se rwa tchdogfun c t ion s .There spon s ib i l i tytop ro v ide in fo rma t ioncou ldbec rea teda spa r to fthe Framewo r kAg reemen t . 5 .Op t ionsApp ra isa l 5 .1App ra isa lpa rame te rs 5 .1 .1 Toapp ra isethe impa c to fthere fo rmsweu sethefo l low ingpa rame te r s : • Animp lemen ta t ionpe r iodo f2013 /142014 /15du r ingwh i cht ran s i t iona lco s tsa re in cu r red. • F i r s tfu l lyea ro fthe impa c to fthere fo rms in2015 /16 ,w i thanapp ra isa lpe r iodo f10yea rs fo l low ing(weu se10yea r sa sthere cen tSpend ingRoundannoun cedfund ingto2020 /21anda p lanfo rafu r the rin c rea sedle ve lo f in ve s tmen tfo rthene x t1015yea rs ;wedon ’ tu sea longe r pe r ioda swea reapp ra is ingthede l ive r yo froadin f ra s t ru c tu re ,no tthe impa c tso ftha t in f ra s t ru c tu rewh i chwou ldu sua l ly beapp ra isedo ve ra60yea rpe r iod ). • Ap r i ceba seo f2013 /14 ,u s ingtheT rea su ryGDPde f la to rse r ie stocon ve r tco s tsandbene f i tsto thesamep r iceba se .Be lowtheba s iso fa l lf igu re sa requo ted . • Ap re sen tva lueba seyea ro f2013 /14(a sth is isthecu r ren tyea r ) ,u s ingtheTrea su r yG reen Boo kd is coun tra teo f3 .5%tod is coun tco s tsandbene f i ts. • Weu sef inan c ia lyea r stof i tw i thHAf inan c ia lda ta. 5 .1 .2 These c t ion sbe lowe xp la inthee v iden ceba seanda s sump t ion sfo rou re s t ima te sandno tethe p r iceba seandwhe the rf igu re sa red is coun tedo rno t .U s ingtheabo vea s sump t ion sweha ve ca lcu la tedthef igu re sshownonthesumma r yshee t . 5 .2Dono th ing 5 .2 .1 Th is isthedono th ingop t ionaga in s twh ichtheo the rop t ion sa rea s se s sedandhen ceha sno co s to rbene f i to f i tsown .Theba se l ine in s t i tu t iona lf ramewo r kande xpend i tu refo re ca s tsha vebeen de s c r ibedabo ve. 5 .2 .2 Be low weco ve rtheop t ion sfo rre fo rm ,bu tin th isse c t ion weco ve rthee v iden cetha tthe re is s copefo rimp ro vemen t .Theke ye v iden cefo rth iscome sf romcon s id e r ingthed r ive r sfo re conom ic e f f ic ien cy inthep ro v is iono f longte rmna t iona lin f ra s t ru c tu re .Econom i ce f f ic ien cy mean sensu r ing tha tre sou r ce sa rea l lo ca tedtothe mo s tp rodu c t iveu se s( ‘a l lo ca t ive ’e f f ic ien cy ) ,tha tthe sere sou r ce s a respen tinawa ytha t ma x im ise sva luefo r mone y( ‘p rodu c t ive ’e f f ic ien cy ) ,andtha to ve rt ime re sou r ce sa reu sedtod r ive inno va t ionand m in im isewho le l i feco s ts( ‘d ynam ic ’e f f ic ien cy ) . 5 .2 .3 Ase xp la inedinou rd is cu s s iono fthep rob lem ,the rea re man yin s tan ce s whe rethe cha ra c te r is t icso fthes ta tu squoa reno top t ima lfo rd r iv ingva luefo r mone y . Weha vee v iden cetha t th is istheca sef romava r ie tyo fsou r ce s : • Anumbe ro frepo r tsha ve iden t i f iedine f f ic ien c ie s ingo ve rnmen tp ro cu remen to f in f ra s t ru c tu reand 21 con s t ru c t iono fa tlea s t15 –20%. • Ben chma r k ingo fe igh troad sp ro je c tsbe tweentheUKandtheNe the r land sb yIn f ra s t ru c tu reUK ind ica tedtha ttheUKe xamp le swe reona ve rage10%h ighe r ,ba sedontheun i tco s tspe rlane k i lome t re .Ap re v iou ss tud yunde r ta kenonbeha l fo ftheH ighwa y sAgen cy in2009s im i la r ly 21 Th ese in c lude :In f ra s t ru c tu reCos tRe v iew ,In f ras t ru c tu reUK ,De cembe r2010 ;Gove rnmen tP rocu remen tS t ra teg y ,Cab in e tO f f ice , Ma y2011 . 13 ind ica tedtha tun i tco s ts intheUKw e reupto32%h ighe rthantheNe the r land spe rlanek i lome t re , 22 a l thoughth iswa sba sedontende redp r ice sra the rthana c tua lco s ts . Na t iona lAud i tO f f ice(NAO ) ana ly s iso f ma in tenan ces cheme sa lsoshowstha tun i tco s tsha ver iseninre cen tyea r swe l labo ve thera teo f in f la t ion ,a sF igu re3shows . F igu re3:Rou t ine ma in tenanceexpend i tu repe rlanek i lome t read jus tedfo rgene ra lin f la t ion(£ ,2008 /09 p r ices ) 14000 Expend i tu repe r lanekm(£ ) 12000 10000 8000 6000 4000 2000 0 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 Sou r ce :H ighwa ysAgen c y :Con t ra c t in gfo rH ighwa y s Ma in ten an ce , Na t ion a lAud i tO f f ice ,O c tobe r2009 5 .2 .4 TheNAOfoundtha tspend ingonp lannedrenewa lso froadspe rsqua re me t rere su r fa ceda lso ro seb y70%o ve rthesam epe r iod ,a sshowninF igu re4.Howe ve r ,th isf igu re in c lude sspend ingon i temssu cha sba r r ie r s ,l igh t ingandd ra inagewh ichdono ty ie ldare su r fa ceda rea –webe l ie veth is typeo fspend ingha srep re sen tedanin c rea s ingp ropo r t iono ftheto ta l .TheAgen cy ’sowne s t ima teo f spend ingonre su r fa c ingpe rsqua re me t ret rea tedind ica te sanin c rea seo f17%abo vegene ra lp r ice in f la t ionbe tween2004 /05and2008 /09 ,bu ttheNAOwa sno tab letofu l lyva l ida teth ise s t ima te . F igu re4:To ta lcos to froadrenewa lsac t iv i type rsqua re me t reo fresu r fac ing ,ad jus tedfo rgene ra lin f la t ion (2002 /03 2008 /09 ) 22 In f ra s t ru c tu reCos tRe v iew ,In f ra s t ru c tu reUK , De cembe r2010 ,andEu ropeanCos tCompa r ison–Cos td i f fe ren ce sbe tweenEng l ishan d Du t chH ighwa y Con s t ru c t ion ,ECHa r r isandTRL ,De cembe r2009 .Th ela t te rs tud y madease r ie so fte chn ica lan dcu l tu ra lad ju s tmen t stothe UKcos t swh ich–a sno tedb yIn f ra s t ru c tu reUK–toge th e rredu cethed i f fe ren cetoaf igu recompa rab letothe i rf in d ing s . 14 100 Co s tpe rsqua re me t re(£ ) 90 80 70 60 50 40 30 20 10 0 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 Sou r ce :H ighwa ysAgen c y :Con t ra c t in gfo rH ighwa y s Ma in ten an ce , Na t ion a lAud i tO f f ice ,O c tobe r2009 5 .2 .5 Un ce r ta in ty inin ve s tmen tp lann ingandfund ingc rea te s ine f f ic ien cy inava r ie tyo fwa y s : • Redu c ingthe A gen cy ’sab i l i tytose cu ree f f ic ien c ie sb yp re ven t ingi tf roms t r ik inglong te rm ag reemen tsw i thsupp l ie r stha tcou ldo f fe rbe t te rva luefo r mone y. • Ther is ko fp ro je c tcan ce l la t ionis bu i l t in tothep r ice squo tedb ysupp l ie r s ,thu s in c rea s ingtheco s t . • Requ i r ingtheo rgan isa t iontosome t ime sde la yo rcan ce lp rog ramme s(wh ichcanleadtoabo r t ive de s ignandp ro cu remen two r k ) . • TheAgen cyha sfoundi tse l funab letoadop tr igo rou sop t imumwho lel i fea sse t managemen t p r in c ip le s ,o rs igncon t ra c tsw i thsupp l ie r sre f le c t ingtho sep r inc ip le s . 5 .2 .6 Ana ly s isb yanumbe ro fo rgan isa t ion s ,in c lud ingC IPFA ,theIn s t i tu teo fAs se t Managemen t ,and 23 ,ind i ca te stha t ,whencoup ledw i throbu s ta s se t managemen tandcomme r c ia l In f ra s t ru c tu reUK capab i l i tyonthepa r to fthese r v icep ro v ide r ,g rea te rv is ib i l i tyo fthep ipe l ineo ffu tu reroad s in ve s tmen tenab le sco s te f f ic ien c ie sfo rthese rv icep ro v ide randsupp lycha in .Fo re xamp le ,g rea te r ce r ta in tyo ffund ingenab le se conom ie so fs ca lef romp ro cu remen to f ma te r ia lsfo rla rge r p rog ramme so fwo r k ,redu cedlabou rco s tsb ya l low ingcon t ra c to r stop lanfo randsmoo thou tpea k s andt rough so fwo r k ,andg rea te rin ve s tmen tinnewte chno log ie sandp ro ce s se swh i chbe comeco s te f f ic ien tw i thg rea te rce r ta in tyo ve rfu tu rewo r k . 5 .2 .7 Thetheo re t ica lca se issuppo r tedb ysomeemp i r i ca le v iden ce .In f ra s t ru c tu reUK ’s‘ In f ra s t ru c tu re Co s tRe v iew2010’ind i ca te dtha te x tend ingfund ingce r ta in tyha sbeena s so c ia tedw i thun i tco s t sa v ing so f10 –20% ino the rse c to rsandcoun t r ie s ,pa r t icu la r lyfo rrou t ine ma in tenan ceandrenewa ls 24 wo r k . Fo re xamp le : • theSco t t ish Go ve rnmen t ’s long te rmroad ma in tenan cecon t ra c ts ,la s t ingupto10yea rs ,ha ve beena s so c ia tedw i ths ign i f i can tsa v ing sf romg iv ingcon t ra c to r sap ipe l ineo fwo r ktha t in cen t iv ise s in ve s tmen t inyea r onyea rimp ro vemen t ,fo re xamp leredu c inglabou rco s tth rough imp ro v ingp rodu c t iv i tyb y20% ; • theR i jk swa te r s taa tin theNe the r landsgene ra tedsa v ing so f20%inroad s ,b ye x tend ingcon t ra c t te rmsf rom1 –2yea rsto5–7yea r sandb ybund l ing mo re ma in tenan cea c t iv i t ie stoge the rinthe samecon t ra c t ;and 23 In f ra s t ru c tu reCos tRe v iew ,2010 ,HMT reasu r yandIn f ra s t ru c tu reUK ( h t tps : / /www .gov .u k /gove rnmen t /u p load s / s y s tem /up load s /a t ta chmen t_da ta / f i le /192588 / cos t_ re v iew_ma in211210 .pd f) 24 Ib id . 15 •w i th intheB i rm inghamH ighwa y s Ma in tenan cePF I ,theab i l i tytop lanlongte rmp ro v idedce r ta in ty o frequ i remen tfo r1 m i l l iontonne so fa spha l t ,wh i cha l lowedthemtop ro cu reth is mo ree f fe c t ive ly , redu c ingsupp l ie randsub con t r a c to rco s tsb ya tlea s t10% . 5 .2 .8 Intheregu la tedin f ra s t ru c tu rese c to r s ,g rea te rce r ta in tyo ve rthe in ve s tmen tp ipe l ineha sbeen a ch ie vedth roughf iveyea r lycy c le so f in ve s tmen tp lann ing ,o ve rwh ichtheregu la to rse tsp r ice s in the indu s t r y .Howe ve r ,re sea r chb yIn f ra s t ru c tu reUKind ica te stha t ,e venintheregu la tedse c to r s , thef ive yea r lyre v iewsc rea tea l ineo fun ce r ta in ty inin ve s tmen ta roundthere v iewpo in t ,wh i ch mean stha tpo ten t ia le f f ic ien cysa v ing scon t inuetobe lo s t ,e s t ima tedb yonewa te rcompan ytobe in 25 theo rde ro f10 –15%inthewa te rse c to r. 5 .2 .9 Ano the ris sue isthee f fe c to fannua l isedbudge ts ,pa r t icu la r lywhencomb inedw i ththe ‘s tops ta r t ’ na tu reo ffund ingp re v iou s lyde s c r ibed .TheH ighwa y sAgen cycu r ren t lyha snoendyea rf le x ib i l i ty ,in i tsownr igh t ,onwhenbudge tsa respen t .Thecomb ina t iono fth isw i thregu la rchange stobudge tsa s f is ca le ven tsd r ive sanapp roa chtocap i ta lin ve s tmen twhe rethep rog ramme issp l i tin toannua l de l ive r yp lan s/budge ts.Be cau sethep repa ra t ion,de s ignandde l ive ryo fscheme smu s thappen w i th inayea r,thef i r s tha l fo fthef inan c ia lyea r(Ap r i ltoSep tembe r )isu sedtop repa reandde s ign s cheme sandthese condha l ftode l ive r–th isre su l t sin too man ywo r k s inw in te r . 5 .2 .10Thefo l low ingf igu reshowsthee x ten ttowh i che xpend i tu reha so ccu r redtowa rd stheba ckendo f thef inan c ia lyea ro ve rthe la s ttwospend ingre v iews : %o fyea rspend F igu re5 :Ave rageannua lspendp ro f i le20072013 1 8 1 6 1 4 1 2 1 0 8 6 4 2 0 9 0 0 8 0 0 7 0 0 6 0 0 5 0 0 £m 4 0 0 3 0 0 2 0 0 1 0 0 0 A v e rage %(we igh t ed ) T o t a l( £m) A p r M a y Jun Ju l A ug Sep tO c t No v De c Jan F eb M a r Mon th Sou r ce ;H ighwa ysAgen c yf igu re sp repa redb yS t ra teg icRoad sIn ve s tmen tan dSpon so r sh ipd iv is ion 5 .2 .11Thef igu re s ind ica tea ma r kedannua lcy c lew i th62%o fthep rog rammetyp i ca l lybe ingde l ive red inthese condha l fo fthef inan c ia lyea r(O c t Ma r ch )and37%o fthep rog ramme in the w inte r mon th s (No v Feb ) .Th isimpo se sth reetype so fco s t : • In e f f ic ien tde l ive ryduetoru sh ings chemede ve lopmen t( toen su re i tis int imefo ryea rend )and ine f f ic ien tu seo fre sou r ce stode l ive rs cheme s ,a sde l ive rycha l lenge sa reunne ce s sa r i ly in c rea sedandthesames ta f fneed edtowo r kon mu l t ip les cheme s . • Unde r ta k ing mo rewo r kthanne ce s sa r y inw in te r mon th sw i tha s so c ia tedco s tin c rea se sand 26 de la y sduetow in te rwea the randaredu c t ionina s se tl i fe. 25 Smoo th ingIn ve s tmen tCy c le s inthe Wa te rSe c to r ,HMT rea su r y 26 Fo rexamp le ,resu r fa c in gwo rk scanon l ye f fe c t ive l ybeunde r takenwhen thetempe ra tu re isabove5deg ree sasthe ma te r ia ldoe sn o tb in d co r re c t l ya tlowe rtempe ra tu re s . 16 • Lowe ra l lo ca t ivee f f ic ien cya ss cheme sa re mo re l ike lytobese le c tedonthe i rde l ive rab i l i ty inthe sho r t te rmra the rthanthebe s tva lue inthe longe rte rm 5 .2 .12A lanCoo kcon s ide redth israngeo fe v iden ceandcon c ludedtha t : “ Ba sedone v iden cef romcompa r ison sw i tho the rin f ra s t ru c tu rebu s ine s se s ,Iamcon v in cedtha tthe pub l ic i sno tge t t ingagoodenoughdea landthecu r ren t mode li san inadequa tewa yo frunn ingone o ftheUK ’ s mo s t impo r tan tp ie ce so fe conom icin f ra s t ru c tu re .Th i si sbe cau se : • the rea rein su f f i c ien tsu s ta inedande x te rna lp re s su re sontheAgen c ytose cu reimp ro vemen ts in va luefo r mone ya c ro ss i t sp rog ramme ; • theneedtopu tf le x ib i l i t yf i r s tlead stosub op t ima lde c i s ion sabou tre sou r cea l lo ca t ionandne two r k managemen t ,wh i chdono tre f le c tthecoun t r y ’ s longte rme conom icin te re s t ;and • me chan ism sfo riden t i f y ingthespe c i f i cneed so froadu se r s ,andt ran s la t ingtho se in to in cen t i ve s 27 to mee ttho seneed sandp ro v idee x ce l len tcu s tome rse r v i ce ,a rewea k . ” 5 .2 .13Theabo ve i l lu s t ra te ssomeo ftheke yrea son swh ythe re iss copefo rimp ro vedpe r fo rman ce . The re ise v iden cef romo the rin f ra s t ru c tu rebu s ine sse stha tcomm i t tedlong te rmfund ing ,ac lea r senseo fs t ra teg icd i re c t ionanda c t ivechamp ion ingo ftheneedso fcu s tome r scanleadtod rama t ic imp ro vemen tstoe f f ic ien cy ,wh i lea ch ie v ingbe t te rqua l i ty in f ra s t ru c tu reandimp ro vedse r v ice 28 qua l i ty. 5 .3Op t ionone –Ins t i tu t iona lre fo rm w i thleg is la t ion Bene f i ts 5 .3 .1 The rea reth reema in type so fbene f i twh ichweha ve iden t i f iedf romth isop t ion : • Imp ro vemen ts ine f f ic ien cyandva luefo r mone yo fde l ive ry • Po ten t ia lfo rabe t te rse r v icefo rroadu se r s • E cono m i cg row thth roughimp ro v ingthecond i t ion sfo rthedome s t ic UKw idesupp lycha in We ta kethe se intu rnbe low . Imp ro v inge f f ic ien cyandva luefo r mone y 5 .3 .2 TheH ighwa y s Agen cyp lan si tss cheme sonava lue managemen tba s is .Ino rde rtode ve lopa robu s tp rog rammeo f wo r kstha t ma ke sbe s tu se o ffund ingto mee tc r i t i ca l ne two r kneed s ,the H ighwa y s Agen cy ope ra te s as t r ic ts cheme de ve lopmen t andfund ing p ro ce s s(pa r t icu la r lyfo r renewa lsandsma l le rs cheme s )ba sedonana t iona lp r io r i t isa t iono fe v iden cedneed .A l ls cheme s de l ive rva luefo r mone yw i th inthecu r ren t go ve rnan cef ramewo r ktha tthe HA ope ra te and wo r k unde r . 5 .3 .3 Howe ve r ,a stheea r l ie rd is cu s s ionsh igh l igh t,the rea rearangeo fpo ten t ia lre fo rmstha tcou ld he lpimp ro vetheH ighwa y sAgen cy ’sab i l i tytod r ivee f f ic ien cyandva luefo r mone yfu r the r . Ma k ing theroad sope ra to r mo re independen tthantheHAisa tp re sen tcou ldhe lptoengende racomme r c ia l andlongte rmapp roa chto manag ingtheroad s .Be ingc lo se rtothecomme r c ia l ma r ke ti tope ra te s in andta k inga longte rmapp roa chto manag ingtheSRNa rebo thke ytothecompan yrea l is ingthe e f f ic ien c ie sen v isagedintheCoo kRe v iew.There po r tre commendedtha tthego ve rnmen tshou ld : 27 CookRe v iew ,p .65 . 28 Th is iscon s is ten tw i thIn f ra s t ru c tu reUK ’sCos tRe v iewCh a r te r ,pub l ished inJune2011 . 17 “… re fo rmthes ta tu so fthene two r k manage rino rde rtop ro v ideaca ta l y s tfo rchange ,sotha t i tcan ope ra tew i th mo rece r ta in t yin i t sfund ingse t t lemen t s ,g rea te rcomme r c ia lf le x ib i l i t y ,and le s s 29 m in is te r ia l in te r ven t iononada yto da yope ra t iona lba s i s ”. 5 .3 .4 Thetab lebe lowsumma r ise sthes copeo fthe sepo s s ib lere fo rmswh i chwegoontoa s se s sthe e v iden cefo r . Tab le2 : Re fo rmop t ions A reao f re fo rm Road In ve s tmen t S t ra teg y Spec i f icre fo rmsposs ib le Reasonth iscou ldenab leimp rovemen t S ta temen to fa va i lab lefundsfo r ag ivennumbe ro fyea rs. Pe r fo rman cespe c i f ica t ion , in c lud ing iden t i f ica t iono f s cheme stobede l ive red . Endyea rf le x ib i l i ty. Fund ingce r ta in tyandin ve s tmen tp lann ingce r ta in ty , enab l ingbene f i tsf romlongte rmfo cu sandle s s f inan c ia lr is kbo rneb ysupp l ie r s . En cou rageg rea te rinno va t ioninsupp lycha in Wo r ks chedu leda tapp rop r ia tet ime so ftheyea r . Avo id ingp re s su retospendbudge tinyea r,a l low ing imp ro vedp lann ing . Be t te ra l ignedw i thfu l ll i fea s se t managemen t . Mon i to ring Ab i l i tyto mo vep ro je c tsbe tweenyea r swhe re i tw i l l ma x im ise e f f ic ien cy . Su s ta inedp re s su retoa ch ie veva luefo r mone yw i th independen tregu la t ionandben chma r k ingo fco s t pe r fo rman ceandde l ive ry. Es tab l ishmen to famon i to r ing andregu la to r yfun c t ionto s c ru t in iseandcha l lenge compan y ’sco s ts ,pe r fo rman ce andde l ive ry. Roadu se r Bod yappo in tedtorep re sen tthe Pub l ishrepo r tsandad v isego ve rnmen tandthe wa tchdog in te re s tso froadu se r s . compan y ,he lp ingtoa l igncompan y ’sob je c t ive sw i th roadu se r s ’in te re s ts . In s t i tu t iona l Re fo rmspo s s ib le inava r ie tyo f Qu icke rs igno f fp ro cedu re sg iv ingimp ro ved con s t ra in ts a rea s : re la t ion sh ipw i thsupp lycha in ,pa r t icu l a r lyon ma jo r p r o j e c t s a n d f i n a n c i a l p r o c e d u r e s . unde rcen t ra l• F inan c ia lde lega t ion sand con t ro ls f le x ib i l i t ie s A t t ra c t ingandre ta in ingspe c ia l iseds ta f f ;pa r t icu la r ly • Ma jo rp ro je c tsand inp ro je c t managemen tandcomme r c ia lp ro cu remen t . p rog ramme sapp ro va l Po ten t ia ls copetoin c rea seu seo f pe r fo rman ce • Re c ru i tmen tandrewa rd re la tedpa ybe lowboa rdle ve l .De c rea sedre l ian ceon 29 CookRe v iew ,p .73 . 18 • Co rpo ra tespend ing in te r ims ta f f . Po ten t ia lt imeandco s tsa v ing s inupg rad ingIT , t ra in ingandva r iousa rea so fp ro cu remen t . O the r in s t i tu t iona l con s t ra in ts S ta tu to r ypowe r sanddu t ie s. A mo recomme r c ia l lyfo cu sed andindependen tgo ve rnan ce s t ru c tu recou ldbe in t rodu ced . C lea rdema r ca t iono fro le sbe tweengo ve rnmen tand theda y to da yope ra t ion s ,g iv ingt ran spa ren cyo f p ro ce s s .Th isshou ldenab le imp ro vedre la t ionsh ips w i ththesupp lycha in ,a sthenewbod yw i l l managei ts con t ra c tsandre la t ion sh ip soni tsownau tho r i ty . Po ten t ia lt imeandco s tsa v ing sf romqu i cke rde c is ion ma k ing. D is c ip l ine sf romcomme r c ia lgo ve rnan cef ramewo r k unde rtheCompan ie sAc tw i l l imp ro vepe r fo rman ce and ma ke independen cec red ib le ,ra is ingthe compan y ’spub l i cp ro f i leandimp ro v ingsupp l ie r con f iden ce inlong te rmin ve s tmen tp lansandfund ing . 5 .3 .5 There fo rmscou ldbecomb inedin mo rethanonewa y ;howe ve rthe rea re in te r re la t ion sh ip s be tween man yo fthemea su re s( fo re xamp le ,fo rleg is la t ionunde rp inn ingfund ingce r ta in tytode l ive r e f f ic ien c ie s ,long te rmp lan s mu s tbec red ib letosupp l ie r sandtheope ra to r mu s te x t ra c tsa v ing s wheni ttende r s .O r ,mo ree xpe r ien cedcomme r c ia l manage rswou ldbeab letoa ch ie ve mo re inan o rgan isa t ionw i thfund ingce r ta in tyandf le x ib i l i tythanw i thou t ),the re fo reweha vet rea tedthe se re fo rmsa soneop t ionfo rthepu rpo se so fth is impa c ta s se s smen t ,ana ly s ingthes ca leo fne tbene f i ts there fo rmp re sen tsandwhe the rleg is la t ion ma x im ise sthem . 5 .3 .6 Were v iewedthee v iden ceandf oundpo ten t ia lsa v ing s,a si l lu s t ra tedinthecha r tbe low .The H ighwa y sAgen cya imstode l ive rs ign i f ic an te f f ic ien c ie se veni fre fo rmdoe sno thappen ;thecen t ra l e s t ima teo fthe se isshownb ytheg reen( top )po r t iono ftheba rs .Howe ve r ,the re issomeun ce r ta in ty o ve rthefea s ib i l i tyo fthe sesa v ing s ,andpa ss ingthere fo rmswou ldin c rea sethe l ike l ihoodthe yw i l l berea l ised –were f le c tth is inou rh ighe s t ima teo ftherangeo fe f f ic ien c ie sthere fo rmscou ldde l ive r . These cond ,pu rp le ,po r t iono ftheba rsshowsthee f f ic ien c ie stha tleg is la te dce r ta in tyo f in ve s tmen t p lan sandf le x ib i l i tyo ffund ingise xpe c tedtoma kepo s s ib le .Thebo t tom ,b lue ,po r t iono ftheba rs showsthean t ic ipa tedspend ingfo l low ingthere fo rms .Be lowwee xp la inthee v iden cefo rthe se e s t ima te s . F igu re6 :H ighwaysAgencyan t ic ipa tedspend ingandes t ima tede f f ic ienc ies-cen t ra lcase 19 An t i c i p a t ed sp end i ngp e ry e a r £7 bn E f f i c i en c i e sHAa im tod e l i v e rov e rp e r i odi nb a se l i n e( c e r t a i n tyo fa ch i ev i ngth e se i n c r e a sedw i thl eg i s l a t i on ) E f f i c i en c i e sd e l i v e r ab l ew i thc e r t a i n tyo f i nv e s tm en tp l an sandf l ex i b i l i tyo ff und i ng HAsp end i ngw i thf u l lr e f o rm s £6 bn £5 bn £4 bn £3 bn £2 bn £1 bn £0 bn 1 5 /1 6 1 6 /1 7 1 7 /1 8 1 8 /1 9 1 9 /2 0 2 0 /2 1 2 1 /2 2 2 2 /2 3 2 3 /2 4 2 4 /2 5 Sou r ce :H ighwa ysAgen cyandD fT Compan yf ramewo r kands ta tu s 5 .3 .7 A f te rre v iew ingthee v iden ceo fthep rob lemstheH ighwa y sAgen cycu r ren t l yfa ce s ,A c t ionfo r Road sandtheCoo kRe v iew sugge s tedtha tthee s tab l ishmen to fan ewbod y–a ‘go ve rnmen townedcompan y ’–wou lda l lowfo r anin s t i tu t iona ls t ru c tu rewh i chwou ldbe t te rd r ivee f f ic ien c ie s . 5 .3 .8 TheHAcu r ren t lyope ra te sunde rane xe cu t iveagen cyf ramewo r kw i thcen t ra lcon t ro lso ve ri ts go ve rnan ce .Wh i ls tc rea t ingacompan ythe reis anoppo r tun i tytoa s se s stheop t ima lgo ve rnan ce s t ru c tu retoa l lowacomme r c ia lcu l tu rechangeba sedong rea te rindependen cef rom m in is te r s .We ha vede te rm inedago ve rnan cef ramewo r kde s ignedtop ro v ideth is .Th is isde ta i ledonpage s2129 o ftheGo ve rnmen t’sr e spon setothecon su l ta t ionont rans fo rm ingtheH ighwa y sAgen cy in toa 30 go ve rnmen townedcompan y. 5 .3 .9 Unde rthes ta tu squo ,theHAha store fe rde c is ionma k inga tva r iou s le ve ls to m in is te r s ,be cau se e xe cu t iveagen c ie sfa l lf i rm lyw i th intherem i tandre spon s ib i l i tyo f theSe c re ta r yo fS ta te .C rea t inga compan yw i l lp ro v ide lega lsepa ra t iono fthene two r kope ra to rf romtheSe c re ta r yo fS ta te .Th is is seena sane ce ssa r yf i r s ts tepinbu i ld ingthew ide rcu l tu reo f independen cere commendedb yCoo k. W i thou ttha tsepa ra t ion ,theSe c re ta r yo fS ta tewou ldbe lega l lyrequ i redtoa ssu reh imse l fo fa l l de c is ion stha ttheAgen cy ma ke sonh isbeha l f–wh i chinp ra c t i ce mean stha ta l lde c is ionma k ingis dom ina tedb ythe m in is te r ’sre spon s ib i l i ty . 5 .3 .10Theboa rdo fa lega l lysepa ra tecompan ywou ldbefu l lya ccoun tab lefo rmee t ingthepe r fo rman ce spe c i f ica t ionintheR IS ,andi twou ldbepe r ce iveda ssu chb yroadu se rsandthecompan y ’s supp l ie r s .T heAgen cywou ldthenbe in cen t iv isedandcha l lengedtoa c tmo re l ik eaninno va t ive , comme r c ia l ly fo cu sedin f ra s t ru c tu rep ro v ide r ,c lo se rto i ts ma r ke tandfo cu sedontheneed so fthe ne two r k .I twou ldbe mo red i f f icu l tfo rWh i teha l l tod i re c tthecompan yto ma ked is rup t ivechange sto ag reedcon t ra c tua lou tpu tsintheR IS w i thou ta ma jo r ,t ran spa ren tandp ro t ra c tedre v iewo ftheR IS andthefund ing .Th iswou ldbeanimpo r tan timp ro vemen to ve rthes ta tu squo ,whe rego ve rnmen t d i re c tstheHAc lo se ly , mean ingi tha stoa c tonarangeo fcompe t ingpo l i t i ca lp re s su re s ,wh i cha l te r i tsapp roa chtone two r k managemen tona nunp red ic tab leba s isandwou ld ma kethebene f i tso fa long te rmapp roa chd i f f icu l ttorea l ise . 5 .3 .11The independen ceanda ccoun tab i l i tyde s c r ibedabo vea rene ce ssa r yf i r s ts tep s inbu i ld inga w ide rcu l tu reo f independen ce .Thep r io r i t ie so ftheboa rdw i l lbec lo se rtotho seo facomme r c ia l 30 Depa r tmen tfo rT ran spo r t , ‘Gove rnmen tre spon setocon su l ta t ionon t ran s fo rm ingtheH ighwa y sAgen cyin toagove rnmen townedcompan y’ , Ap r i l2014 ,h t tps : / /www .gov .u k /gove rnmen t / spee che s /gove rnmen tre spon se to con su l ta t ion ont ran s fo rm in g th e h ighwa y sagen cyin to -a gove rnmen townedcompan y. 20 bu s ine ss :fo cu sedon lyonde l ive r yandco s ts ,w i thc lea re xpe c ta t ionsandpe r fo rman ce ind ica to r sse t b y i tsc l ien twh ichha vetobe me ttore ce iverewa rd .G rea te rope ra t iona lf le x ib i l i tyw i l la lsoenab lethe compan ytoa l igni tsp ra c t i ce sw i ththo seo f i tssupp l ie r s ,c rea t ingg rea te rs copefo rinno va t ion . 5 .3 .12Afu r the rbene f i to fthet ranspa ren cyo ftheR ISandthere spon s ib i l i tyo f mee t ingi tre s id ingf i rm ly w i ththecompan y ’sd i re c to r sistha tthecompan ywou ldope ra tew i thac lea rfo cu son ma in ta in inga goodrepu ta t ionw i throadu se r sandw i thne ighbou r stothene two r k ,andi twou ldope ra tew i th sha rpe rf inan c ia lbeha v iou ra s i tsough tto inno va tetoredu ceo rremo veco s t(p re s su recom ingf rom awa tchdogandthego ve rnmen ta ssha reho lde r ) .Bypub l ish ingtheR ISanden su r ingtha tthe pe r fo rman ceande f f ic ien cyo fthecompan yaga in s tth is is independen t lya sse s sedb ytheS t ra teg ic Road sNe two r k Mon i to r ,thecompan ywou ldbet ran spa ren t lya ndpub l ica l lyre spon s ib lefo ri tsown pe r fo rman ceandde l ive ry .Thecompan ywou ldthenbed i re c t lya ccoun tab letothe mon i to r –whow i l l ha ves ta tu to r ypowe r stosan c t ionthecompan yfo rpoo rpe r fo rman ce –a swe l la stotheSe c re ta ryo f S ta tea stheso lesha reho lde rinthecompan y .TheCha i rman ,Ch ie fExe cu t iveandtheBoa rdwou ld ha vec lea rpe r sona la ccoun tab i l i tyandintheca seo ftheCha i rmanandCEO ,ah ighe rpub l i cp ro f i le thanistheca senow .The ywou ldthe re fo rebesub je c ttofa rg rea te rpub l icp re ssu retode l ive ra be t te rope ra t ingne two r ka tgenu ine ly lowe run i tco s t . 5 .3 .13I ftheindependen cef romgo ve rnmen tisno tseena sc red ib le b ythecompan ie s inthesupp ly cha in ,the re isas t rongr is ktha tl i t t lechangew i l lbepe r ce ivedf romthep re sen ta r rang emen t.Th is wou ld meantha tthesa v ing se xpe c tedf romg rea te rcomm i tmen ttoope ra t iona l ma t te r sand e f f ic ien cyw i l lno tberea l isedtoan y th ingl ikethesamee x ten t ,a sthe sere lyone f f ic ien c ie sse cu red b ysupp l ie r sp lann inga c t iv i tyo ve rlonge rpe r iod s . T ran s fe ro fs ta tuto r ydu t ie stothenewgo ve rnmen townedcompan y 5 .3 .14Anewdeg reeo fope ra t iona lindependen cef rom m in is te r scou ldbea ch ie vedb yse t t ingupthe Agen cya sah ighwa yau tho r i tyunde rtheH ighwa y sAc t(ando the rre le van tleg is la t ion )ino rde rto t ran s fe rapp rop r ia tepowe rsf romtheSe c re ta r yo fS ta tetothecompan y ,remo v ingm in is te r ia l app ro va lf romsome la ye r so fthede c is ionma k ingp ro ce ss . Thecompan ywou ldha vethepowe r s andindependen cene ce ssa r ytode l ive rtheR IS(o ve randabo vethegene ra ldu t ie sandob l iga t ion s tha twou ldbet ran s fe r redto ma in ta inandenhan cethes t ra teg icroadne two r k ) .Thebod ywou ldbe ab letop lanina mo res tab leenv i ronmen t ,speedupda yto da yope ra t ion s ,anda l igni ts in te rna l p ro ce s se s mo rec lo se lytotha to fthesupp ly ma r ke ti tope ra te s in . 5 .3 .15Ontheo the rhand ,theSe c re ta r yo fS ta tew i l lno longe rbed i re c t ly l iab lefo rthe managemen to f a f fe c tedroads .Th is mean shew i l lbeab letocon cen t ra teonde ve lop ingsu cce s s ivepe r fo rman ce ind ica to r sandshap ingas t r a teg icd i re c t ionfo rthecompan y ,w i thou tneed ingtobecon ce rnedabou t theta c t i ca l managemen to fthene two r k .A tthesamet ime , i t isre cogn isedtha tu l t ima tepo l i t ica l re spons ib i l i tyw i l lrema inw i ththeSe c re ta r yo fS ta tefo rT ran spo r t ,a s istheca sew i tha l lt ran spo r t mode s . 5 .3 .16The rew i l l ,howe ve r ,beaneedtop la cesomecon t ro lo ve rhowthecompan yspend sthepub l ic mone yb ywh i ch i tw i l lbefunded.Inth iss t ru c tu r e ,th iswou ldbede l ive redinse ve ra lwa y s : •b ytheDepa r tmen tfo rT ran spo r tse t t ingaRoadIn ve s tmen tS t ra teg yw i thas ta temen to ff und s ava i lab le ;con s ide ra t iono ftheva luefo rmone yo fmo s t ma jo rs cheme s wou ldbe madea tth is s tage ,a swe l la sfund ingfo rre sou r ceandco rpo ra tespend ing . •b yanews t ru c tu refo ra ccoun tab i l i ty–th iswou ldin c ludethes t ru c tu reunde r wh ichthere fo rmed H ighwa y sAgen cycou ld ma kede c is ion sabou tind iv idua lin ve s tmen ts in c lud ingwhe re re spons ib i l i tyfo rtheva lueo f mone yo fspend ingwou ldnowl ie ;and • re ta in ingsomed i re c tcon t ro lswhe rene ce s sa r ytoen su rep ub l ic mone y isu sedapp rop r ia te ly( see be low ) . 21 Re la xa t iono fcen t ra lgo ve rnmen tcon t ro ls 5 .3 .17Inthecon te x to fbe inganagen cyo fago ve rnmen tdepa r tmen t ,con s t ra in tsa rep la cedonan o rgan isa t ion ’sab i l i tytocompe tew i thp r iva tese c to rcompe t i to r s( fo re xamp lefo rs ta f f )andtore spond qu ick lytocomme r c ia lcha l lenge s . 5 .3 .18Asc iv i lse r v iceo rgan isa t ions ,e xe cu t iveagen c ie sfa cefu r the rcon s t ra in tsonthe i rope ra t iona l de c is ion s ,pa r t icu la r ly inte rmso fhumanre sou r c ingde c is ion s .As membe r so fthec iv i lse rv ice ,HA s ta f fha vethesamecond i t ion so fse r v icea scen t ra ldepa r tmen ts .Th iscan meantha ti t is mo re d i f f icu l tfo r managemen ttoa ch ie veg rea te re f f ic ien c ie s ini tss ta f fco s ts ,and managemen tw i l lha ve le s sf le x ib i l i ty ina l te r ingin cen t ives t ru c tu re s totheneedso fthebu s ine ss .Fu r the rmo re ,c iv i lse r v ice remune ra t ionle ve lsa re mo rere s t r ic tedthantho seope ra t inginthecomme r c ia lse c to r , ma k ingi t mo red i f f icu l ttore c ru i tm idd leandsen io r manage r sw i thapp ropr ia tee xpe r ien ceandte chn ica l e xpe r tise .Compan ie sc la ss i f iedtocen t ra lgo ve rnmen t ,l ikee xe cu t iveagenc ie s ,ope ra tew i th in l im i ts onse t t ingpa yfo rthe i rs ta f f . 5 .3 .19 Anumbe ro fAgen cysen io r managemen tande x te rna ls ta keho lde rsin te r v iewedb ytheCoo k Re v iewteama rguedtha tcen t ra lgo ve rnmen tcon s t ra in ts inh ib i ttheab i l i tyo ftheAgen cytoope ra te a se f f ic ien t lya spo s s ib le ,g iventha ti tsp r ima r yfo cu s isonin te ra c t ingw i ththep r iva tese c to r . Wh i le i t isd i f f icu l ttoquan t i f ythe impa c to fthe se ,someke ycon s t ra in tswe re iden t i f iedo ve r: • ab i l i tytoa t t ra c tandre ta incomme r c ia lta len tinthe in f ra s t ru c tu rese c to r .Theremune ra t iono f spe c ia l iseds ta f f–su cha seng inee r s ,con t ra c t manage r sanda sse t manage r s–compa re spoo r ly w i thp r iva tese c to rcompa ra to r s ,andthe re isre la t ive lyl i t t leu seo fpe r fo rman ce re la tedpa y , l im i t ingtheab i l i tyo fthesponso rto in cen t iv ise manage r ia lpe r fo rman cea sasub s t i tu tefo ra sha reho lde rp ro f i t mo t ive ; •f le x ib i l i ty in manag inghumanre sou r ce s ,pa r t icu la r ly in ma k ingre spon s iveope ra t iona lde c is ion s i n t ra f f ic managemen t ,wh ichcompa re spoo r lytop r iva tese c to rcompa ra to r ssu cha stheRAC , ba sedonin te rna lben chma r k ingo fp ro cedu re; • theab i l i tytode ve lops k i l ls intheAgen cy ,pa r t icu la r ly inse cu r ingt ra in ingfo rco recompe ten c ie s su cha sa s se t mana gemen t ; • ab i l i tytop romo tecu l tu rechange ,in c lud inga mo recomme r c ia lcu l tu re ;and • pe r ce ivedwa s tageo fre sou r ce sth roughbu reau c ra t iccon t ro ls ,in c lud ingdup l ica t iono fgo ve rnan ce a r rangemen ts . 5 .3 .20C iv i lse r v iceo rgan isa t ion sa lsoha vetore spondtoo the rcen t ra lpo l icy in i t ia t ive s ,wh i ch ma y in some in s tan ce scon s t ra inthef le x ib i l i tyo fthe i rcomme r c ia lde c is ion ma k ingandthe i rfo cu son de l ive r ingthe i rco rebu s ine ss .H ighwa y sAgen cyboa rd membe r s in te r v iewedb ytheCoo kRe v iew teamiden t i f iedbu reau c ra cyandde la ysa roundde c is ion soncon su l tan cyspend ingandITp ro je c tsa s acon s t ra in tonthe i rab i l i tyto ma kere spon s ivecomme r c ia lde c is ion s .Fo re xamp le : • theAgen cyde l ive rs i tsou tcome sth roughthesupp lycha in ,andi t isrou t inep ra c t icetoou tsou r ce te chn ica lse r v ice ssu cha sde s ign ,spe c ia l is tad v iceandcon s t ru c t iona c t iv i t ie s .TheAgen cy e s t ima te stha ti tcu r ren t lysu f fe rssomef ivewee k so fadd i t iona lde la yfo ranumbe ro fthe se de c is ion swh ichha vetobere fe r redtotheD fTfo rapp ro va l ;and • theAgen cy ’sp ro cu remen tp ro ce s sfo ro f f iceba sedITse r v ice s iscen t ra ltothee f fe c t iveope ra t ion andthe re fo rep rog rammede l ive r y .Th ise lemen trep re sen ts le ssthan1%o fp rog rammespendbu t thein te rna lapp ro va lp ro ce s se styp ica l lyaddbe tweense ve ra lwee k sandse ve ra l mon th sto p rog ramme sa srequ i remen tsa rec la r i f ied . 5 .3 .21I t ispo s s ib letha tthecompan ycou ldbeg iven mo ref reedoma roundce r ta incon t ro lswhe rethe re isac lea rca sefo ri t ,de sp i tebe ingc la s s i f iedtocen t ra lgo ve rnmen t.Th iswou ldremo vesomeo fthe co s tsde s c r ibedabo veanda l lowthecompan ytocompe tefo ri tss ta f f inthesame ma r ke tp la cea s i ts supp l ie r s ,a swe l la sse ti tsowns t ru c tu re sfo rin cen t iv is ingpe r fo rman ce ,wh ichshou ldleadto lowe r co s tsth rough mo ree f f ic ien t managemen to fp ro je c tsandbe t te rcon t ra c tnego t ia t ionand managemen t .A lso,i tw ou ldremo veunne ce s sa r yde la y sduetodup l ica t ivela ye r s inde c is ion ma k ing p ro ce s se s ,fo cu s ingthea ccoun tab i l i tyfo rspeedandpe r fo rman ceon manage r stotheboa rdandon 22 theboa rdtoth eowne r( theSe c re ta r yo fS ta te ) .Fu r the rwo r kw i l lbeunde r ta kentoe s tab l ishthe mo s t idea lcon t ro la r rangemen ts. 5 .3 .22On cee s tab l isheda sou ts ideo fthec iv i lse r v ice,thecompan yw i l lbeab letore c ru i ts ta f f mu ch mo requ ick lya sc iv i lse r v ice re c ru i tmen tp r in c ip le sw i l l no tapp lyandthe re fo re i tw i l lbeab leto re spondto i tsbu s ine s sneed sfa r mo rerap id lythana tp re sen t .I t isen v isagedtha tthecompan yw i l l e s tab l ishi tsownHRfun c t ionanda r rangemen tstha ta re independen to fthec iv i lse r v ice .Th isshou ld p ro v idefo rg rea te rre spon s ivene s sandthef le x ib i l i tytoshapeacu l tu reandbeha v iou r stha t in cen t iv isepe r fo rman ceanda re con s is ten tw i ththo sefoundinacomme r c ia lenv i ronmen t ,sub je c tto an ycen t ra lgo ve rnmen tre s t r ic tion s tha ta re ma in ta ined . 5 .3 .23Th is mean stha tthecompan ycou ldbese tupw i ththef reedomtose ti tsownta len t managemen t s t ra tegyfo rthere c ru i tmen t ,re ten t ion ,rewa rdandre lea seo fi ts s ta f fandcou ldin t rodu cechange sto thecon t ra c tua lemp lo ymen tte rmsandcond i t ion so ft ran s fe r reds ta f fth roughtheno rma lcou r seo fi ts bu s ine ss,sub je c ttocon su l t ingemp lo yee sandthe i rrep re sen ta t ive s inl inew i themp lo ymen tand t rade sun ionleg is la t ion .Inadd i t ion ,thecompan ywou ldbef reetoh i renews ta f fonad i f fe ren t emp lo ymen tcon tra c t . Endyea rf le x ib i l i t y 5 .3 .24 A ss ta tedinthede s c r ip t iono fop t ion s ,thenewcompan yw i l lha vetheab i l i tyto mo ve10%o f i ts cap i ta lbudge tbe tweenyea r s .Th is isne ce s sa r ytode l ive rtheR ISa si t mean sthecompan yw i l lbe ab letop lanwhens cheme sa reunde r ta kena c ro sstheR IScy c letoen su reg rea te s te f f ic ien cy, con s is ten tw i thou tcome srequ i redo f i t.Th isa lsog ive stheHAthef le x ib i l i tytoa vo idthe ‘spendi to r lo se i t ’ men ta l i tytha tiso f tena s so c ia tedw i thannua lbudge ts .Th isa l lowsthefo cu stobeonthe mo s t e f f ic ien tandt ime lyde l ive ry ,ra the rthani tha v ingtof i t intothef inan c ia lca lenda r . 5 .3 .25Cu r ren t lytheHAsu f fe r sf romi tsf inan c ia lyea rend ingju s ta f te rthew in te r mon th s ,a sou t l ined abo ve ,comb inedw i thune xpe c tedchange stofund ing .Thecomb inedimpa c to fthe setwofa c to r s mean stha tp lann ingcanno tbeunde r ta keno ve rtheapp rop r ia tet ime s ca leand ma in tenan cewo r k , e spe c ia l lypa vemen two r k s ,requ i re sgoodp lann ing .I tshou ldta kea ccoun to fsea sona lt ra f f ic capa c i tydemand s ,a cce s srequ i remen ts ,o the rad ja cen two r k s ,andspe c ia le ven ts . Wea the rs t rong ly in f luen ce sthewo r kp rog rammes in cepa vemen t ma te r ia lsa resu s cep t ib letoe x t remetempe ra tu re s , snowandra in .Fo re xamp le ,re su r fa c ingwo r k scanon lybee f fe c t ive lyunde r ta kenwhenthe tempe ra tu re isabo ve5deg ree sa sthe ma te r ia ldoe sno tb indco r re c t lya tlowe rtempe ra tu re s .In add i t ion ,con t ra c to r sa reidea l ly requ i redtowo r ka tn igh tt imeto m in im ised is rup t ion , mean ingthe y a re mo reo f tenla y inga spha l t ma te r ia lsandcon c re teinve r yco ldcond i t ion s .Th iscou ldpo ten t ia l ly re su l tintherap idcoo l ingo fa spha l tanda rea so fa spha l tpa v ingw i thredu ceddu rab i l i ty .The sub sequen trepa i r so fthede fe c t ivea rea swou ldin cu radd i t iona lco s tstotheH ighwa y sAgen cyand gene ra te mo ret ra f f icd is rup t ion .Thefu tu re ma in tenan cerequ i remen ts ,a l thoughno tquan t i f ieda tth is s tage ,cou ldbeas ign i f ican tco s to fw in te rwo r k so ve rthe longte rm . 5 .3 .26Thes lowe rspeedo fp rog re s sdu r ingw in te r mon th sfo rthewea the rre la tedrea sonsabo ve in cu r s h ighe rco s ts ,fo re xamp leduetop lan tbe ingle f tid lefo rpe r iod sawa i t ingwa rme rtempe ra tu re so r t ra f f ic managemen trequ i redfo rlonge rpe r iod s .Adeg reeo ff le x ib i l i ty inthewa ytheH ighwa y s Agen cy manage s i tsbudge twou ldenab lethemtop lanthewo r ksp rog rammeanda ch ie vethebe s t po ss ib lewo r kman sh ip ,thu sm in im is ingt ra f f icd is rup t ionandco s tstothepub l ic inthe longrun . 5 .3 .27Mo re impo r tan t ly ,longe rte rmp lann ingha sbeeniden t i f ieda sane f fe c t ivewa ytodea lw i th ine f f ic ien cycau sedb yw in te rwo r k s .TheHAe s t ima te stha tp ro f i l ingwo r k se f f ic ien t lycana ch ie ve 20%qu icke rde l ive r yandtha tth is lead stoa20%redu c t ionina ve ragep ropo r t iono fs chemeco s ts a ccoun tedfo rb yt imeba sedco s ts .Be t te rp lann ingwou lda l low mo resumme rwo r k inga vo id ingthe sho r te rwo r k ingda y sandthepoo rwea the ro fw in te r . 5 .3 .28 T ab le 3showsthea ve ragep ropo r t iono fs chemeco s tsa ccoun tedfo rb yt ime ba sedco s ts( su ch a sp re l im ina r ywo r kandtra f f ic managemen t )andnon t ime ba sedco s ts .I t i sa s sumedtha tt ime ba sedco s tsa red i re c t lyp ropo r t iona ltodu ra t iono fthewo r k stode r ivethecon c lu s iontha t20% qu icke rde l ive r yo ftho sewo r kscu r ren t lyunde r ta keninw in te rwou ldt ran s la teto20%redu c t iono f t imeba sedco s tswh ichwou ldde l ive r5%redu c t ionintheco s tso fas chemeunde r ta keninw in te r . 23 37%o fwo r k sa recu r ren t lyunde r ta keninw in te r ;i fa l lthe sewe rerep ro f i ledtheno ve ra l lsa v ingso f 1 .9%cou ldbe madeonthe ma in tenan cebudge tduetoendyea rf le x ib i l i ty . Tab le3 :Fo recas tsav ings(20%qu icke rde l ive ryo fw in te r wo rks ) Po ten t ia lsav ings % Cu r ren tco s tsa s % %sa v ingsfo r20% %sa v ingsfo r20% o fto ta l qu i cke rde l i ve ry qu i cke rde l i ve rya t37% (ave ragescheme ) wo r ksdu r ingw in te r (NovtoFeb ) T imebasedcos ts P re l im ina r ywo r k T raf f i c managemen t Nont ime based cos ts Wo r k s P repa ra t ion , supe r v i s ion andde s ign To ta l 10.7 14 .5 2 .1 2 .9 0 .8 1 .1 46 .5 N /A N /A 28 .3 100 .0 N /A 5 .0 N /A 1 .9 5 .3 .29 T hee xa c tsa v ingw i l ldependuponhow mu chwo r kcu r ren t lyunde r ta kendu r ingw in te r mon th s canbe mo vedtoo the rpe r iodso ftheyea randthee x ten ttowh i chth isa l low swo r k stobecomp le ted qu icke r .Thefo l low ingtab leshowssomes cena r io sw i the s t ima tedto ta lannua lsa v ing sba sedon to ta lannua le xpend i tu reo f£600m . Tab le4 :Scena r iosfo rsav ingonw in te r wo rks 25%w in te rwo r k mo ved 50%w in te rwo r k mo ved 100%w in te rwo r k mo ved 10% 10% 20% 20% 30% 30% qu i cke r qu i cke r qu i cke r qu i cke r qu i cke r qu i cke r (% ) (£m ) (% ) (£m ) (% ) (£m ) 0 .24 1 .4 0 .48 2 .8 0 .7 4 .2 0 .48 2 .8 0 .95 5 .7 1 .4 8 .4 0 .95 5 .7 1 .9 11 .4 2 .8 16 .8 5 .3 .30Therea l ismo fthe see s t ima te s issuppo r tedb ythede ta i lo ftheAgen cy ’scu r ren t ma in tenan ce con t ra c ts .Spe c i f ica l ly ,theAs se tSuppo r tCon t ra c ts(ASCs )in c ludera tead ju s tmen tsfo rsumme rand w in te rwo r kra te sw i thsumme rra te sbe ing0 .51%le s s(ba sedonthetwoASCsle ttoda tefo rA rea2 and10 ) .Thera te sa reu sedtose tta rge tco s ts mean ingtha tlowe ro ve ra l lta rge tco s tsw i l lbese t en su r ingtheabo vesa v ing sa rerea l isedb ytheHAinca shte rms . 5 .3 .31En su r ingtheH ighwa y sAgen cyha sendyea rf le x ib i l i tywou lda lsoa vo idther is ko fs cheme s be ingse le c tedba sedonthe i rde l ive rab i l i tyra the rthan ma x im is ingtheva luefo r mone yo fs cheme s ta kenfo rwa rdtocon s t ru c t ion .Th isshou ldimp ro vethea l lo ca t ivee f f ic ien cyo fs chemese le c t ionand leadtog re a te rs chemebene f i ts . Weha veno tbeenab letoquan t i f yth is,howe ve r,a sw i thou t ope ra t ingthenew me thodi t isno tpo s s ib letosa yhow mu chde c is ion sonscheme swou lda c tua l ly bea l te red . 5 .3 .32Endyea rf le x ib i l i tyw i l la l lowfo r ma jo rp ro je c tstobede l ive redinthe mo s tt ime lyandco s t e f fe c t ivewa y ,ra the rthanha v ingtof i ttoanin ve s tmen tp ro f i leo f tende c ided man yyea r s inad van ce o fthea c tua lp ro je c tde l ive r y .Cu r ren t ly ,o n ceap ro je c tisapp ro vedtheto ta lle ve lo ffund ingrequ i red w i l lo f tenbefa i rly ce r ta in(w i th inarange )bu tthet im ingo fth isspendo ve ranumbe ro fyea r sw i l lbe un ce r ta ina tthet imetha tfund ing isa l lo ca ted .The rea re man yfa c to r stha tw i l limpa c tthet im ingo f de l ive r y ,fo re xamp lepub l iccon su l ta t ion so rthep ro cu remen tp roce s s .Wh i l s t manag ingtoaspe c i f ic annua lfund ingle ve lisea s ie ra c ro s sap rog rammeo fa c t iv i ty ,ha v ingsomef le x ib i l i tybe tweenyea rs w i l len su rede l ive r y isno tcon s t ra inedth roughana rb i t ra r yannua lfund ingcon s t ra in t . 5 .3 .33H is to r ica l ly ,the reha sneededtobesho r tte rms low ingdowno rspeed ingupo f in ve s tmen ttof i t w i thannua lfund ingp ro f i le s .Th is isa lsod i f f icu l tfo rthesupp lycha into manage ,re su l t inginan 24 inab i l i tytocon f iden t lyp lanfo rcap i ta lin ve s tmen tandfo rlong te rmwo r k fo r cep lann in g .Adho c so lu t ionstothep rob lemha vebeene xp lo red .Fo re xamp le ,t heH ighwa y sAgen cy ,th roughthe Depa r tmen tfo rT ran spo r t ,nego t ia tedabudge te x changew i ththeT rea su r yfo r2012 /13( toca r r y fo rwa rdfund ingf romoneyea rtothene x t )tore f le c ttherea l i tyo ff lu c tua t ingspend ingp ro f i le sa s p ro je c ts mo vedth roughthede ve lopmen tcy c le . Wh i ls tth isa vo idedtheneedtos lowdownde l ive r yo f roads cheme s ,th iss t i l lre su l tedinun ce r ta in tyun t i lre la t ive ly la te intheyea r .F le x ib i l i tyo ve raR IS cy c les hou ldb r ingc lea re rbene f i ts . In ve s tmen tp lann ingce r ta in t y 5 .3 .34Fo rtheHAtoma ke e f f ic ien cysa v ing s ,i tneed stobece r ta intha tthefun d ingw i l lcon t inuefo rthe longte rm(anda vo idtheannua lcy c leo fgo ve rnmen tbudge t ingi tcu r ren t lybe come s in vo lvedi n ) . The re fo re leg is la t ionw i l lp la ceanob l iga t ionongo ve rnmen ttop ro v ideas ta temen tonbo ththe in ve s tmen tp lanandthepub l icf inan ce swh ichw i l lbecomm i t tedfo rthepe r iod .Thea imistop ro v ide a le ve lo fce r ta in tyo ve rin ve s tmen tl iketha twh ichc u r ren t lye x is ts ino the rin f ra s t ru c tu rese c to r s– in c lud ingra i landwa te r–lo ck inginthebene f i ts . 5 .3 .35 O ve r95%o ftheH ighwa y sAgen cy ’sspendisde l ive redunde rcon t ra c tb ythep r iva tese c to rand theun ce r ta in tyo ve rfund ingle ve lscau se sde la yandine f f i c ien cy . 5 .3 .36Cu r ren t lyma in tenan ceandrenewa lp ro je c tsa ree f fe c t ive lyp ro cu redonap ro je c tb yp ro je c tba s is ba sedonase to ftende redra te s(ASC )o rde r ivedp r ice s(Manag ingAgen tCon t ra c to r ,MAC )andan in cen t ive me chan ismtode l ive ra ta lowe rco s t .Th isapp roa chisrea sonab lys tanda rdandtoa ce r ta ine x ten td r ivenb ythefund ingcon s t ra in ts .Howe ve r ,i tdoe sno ten cou rageap rog ramme app roa chtobeta ken .Su ch ap rog rammeapp roa chcou ld ,fo re xamp le ,beth roughp lann inga sequen t ia lp rog rammeo froadrenewa ls cheme swhe rep lan tandlabou r mo vef romonep ro je c tto ano the rw i thl im i ted mob i l isa t ionanddemob i l isa t ionco s ts . 5 .3 .37Ane xamp leo fhowth iscanbede l ive redisth roughredu c ingtheco s to fdemob i l isa t ion/ mob i l isa t ion . Ev iden cef rom CECA31 showsth epo ten t ia limpa c to fth is : “ TheAgen c ybea r stheco s t so ff i r ingandreh i r ingd i re c t l y( con t ra c tua l l y ) ,o rind i re c t l y ,th roughtheh igh p r ice sse tb ysupp l ie r stop ro te c taga in s tther i s ko fun ce r ta inbu s ine s s .Ba sedon O f f iceo fNa t iona l rou tpu t intheroad sse c to r ,CECAe s t ima te stha ta round10 ,000emp lo yee sha ve S ta t i s t i c sda ta32 fo beenlo s tf romtheindu s t r ya sare su l to fthede c l ine inou tpu tbe tweenthepea kina c t i v i t yin2010and 33 2012 .Ba sedonCha r te redIn s t i tu teo fPe r sonne landDe ve lopmen tresea r ch loo k inga tthet yp i ca l co s t so fredundan c y , i tcou ldbee s t ima tedtha ttheco s to fla y ingo f fth i snumbe ro femp lo yee swou ldbe mo rethan£100 m i l l ion .Renewedh i r ingo fthesamenumbe ro fwo r ke r store spondtonewdemand 34 wou ldco s tafu r the r£50 m i l l ion ,ba sedone x is t ingre sea r chontheco s t so femp lo ymen t .” 5 .3 .38Con t ra c t ingasequen t ia lp rog rammeo froadrenewa ls cheme swou ldenab le labou rtomo vef rom onep ro je c ttoano the rw i th l im i ted mob i l isa t ionanddemob i l isa t ionco s ts .Ce r ta in tyandcon t inu i ty wou ldg ivesupp l ie r sthebene f i to f manag ingthe i rre sou r ce s( in c lud inghumanre sou r ce s )be t te r , redu cethe i rco s tsando f fe rlowe rra te s . 5 .3 .39S im i la rs i tua t ion sha vebeenseeninu t i l i tycompan ie swhe re in ve s tmen tp lan sa resub je c tto regu la to rapp ro va lonaf iveyea r lycy c le . Are cen tHMTs tud y ,‘Smoo th ing in ve s tmen tcy c le s inthe wa te rse c to r ’( Ju ly2012 ),h igh l igh tedthe is sueande s t ima tedtha tbe tween3%and5%p rodu c t iv i ty wa sbe inglo s tf romthee f fe c tso fh i r ingandf i r ingwo r ke r s inthe indu s t r ycau seda sare su l to f cy c l ica lin ve s tmen t .The is sue iswo r senedintheca seo froadsb yafund ingcy c lewh ich issho r te r andpa r t icu la r lyfa rle s sce r ta ine venthantha tintheregu la tedu t i l i t ie s . 5 .3 .40TheH ighwa y sAgen cy ,ba sedonane cdo ta le v iden cea sde s c r ibedabo ve ,andacau t ious compa r isonw i ththewa te rindu s t r y ,e s t ima te stha ti tlo se sa tlea s t1 .5-3% inp rodu c t iv i tyf romthe e f fe c tso fh i r ingandf i r ingwo r ke rscau seda sare su l to fcy c l i ca lin ve s tmen t .I tisd i f f icu l ttoquan t i f y 31 CECAb r ie f ing :Theroadah ead –ben e f i t so fh ighwa y s in ve s tmen tce r ta in t ytothesupp l ycha in ,June2013 32 Ou tpu t intheCon s t ru c t ionIn du s t ry , Ma r ch2013 h t tp : / /www .on s .gov .u k /on s /pub l ica t ion s / rere fe ren ce tab le s .h tm l?ed i t ion= t cm%3A77 283308 33 Labou rcos tsa v ing sf roma l te rna t ive storedundan c y–Cha r te redIn s t i tu teo fPe r sonne landDeve lopmen t www . c ipd . co .u k /NR / rdon l y re s /A3435C1668374DC985B10646F72310F3 /0 / impa c t_27_2o f3 .pd f 34 U .K .Ta len tAcqu is i t ionFa c tbook®2011 –Be r s inh t tp : / /ma rke t in g .be r s in . com / r s /be r s in / image s /120911_ES_TAFBUK2011_KOL_F in a l .pd f 25 thee xa c te f f ic ie n cy lo ssduetoa la cko fda tarega rd ingtheco s ts in cu r redb yh i r ingandf i r ingand d i f f icu l tyto iso la tethe seco s tsf romo the re f fe c tso fthecy c l i ca lin ve s tmen t .Th isda taneed stobe co l le c tedf romsupp l ie r sandade ta i leds tud ywou ldberequ i redtos how w i th mo recon f iden ceb y how mu chp rodu c t iv i tycou ldbeenhan ced . 5 .3 .41Thebu lko ftheHA ’snoncap i ta lma in tenan ce( rou t ine )a c t iv i t ie sa rede l ive redth rough5yea r con t ra c tsw i thf ixedco s tsco ve r ingrou t ine ma in tenan cea c t iv i t ie s(eme rgencyrepa i r s ,g ra s scu t t ing , w in te r ma in tenan cee tc ) .Thecomm i tmen tsunde rthe secon t ra c tse x tendbe yondthebudge ts a l lo ca tedtotheHAandthe re fo rea rep r io r i t isedinea chbudge t .L onge rte rmfund ingw i l la l lowe ven longe rcon t ra c tte rmstobecon s ide redwh iche x tendbe yond5yea rs .Bene f i tswou ldcomef rom : • redu ced mob i l isa t ion/demob i l isa t ionco s ts ;and • redu cedtende rco s ts . 5 .3 .42Teny ea rcon t ra c tsa re l ike lytoha lvethe mob i l isa t ion /demob i l isa t ionandtende rco s ts .Fo ran asse t managemen to rgan isa t ion ,5 yea rcon t ra c tsa reno tlongenoughtoen su ree f f ic ien ta s se t managemen t .The e f f ic ien c ie swou ldcomef romo ve rheadsa v ing s–e .g .longe ro f f ice lea se s ,PPM andf inan c ia ls y s temsandg rea te rin cen t iv e sfo rsupp l ie r sto in ve s tandcon t r ibu tetowa rd s long te rm sa v ingin i t ia t ive s .IntheCoo kRe v iew ,i twa se s t ima tedtha ttheHAcou ldgene ra te5%sa v ing son lum psumcu r ren t ma in tenan ceco s ts(wh ichrep re sen tc .£10 m i l l ionp .a . ). 5 .3 .43Tab le5showsasumma r yo fthe manag ingagen tco s tswh i chcomp r isethe lumpsumfeeand thepo ten t ia lfo ra ch ie v ingsa v ing s inth isa reaba sedontheabo vea s sump t ion s .Ah ighre la t ive p ropo r t iono fco s tsre la tetoo ve rheadtypea c t iv i t ie swh ichcou ldberedu cedw i th longe rte rmsupp ly con t ra c tso rthe seo ve rhead sbe ingp ro v ideda sacen t ra lse rv icea c ro s sa l lcon t ra c ts(e .g .fo r f inan c ia ls y s tems ) . Tab le5 : Manag ingagen tscos tra t ios % Ove rheads Rou t ine ma in tenance W in te rse r v i ce Inc iden tsuppo r t To ta l Ave rage lumpsum 37% 39% 8% 16% 100% 5 .3 .44TheHAbe l ie vetha t37%o ve rheadco s ts ish ighe rthanthea ve ragefo rsu chana s se t managemen to rgan isa t ionanda13%e f f ic ien cysa v ingino ve rheada c t iv i t ie sa s l is tedabo ve , a ch ie vab leth roughlonge rte rmce r ta in ty ,wou ldy ie ldano ve ra l l5%sa v ingin ma in tenan ceco s ts th roughredu cedo ve rheads . 5 .3 .45Ba l fou rBea t ty iden t i f iedtha tle t t ingcon t ra c tstha tt ra ve r sethe l i fe cy c leun lo cke f f ic ien cybene f i ts th roughsupe r io randsha reda s se tknow ledgeanden su rebe s tp ra c t isebe come ss tanda rda c ro ss the indu s t r yb yfo s te r ingpa r tne r sh ipw i thandbe tweensupp l ie rs .Th eM25con t ra c tisane xamp leo f th iswhe rea c t ion ssu cha s in c rea s ings tee lw id th su sedfo rshee tp i l ingredu cedfu tu re ma in tenan ce co s ts . 5 .3 .46O ve ra l l ,in te rna lana lys isb ytheAgen cysugge s tstha tg rea te rfund ingce r ta in tya lonewou ld enab lesa v ing so fa round15%inrenewa lswo r k(agg rega tedsa v inga c ro ssva r iou srenewa ls e lemen ts ),con s is ten tw i thca ses tud ye v iden cef romIn f ra s t ru c tu reUKon10 –20%sa v ing s ino the r indu s t r ie s .Th is is l ike lytobeth roughanumbe ro f me thod sp r in c ipa l ly in vo lv ingcomb in ingsma l le r p ro je c ts into la rge rp ro je c ts .Th iswou ldredu cecon s t ru c t ions chemeo ve rhead ssu cha ss i tese tup co s tsandt ra f f ic managemen t .Toe f fe c t ive lycomb ines cheme s inth is manne rw i l lrequ i rea longe r te rmcomm i tmen t ,a ssupp l ie r sw i l lberequ i redto in c rea sethe i rde l ive rycapa c i tyto mee tthe requ i redou tpu tle ve l .Aga in ,thesupp lycha inha sbeenu sedtoa tlea s taruno f4 yea rind ica t ive budge tsbu twh i chha vethenbeenva r ieda tre la t ive lysho r tno t ice .The rewou ldbea lea rn ingpe r iod , sofo rou re f f ic ien cye s t ima te swea ssumetha ttherenewa lsbudge twou ldbe15%lowe rf rom 2020 /21 ,andbe tween2015 /16andthensa v ing sontherenewa lsbudge twou ldin c rea seb y2 .5 pe r cen tagepo in tsea chyea r. 26 5 .3 .47The re isa lso l ike lytobes copefo rfu r the rannua le f f ic ien c ie s inthe ma jo rs chemep rog ramme , be causetheAgen cywou ldha veabe t te rfounda t iontoapp roa chthesupp lycha inw i ththanthe ‘s top / s ta r t ’h is to r ica lfund ings i tua t iontha thade x is tedinthepa s tspend ingre v iewsandsub sequen t Au tumnS ta temen ts.Even mo reco s tsa v ing scou ldbea ch ie vedduetobe t te r mob i l isa t iono fp lan t , ma ch ine r yandwo r k fo r ceande conom ie so fs ca lea sare su l to fagua ran teedvo lumeanddu ra t iono f wo r k .Th is isa lsodependen toncon s is ten cyandhowthep rog ramme isde l ive redi .e .longe r te rm h ighe rvo lumep rog rammev s . mo resho r tte rmlowe rle ve lin ve s tmen t .TheH ighwa y sAgen cy e s t ima testha tce r ta in tyo f in ve s tmen tp lan sandf le x ib i l i tyo ffund ingcou ldde l ive rsa v ing so fa round 15%onnew ma jo rs cheme s.Th isha sno tbeenapp l iedtotho ses cheme s intheapp ra isa lpe r iod wh i cha rea l read yunde rwa ya s i tisun l ike lythere fo rmsw i l lcome int ime tode l ive rfu r the rsa v ing s– sotheo ve ra l lsa v ingiss l igh t ly le s sthanth is15%.TheH ighwa y sAgen cyandthesupp lycha inv iew i ta s c r i t i ca ltha tthefund ingle ve lo ve rthe longe rte rmisunde rp innedb y leg is la t iontog ivethesupp ly cha inthene ce s sa ry le ve lo fcon f iden cetochangebeha v iou r . 5 .3 .48Ino rde rfo rtheco rpo ra t isedbodytoa ch ie vee f f ic ien c ie sf rome xe r c is ingi tsope ra t iona land f inan c ia lindependen ce i tneed sas t ra teg icd i re c t ionf romgo ve rnmen tands tab i l i tyo ffund ingo ve r mo rethananannua lcy c le .TheR ISwou ldse tou tsomeo fthes cheme s andthefund ingle ve lsfo r d i f fe ren tou tcome stobede l ive redo ve raf iveyea rpe r iodw i tha mu chg rea te rdeg reeo fce r ta in ty thanunde rthes ta tu squo ,a swe l la so f fe r ingac lea rp lanfo rp ipe l inep ro je c tso rs cheme s inthe fo l low ingyea r s .Th iss t ra teg icapp roa chcou ldleadtosa v ing sb ya l low ingthecompan ytop lanfo ra longe rte rmthantheHAcana tp re sen t .Byen te r ingin to longe rcon t ra c tsw i thsupp l ie r s i tcou ldge ta be t te rdea lfo rta xpa ye r sa s le s sr is kwou ldbep r icedinandsupp l ie r swou ldbeab letop ro cu re ma te r ia lsa tlowe rco s tso ve rlonge rt imepe r iod s .Thefo rwa rdp rog rammeo fwo r kwou lda lsog ive supp l ie r sthecon f iden ceo fafu tu rea c t ive ma r ke tfo rthe i rse r v ice s . 5 .3 .49F ina l ly ,theH ighwa y sAgen cye s t ima te stha tthece r ta in tyo f in ve s tmen tp lan sandp rog ramme budge twou ldgene ra te15%sa v ing sontheannua lre sou r cebudget(e x cep tthee lemen twh i ch is a l read ycon t ra c tedinPF Is cheme s )b y2020 /21 , in c rea s ingb y2 .5pe r cen tagepo in tsea chyea run t i l then .Th ise s t ima te isba sedone xpe r ien ce ino the rse c to r sandthecompe t it i vep re ssu retha twou ld bed r iventh roughthece r ta in tyo fwo r k loada c ro s sthefu l lpo r t fo l io .Tab le5i l lu s t ra te stha tthea rea whe re mo s timp ro vemen twou ldbed r ivenf romisthea l lo ca t iono fo ve rhead s . 5 .3 .50O ve ra l ltheabo vea s sump t ion sp rodu cethefo l low inge s t ima teo frequ i red fund ingfo rare fo rmed H ighwa y sAgen cy .Tab le6 ,whencompa redtotheba seca se intab le1 ,p rodu ce sthee f f ic ien c ie s shownintab le7 ,be low . Tab le6 :An t ic ipa tedfund ingleve lsassum ingce r ta in ty/f lex ib i l i tyth roughleg is la t ione f f ic ienc ies £m(F igu resinnom ina lp r ices ,nond iscoun ted ) 15 /16 16 /17 17 /18 Cap i ta l 18 /19 19 /20 20 /21 21 /22 22 /23 23 /24 24 /25 10Y rTo ta l Cap i ta l HA Ma in tenance-Renewa ls 429 429 428 426 425 423 430 437 444 452 4 ,322 HA Ma in tenance-Resu r fac ing 289 297 304 312 319 327 - - - - 1 ,848 718 726 732 738 744 750 430 437 444 452 6 ,170 HA Ma jo rs&o the rnon ma in tenancep rog rammes To ta lHA Ma in tenance 1 ,064 1 ,101 1 ,510 1 ,789 2 ,230 3 ,014 3 ,168 3 ,187 3 ,195 3 ,249 23 ,508 To ta lHACap i ta lInves tmen t 1 ,782 1 ,827 2 ,241 2 ,527 2 ,974 3 ,764 3 ,598 3 ,624 3 ,639 3 ,701 29 ,678 Resou rce Resou rce HARoadsPF ISe rv icePaymen ts 426 458 479 467 474 567 515 545 550 643 5 ,124 HA O the rnonPF ISe rv icePaymen tsp rog rammes 525 520 515 515 504 498 506 515 524 533 5 ,155 To ta lHAP rog rammeResou rce 951 978 994 982 978 1 ,065 1 ,021 1 ,060 1 ,074 1 ,175 10 ,279 Tab le7 :Es t ima tedcos te f f ic ienc iesf romre fo rmedH ighwaysAgency £m(F igu resinnom ina lp r ices ,nond iscoun ted ) HA Ma in tenance-Renewa ls HA Ma in tenance-Resu r fac ing To ta lHA Ma in tenance HA Ma jo rs&o the rnon ma in tenancep rog rammes To ta lHACap i ta lInves tmen t 15 /16 16 /17 17 /18 Cap i ta l 18 /19 19 /20 20 /21 21 /22 22 /23 23 /24 10Y rTo ta l Cap i ta l 24 /25 11 23 35 47 61 75 76 77 78 80 562 - - - - - - - - - - - 11 23 35 47 61 75 76 77 78 80 562 9% 7 19 100 172 278 436 539 548 558 567 3 ,224 14% 18 42 134 219 339 510 615 626 636 647 3 ,786 13% Resou rce HARoadsPF ISe rv icePaymen ts 13% Resou rce - - - - - - - - - - - HA O the rnonPF ISe rv icePaymen tsp rog rammes 13 27 42 51 72 88 89 91 92 94 660 13% To ta lHAP rog rammeResou rce 13 27 42 51 72 88 89 91 92 94 660 6% Sou r ce :H ighwa ysAgen c yandD fTca l cu la t ion s .Tab le7p re sen t sthed i f fe ren cebe tweentheba se l inef igu res in tab le1andth epos te f f ic ien c y f igu re s intab le6 . 27 5 .3 .51We ha vead ju s tedthe sef igu re s inl inew i ththeapp ra isa lpa rame te rstop re sen tf igu re s in 2013 /14p r i ce sandp re sen tva luefo rthesumma r yshee ts . 5 .3 .52Theabo veca lcu la t ion srep re sen tou rcen t ra lca seba sedonwha tweth in k i s mo s tl ike lytoo ccu r . Howe ve r ,the re iscon s ide rab leun ce r ta in tya roundthes ca leo fsav ing stha ta repo ss ib le ;twoke y fa c to rsa re : • Anun ce r ta inle ve lo ffu tu refund ingbe yond2020 /21. • Thepo ten t ia ltha ttheH ighwa y sAgen cywon ’ tbeab letoope ra tew i th intheba se l inefund ingle ve l w i thou tre fo rm. 5 .3 .53Fund ingbe yond2020 /21isun ce r ta in ;ou rcen t ra lca sere f le c tstheGo ve rnmen t ’sp lanbu tfu r the r spend ingre v iewsandafu tu reRoadIn ve s tmen tS t ra teg ycou ldchangeth is .Tore f le c tthefa c ttha t th isisake yva r iab le inthes ca leo fbene f i tstha twecane xpe c tweha vep rodu ceda“ low ”s cena r io whe re ma jo rs cheme sbe yond2020 /21 ma yre tu rntothe i rre cen ta ve ragebe fo re2010o fa round£1 bi l l io npe rannum .35 Th iswou ldredu cethele ve lo fe xpe c tede f f ic ien c ie sduetoasma l le rcap i ta l p rog ramme . Were f le c tth iss cena r io inou rlowe s t ima teo fthebene f i tsonthesumma r yshee ts . 5 .3 .54The re isapo ten t ia ltha tthere fo rmsw i l lhe lpto in c rea sethe impa c to fsa v ing s mea su re sthe H ighwa y sAgen cya l ready in tendtounde r ta ke.Inpa r t i cu la rt heAgen cyse t i tse l fthecha l lengeto de l ive re f f ic ien c ie so f20%on ma jo rs cheme sannoun ceda tSpend ingRe v iew2010anda s so c ia ted p ipe l ines cheme s ,and15%fo rnew ma jo rs cheme se venintheab sen ceo ffund ingce r ta in tyand f le x ib i l i ty .The seta rge tsa rebe ing me t ,howe ve rthere fo rmstotheco rpo ra tes t ru c tu reo ftheAgency g iv ingac lea re rre la t ion sh ipw i ththeD fTcou ldin c rea setheab i l i tyfo rpe r fo rman ce inth isa rea . Hen ce inou rh ighs cena r iowe in c ludethe sesa v ing sa sa t t r ibu tab letothere fo rms .Th is is i l lu s t ra ted inf igu re 6,whe rethetopmo s tpo r t iono ftheba r sa re in c ludedinou rh ighs cena r ioon ly . Imp ro v inge x te rna lp re ssu reone f f ic ien c y 5 .3 .55Co rpo ra t is ingtheHAa sde s c r ibedabo veshou ldapp lycomme r c ia lgo ve rnan ces t ru c tu re s , redu cesho r t te rmgo ve rnmen tin te r ven t ionandd is t ra c t ion ,andp ro v idetheope ra to rw i th in c rea sed independen ceo ve ri ts in te rna lp ro ce s se s .Thenewcompan yshou ldthenbeab letode l ive rbe t te r va luefo r mone yfo rta xpa ye r sb yadd re s s ingsou r ce so f ine f f ic ien cy ,fo re xamp leb y imp ro v ingi ts ab i l i tyto manageandben chma r kco s tsandnego t ia tecon t ra c tsw i thsupp l ie r s .Howe ve r ,a sa monopo lyp ro v ide r re ce iv ingi ts in comef romgo ve rnmen t , thecompan yw i l lno tre ce ivecompe t i t ive p re ssu reo ve rp r ice so r ma r ke tsha retoredu ceco s tsandimp ro vebo thp rodu c t ivee f f ic ien cy( the e f f ic ien cyw i thwh ichp ro je c tsa rede l ive red )anda l lo ca t ivee f f ic ien cy( thecho iceo fthebe s tp ro je c ts top ro v ideg ivenou tcome s ) .H is to r ica l ly ,ino the rse c to r s ,ane conom i cregu la to rcompen sa te sfo rth is la cko ffu l l ma r ke tcompe t i t ionandth isra ise stheque s t iono fwha tro lethe re isfo raregu la to rinthe road sse c to r . 5 .3 .56Asde s c r ibedintheop t ion s ,thec rea t iono faS t ra teg icRoadNe two r k M on i to r,imp ro v ing e f f ic ien cyth roughben chma r k ingto im i ta te ma r ke tp re s su re,cou ldleadtobene f i tsa s so c ia tedw i th th isop t ion . 5 .3 .57Econom i cregu la t ion( inse c to r ssu cha sga s ,e le c t r icandwa te r )isu sedtod r ivee f f ic ien cya c ro ss afew monopo l is to rgan isa t ion swh i lea tthesamet imede l ive r ingthebe s tp r icefo rcon sume r s .Fo r road s ,intheab sen ceo fad i re c tcha rgetou se r so rp r iva tesha reho lde r stota kee x ce s s ivep ro f i ts, the re is le s ss copefo raregu la to rtocon t ro lco s tsbu tthe rea repo ten t ia lcho ice sa roundwha tle ve lo f a ccoun tab i l i ty iswan ted ,thecha ra c te r is t icso fthemon i to r andthes copeo fregu la t ion,andwhe the r t he rea refu r the rbene f i tsine s tab l ish ingi tin leg is la t ion .F igu re 7de s c r ibe stheso r to fregu la to ry a c t iv i t ie sonthespe c t rumf rom“ l igh ttou ch ”tofu l le conom i cregu la to r ypowe r . 35 In te rna lHAou t tu rnda ta . 28 F igu re7:Examp leso fex is t ingr egu la to rsandspec t rumo ffunc t ions L i g h t t o u c h r e g u l a t o r y p ow e r A d v i s o r y C o n s um e r c h am p i o n P r om o t i o no f s a f e t y , e n v i r o nm e n t a l im p a c t E c o n om i c r e g u l a t o r y p ow e r E f f i c i e n c ya n dV fM m o n i t o r i n g D e c i s i o no n b o n u s e so r s a n c t i o n s A s s e tm a n a g em e n t R e d u c t i o no f r e g u l a t o r yb u r d e n i n i n d u s t r y I n t e g r a t i o na c r o s s t h es e c t o r R e v e n u e / p r i c e c a p p i n g S t im u l a t i n g c om p e t i t i o n L i c e n s i n gb o d y P r om o t e / s u p p o r t e c o n om i cg r ow t h S o l v e n c y ( k e e p i n g c om p a n i e sv i a b l e ) B e n c hm a r k i n g A l l o c a t i o no f f u n d s A c c e s s t oa n d p u b l i c a t i o no f i n f o rm a t i o n C o n s um e r P a n e l s (W a t e r ) F i n a n c i a l R e p o r t i n gC o u n c i l D r i n k i n gW a t e r I n s p e c t o r a t e P a s s e n g e rF o c u s (R a i l ) ORR ,OFWA T , O FGEM , S c o t t i s hW a t e r C omm i s s i o n Sou r ce :D fT 5 .3 .58The reiss t ronge v iden cefo rthe impa c to fe conom i cregu la t ionino the rin f ra s t ru c tu rese c to r s , w i ththeregu la to ra c t inginthe in te re s tso fcon sume r sb yapp ly ingp re ssu refo ryea ronyea r e f f ic ien cy impro vemen ts ,typ i ca l lyu s ingan‘RP I–X ’ta rge tfo rf inan c ia lpe r fo rman cewhe re ‘X ’ rep re sen tstheregu la to r ’se s t ima teo ftherea le f f ic ien cyga in sa ch ie vab leb ythese r v icep ro v ide r .An emp i r i ca lsu r ve yb yNERA(2006 )a rgue stha t“d is tan cef romgo ve rnmen t…enab l inge f fe c t ivefo rma l e conom icregu la t ion ”isoneo ftwoke yd r ive r sfo rco s te f f ic ien cya c ro ssd i f fe ren tco rpo ra tefo rmsfo r 36 in f ra s t ru c tu rebu s ine s se s ,a longs idethe in vo lvemen to fp r iva te in ve s to rs . Wh i lethe re issome d ispu teo ve r mea su remen tis sue sandapp rop r ia tecompa ra to rindu s t r ie s ,a2008re v iewo fe v iden ce f romo the rregu la tedindu s t r ie s(p repa redfo rtheO f f iceo fRa i lRegu la t ionby O xe ra )sugge s teda rangeo fredu c t ion s inrea lope ra t inge xpend i tu reo f4 .0 –6 .2%pe ryea r ,ona ve ragere su l t i ngf roman 37 e f fe c t iveregu la to r. 36 Co rpo ra teFo rms ,F inan c ia l Gua ran tee s ,andE f f ic ien c ype r fo rman ce :Expe c ta t ion sandEv iden ce ,NERA ,De cembe r2006 . 37 Ne two r kRa i l ’ sscopefo re f f ic ien cyga in s inCP4, Oxe ra ,Novembe r2008 .Th is ison l yoneo fanumbe rofrepo r t sth a tp rov ides im i la rranges fo rregu la ted indu s t r ie s :fo rexamp leCo rpo ra teFo rms ,F inanc ia l Gua ran tee s ,andE f f ic ien c ype r fo rman ce :Expe c ta t ion sandEv iden ce ,NERA , De cembe r2006,e s t ima tesa ve ragee f f ic ien c ie s intheregu la ted ,p r iva t isedanddeb tf inan cedu t i l i t ie sa tc .5%pe rannum .The re iscon s ide rab le deba teabou tthedeg reeo fcompa rab i l i t ybe tween indu s t r ie sandp r icecon t ro lpe r iod s .See,fo rexamp le ,As se s s ingNe two r kRa i l ’ sScopefo r E f f ic ien cy Ga in s,LECG ,Ap r i l2008 . 29 Tab le8:E f f ic iencyga insinse lec tedindus t r iessub jec ttoeconom icregu la t ion Owne r sh ip P r iva te Compan y / t ime s ca le Eng landand Wa le swa te rindu s t r ya ve rage(1992 /93–2006 /07 ) Eng landand Wa le ssewe rage indu s t r ya ve rage(1992 /93– 2006 /07 ) E le c t r i c i tyd is t r ibu t ionindu s t r y(1990 /01–2006 /07 ) BAA(1987–1998 ) BT(u s ingca l lm inu te s ,1997 /97–2006 /07 ) BT(u s inge x change l ine s ,1997 /97–2006 /07 ) Pa r t ia l ly p r iva t ised Go ve rnmen t owned S ta tu to r y co rpo ra t ion 1 .7 4 .0 4 .4 NGC(1990 /91–2006 /07 ) No tfo r d iv idend Ope xe f f ic ien c ie s (a ve rage %p .a . ) 1 .8 We lsh Wa te r(2001–2006 ) 4 .9 6 .2 4 .8 S lowe rthanE&W a ve rage Ne two r kRa i l(2003 /04–2008 /09) NATS(2002–06 ) 6 .4 5 .1 NATS(2006–09 ) Ro ya l Ma i l(2002 /03–2005 /06 ) 2 .5 2 .9 Me lbou rne Wa te r(1995 /96–2000 /01 ) Sco t t ish Wa te r(2002 /03–2005 /06 ) 2 .6 8 .8 Sydne y Wa te r(1996 /6 –2000 /01 ) Nopo s i t ive e v iden ce38 Sou r ces :Ne two rkRa i l ’ss copefo re f f ic ien c yga in sinCP4 , Oxe ra , Novembe r2008 ;O f f iceo f Ra i lRegu la t ion : Regu la t ingNe two r kRa i l ’s E f f ic ien cy ,Na t iona lAud i tO f f ice ,Ap r i l2011 ;NERA(2006 ) ;U t i l i t ie sRegu la to rNo r th e rn I re land ;O fwa t . 5 .3 .59I tcanbed i f f icu l ttounp i ckthee f fe c to fe conom icregu la t ionf romthe impa c to fchang ing owne r sh ip–the in t rodu c t iono fregu la t ionha so f tenco in c idedw i thp r iva t isa t ion ,anda l lthe se compa ra to rindu s t r ie sha vehadf reedomtobo r row .Howe ve ra sTab le8ind ica te s ,the rea rese ve ra l e xamp le so fcompa rab lee f f ic ien c ie sbe inggene ra tedingo ve rnmen townedcompan ie ssub je c tto e conom icregu la t ion ,su cha sSco t t ish Wa te randtheRo ya lMa i l. 5 .3 .60 W i thou tp r i ceregu la t ioni tisno tc lea rtowha te x ten te conom icregu la to r yfun c t ioncou ldde l ive r s im i la rpe r fo rman ce .Theana lys isf romregu la tedse c to r sdoe sshowtha ttheab i l i tyo fthecu s tome r o rregu la to rtop ro v ides t rongp re s su re sfo rco s te f f ic ien cyandpe r fo rman cedependsonthe i rab i l i ty toben chma r kpe r fo rman ce ;weknowth is isake ya rea inwh icharegu la to ro rwa tchdogcou ldadd va luebe cau sea2009repo r tb ytheNa t iona lAud i tO f f ice(NAO )showedtha ttheAgen cywa sno t e xp lo i t ingthepo ten t ia lfo rreg iona lben chma r k ingo f ma in tenan cecon t ra c ts ,tohe lpd r ivedown co s ts .39 S in ceth isrepo r t ,theAgen cyha ssub s tan t ia l ly imp ro vedi tscapab i l i t yfo rreg iona l ben chma r k ing . 5 .3 .61Hen ceben chma r k ingiso fke y impo r tan cefo rd r iv inge f f ic ien c ie s intheHA ;andtheNAOha s no tedtha ttheneedtoha vegoodben chma r k in fo rma t ionin c rea se s in ma r ke tsw i thfewe rcompe t i t ive p re ssu re sfo re f f ic ien cy .40 TheCoo kRe v iew iden t i f ie dse ve ra lsou r ce so fbenchma r k ingin fo rma t ion tha tshou ldinp r in c ip lebea va i lab letoafo rmo fmon i to r in c lud ing : 38 Ba sedonana l ys is inNERA(2006 ) . 39 H ighwa ysAgen cy :Con t ra c t ingfo rH ighwa y s Ma in tenan ce ,Na t iona lAu d i tO f f ice ,O c tobe r2009 40 O f f iceo f Ra i lRegu la t ion :Regu la t in gNe two rkRa i l ’sE f f ic ien c y ,Nat iona lAu d i tO f f ice ,Ap r i l2011 30 • ‘bo t tom up ’ in fo rma t ionf romtheAgen cyontheco s tso f i tssupp lycha in ,bo thf romthe ‘co s t in te l l igen ce ’s y s temo fre co rd ingcon t ra c to r s ’co s tsu sedfo rma jo rpro je c ts ,andreg iona l ben chma r k ingda taco l le c tedb ytheAgen cyfo r ma in tenan cecon t ra c to r s ; •o the rUKroadp ro v ide r s ,in c lud ing lo ca lau tho r i tyda taandin fo rma t ionf romthede vo lved adm in is t ra t ion s ; •o the rin f ra s t ru c tu rese c to r s ,fo re xamp leda taco l le c tedb yNe two r kRa i landtheO f f iceo fRa i l Regu la t ion(ORR )onthera i lse c to r ;and • in te rna t iona lcompa ra to rs .Thea va i lab lee v iden cesugge s tstha ttheg ro ssco s tso frunn ingthe SRNa reh ighe rthanin man ycompa rab lecoun t r ie s ,su cha stheNe the r land s ,bu tthe rea re con s ide rab led i f f icu l t ie s incon s t ru c t ingrobu s tcompa r ison sbe tweencoun t r ie sw i thd i f fe ren t 41 ph y s ica l ,cu l tu ra landpo l icyen v i ronmen ts. 5 .3 .62Howe ve r ,the reneed stobeanin s t i tu t iona lse tuptha tcanin cen t iv iseu seo fth is in fo rma t ionto con t inuou s lyd r ive imp ro vemen ts .Thecompan y ’sboa rdwou ldha vearo le inth isbu t i twou ldbe d i f f icu l ttos t ru c tu re i ttoe f fe c t ive lycomb ineabu s ine s ss c ru t in yandcu s tome rchamp ion ingro le . Es tab l ish ingaco s t mon i to rw i l ladd re s sthisth roughho ld ingth eope ra to rtoa ccoun tb y mon i to r ingi ts pe r fo rman ceaga in s ttheR IS,inpa r t icu la rthee f f ic ien cyta rge tsse tfo ri t .I t wou lda lsoco l le c t in fo rma t ion–wh i chthecompan ywou ldbeob l igedtop ro v ideons ta tu to r yba s is –toben chma r k co s tsbe tweend i f fe ren tSRNreg ion sandcompa rab leau tho r i t ie s .I twou ldu seth is in fo rma t iontoa c t a sasou r ceo fe xpe r tad v icefo rgo ve rnmen tandpub l ishrepo r tsto in c rea sepub l i cs c ru t in yand en cou ragefu r the re f f ic ien c ie s . 5 .3 .63 R egu la to rypowe rsa rea lsoe xpe c tedtod r iveimp ro vedpe r fo rman ce .Inadd i t iontoana ly s ingthe compan y ’spe r fo rman ceande f f ic ien cy ,themon i to rw i l lbere spons ib lefo rta k inga c t iontoen cou rage imp ro vedpe r fo rman ce ,u s ings ta tu to r ypowe r stosan c t ionthenewcompan y .Th isin c lud e sd raw ing onthep ra ct i cef romra i lo f is su ingd i re c to rde r so rsan c t ion swhe reapp rop r ia te ,andw i l lc rea tea s t rongin cen t ivetoa c tonthe mon i to r ’sea r ly s tageru l ing s . 5 .3 .64The mon i to rwou lda lsoha vearo letoen su retha ta c tua le f f ic ien cyga in swe rebe ing made ,a s oppo sedtoredu c t ion s inthequa l i tyo rs copeo fou tpu tstoa ch ie veco s tsa v ing s . Wh i ls tredu c t ion s in qua l i tyo rs cope ma ybede s i redinsomeca se s ,the mon i to rwou ld ma kesu retha ttheo r ig ino fco s t sa v ing swa sc lea r .Th is mode len su restha ttheo ve r s igh to fthenewcompan y is independen to f Go ve rnmen t ; mean ingtha tthe re isacon s tan tandnonpo l i t ica lfo r ced r ivingg rea te re f f ic ien cyand pu sh ingfo rbe t te rpe r fo rman ce . Be t te rse rv icefo rroadu se rs 5 .3 .65Unde rtheco rpo ra t ised mode lfo r manag ingthene two r k ,re spo n s ib i l i tytoroadu se r sw i l lfa l lf i rm ly w i ththecompan y .TheCha i rman ,Ch ie fExe cu t iveandtheBoa rdwi l l a l lha vec lea rpe r sona l a ccoun tab i l i tyand,intheca seo ftheCha i rmanandCEO ,ah ighe rpub l icp ro f i lethanistheca se now .The ywi l l the re fo rebesub je c ttofa rg rea te rpub l icp re s su retode l ive rabe t te rope ra t ing ne two r k. 5 .3 .66Addedtoth is ,Pa s senge rFo cu sw i l lre ce iveane xpandedrem i tandre sou r ce stoa c tinthe in te re s ts o froadu se r sb yadv is ingons tanda rdsando the ris sue swh ichi ta s se s se sa sbe ingo f impo r tan cetoroadu se r s .By in t rodu c ingsu chas y s teminp la ceo fthes ta tu squo-whe recu r ren t ly th eD fTa c tsonbeha l fo fbo thta xpa ye r sandroadu se r sv iathesamechanne ls-ac lea re rand mo re t ran spa ren tl in k wi l l bec rea tedbe tweentheroadsp ro v ide randu se r s.T hewa tchdogw i l lunde r ta ke re sea r chino rde rtounde r s tandwha tis sue sa re impo r tan ttoroadu se rs ,rang ingf romtheso r to f sa t is fa c t ionsu r ve ysa l read yregu la r lyunde r ta kenb yPa s senge rFo cu sto mo re in dep threpo r ts .I t wou lduseth isknow ledgetop ro v ide independen tgu idan cetothecompan yanda lsotoin f luen ce the ou tcome sandou tpu tsspe c i f iedintheR IS . Ontopo fensu r ingroadu se r s ’i n te re s tsa rep r io r i t ised app rop r ia te ly inthes t ra teg yfo rthene two r k ,thewa t chdogwou ldp ro v ideapub l icfo cu sonthe compan yo ve rhowe f fe c t ive ly i tis mee t ingthem . 41 In f ra s t ru c tu reCos tRe v iew ,In f ra s t ru c t u reUK , De cembe r2010 ;ECHa r r isandTRL(2009 ) . 31 Econom i cg row th 5 .3 .67There fo rmsp ropo sed ma yha vebene f ic ia limpa c tsone conom icg row thd i re c t lyth roughtwo channe ls : • Cap i ta lspend ingis l ike lytobea s so c ia tedw i thh ighf is ca l mu l t ip l ie r s( thoughthe sew i l lva r y depend ingonthe l ike l ihoodo fc rowd ingou t ). • As tab le in ve s tmen ten v i ronmen tw i l la l lowdome s t icf i rmsandin s t i tu t ion stog row . Th isse c t ionre v iewsthee v iden ce inth isa rea . 5 .3 .68F isca l mu l t ip l ie rs :Go ve rnmen tspend ingha skno ckonimpa c tstoe conom ica c t iv i tyandcan a f fe c tna t iona lin cometh roughthe se impa c ts .Thera t ioo fthechange inna t iona lin come tothe change ingo ve rnmen tspend ingtha tcau se s i tisca l ledthef is ca l mu l t ip l ie r .Hen cea mu l t ip l ie ro f0 .5 wou ld meantha ta£10 b i l l io nin c rea se in Go ve rnmen tspend ingwou ldre su l tina£5 b i l l io nin c rea se 42 tha t mu l t ip l ie r s inde ve lopedcoun t r ie ss in ce2008 ma yha ve in GDP .Re cen t lytheIMFha vesa id beenintherange0 .9to1 .7(be fo re2008ava lueo f0 .5wa su sed ) . Mu l t ip l ie r sa s so c ia tedw i thcap i ta l spend ing ma ybeh ighe rthano the rtype so fspend ingg iventha tthe leng tho fthesupp lycha inand a sso c ia tedse r v ice srequ i redfo rbu i ld ingin f ra s t ru c tu re .Are cen trepo r tb yCEBRf ind saG ro s sVa lue Addedcon s t ru c t ionse c to r mu l t ip l ie ro f2 .843,ba sedonInpu t Ou tpu te s t ima te s .The se mu l t ip l ie r sdo i l lu s t ra tethepo ten t ia lva lueo fcap i ta lin ve s tmen tbu t mu s tbeu sedw i thcau t ionfo rse ve ra lrea sons : • Mu l t ip l ie r sw i l lbeh ighe rwhenin te re s tra te sdono tha veroomto fa l landdome s t i ccu r ren cycan r ren t lywef indh igh mu l t ip l ie r sbe cau seo f lowin te re s t dep re c ia tea l low ingaboo s ttoe xpo r ts44;cu ra te sandawea kenedcu r ren cybu tth is ma yno tbet ruewhenthespend ingis made • The ydono tta kea ccoun to fthepo ten t ia lfo rc rowd ingou to fo the ra c t iv i ty ,wh i chcou ldha ve s im i la r lyh igh mu l t ip l ie r s .Cu r ren t ly i tis l ike lythee conomyha sunde r u sedre sou r ce sandhen ce the mu l t ip l ie r sa ree xpe c tedtobeh ighandthe l ike l ihoodo fc rowd ingou tlowe r .Howe ve r , mu cho f the in f ra s t ru c tu re in ve s tmen tp lanned ma yhappenint ime swhenth is isno tt rue . • Thepo ten t ia lfo rcon sume rbeha v iou rinl inew i ththeR ica rd ianEqu iva len ceh ypo the s is ma y lead tode c rea sedcon sump t ione lsewhe re inthee conomy 5 .3 .69Th is impa c tas se ssmen tloo k sa tin s ti tu t iona lre fo rm ,a soppo sedtoapp ra is ingtheva lueo f in c rea sedin ve s tmen t .Hen cewedono ta t temp ttoe s t ima tethe in c rea sed GDPo rjob sa s so c ia ted w i ththe in ve s tmen ta c t iv i ty ,bu tno tetha tthe re isapo ten t ia lpo s i t ive impa c ton GDPtha tisno t cap tu redintyp i ca lapp ra isa l . 5 .3 .70There fo rmp ropo sa lsde ta i ledabo vea re ,howe ve r ,l ike lytoha veapo s i t ive impa c tonthe dome s t icsupp lycha inb yc rea t inga mo res tab le in ve s tmen tandp lann ingen v i ronmen t .Are cen t 45 ta i lsthepo ten t ia lrea sonstha tthep ropo sa lscou ldha veapo s i t ive impa c t b r ie f ingno teb yCECA de ontheUKsupp lycha in ,inpa r t icu la rin c lud ing : •G rea te r wo rk fo rcesecu r i ty : “Whe resupp l ie r sa reappo in tedonlong te rmcon t ra c tsw i ths tab i l i ty o fwo r k load ,th isa l lowss tab i l i tyo fthewo r k fo r ce ,ma in ta in ings ta f f ingle ve lsra the rthanla y ingo f f andta k ingonwo r ke r sto mee tun ce r ta indemand ” .The rea ret ran sa c t iona lco s ts inh i r ingwo r ke r s and ma k ingredundan c ie s ,bu ta lsoapp ren t ice sh ip sa re l ike lytobec rea tedinre spon setos tab le demand .CECAe s t ima tetha tbe tween56%o femp lo yee s inthecon s t ru c t ionse c to ra re app ren t ice s ,andtha tea ch£1bno fs tead ywo r kwou ldbe l ike lytoc rea tebe tween330400 app ren t ice sh ip s . • Inc reasedresea rchanddeve lopmen t :Re sea r chf rombo th inno va t ioncha r i tyNESTA46,andthe Depa r tmen tfo rBu s ine s s ,Inno va t ionandSk i l lsCommun i tyInno va t ionSu r ve y47 ind i ca te 42 IMF G loba lP rospec t sandPo l ic ie srepo r t2012(Box1 .1 ) . 43 Se cu r ing Ou rEconom y :TheCa sefo rIn f ra s t ru c tu re(Ma y2013 )–CEBRandCECA(h t tp : / /www . ceb r . com / repo r t s / impa c to fin f ra s t ru c tu re / ) 44 O c tobe r2010 Wo r ldEcon om ic Ou t look(h t tp : / /www . im f .o rg /ex te rna l /pub s / f t /weo /2010 /02 /pd f / c3 .pd f) . 45 CECAb r ie f ing :Theroadah ead–ben e f i t so fh ighwa y s in ve s tmen tce r ta in t ytothesupp l ycha in ,June2013. 46 Ne s ta ,(2012 )UKInnova t ion Index :P rodu c t iv i t yan dG row th inUKIndu s t r ie s. h t tp : / /www .ne s ta .o rg .u k /pu b l ica t ion s /wo rk in g_pape r s /a s se t s / fea tu res /u k_ inn ova t ion _ index_p rodu c t iv i t y_an d_g row th _ in_u k_ indu s t r ie s 32 s ign i f ican t ly lowe rle ve lso f inno va t ionincon s t ru c t ionthanino the r ma jo re conom i cse c to r s .In pa r t icu la rtheCommun i tyInno va t ionSu r ve y ind ica te stha tun ce r ta in tyabou tdemandfo rp rodu c ts isake yba r r ie rtog rea te rinno va t ionb ycon s t ru c t ioncon t ra c to r s .Thes top s ta r tfund ing a r rangemen tsde ta i ledea r l ie rinth isdo cumen tshowhowtheroadsse c to rinEng lande xh ib i ts la ck o fce r ta in ty .TheCECAb r ie f ingno tee xp la in stha t:“ Asthebene f i tso f inno va t ionw i l lre lyuponthe na tu reo fthe inno va t ioninque s t ion ,i tha sno tbeenpo s s ib letoquan t i f ythepo ss ib lebene f i ttha t m igh ta r iseshou ldsupp l ie rsbeo f fe redg rea te rs copeto inno va te .Howe ve rare cen trepo r tf rom Aud i tSco t landsugge s tedtha tinno va t ionwou ldcon t r ibu tetosa v ing so fa round10pe rcen tinthe annua lco s tso f lo ca lh ighwa y s ma in tenan ce inSco t land .48” • Enab l ingsma l land med iums i zeden te rp r isestocompe te :TheCECAb r ie f ingno tepo in tsou t tha t :“ TheCab ine tO f f iceha s iden t i f ied49tha toneonthep r in c ipa lba r r ie rstha tp re ven tsma l land med iums izedcompan ie s(SMEs )f romcompe t i t ionfo rpub l icse c to roppo r tun i t ie s ina la cko f v is ib i l i tyo ffo r th com ingoppo r tun i t ie s .Acomm i tmen tto longe rte rmce r ta in tyo f in ve s tmen twou ld a l lowthep repa ra t iono fc lea rp ipe l ine so foppo r tun i t ie s ,he lp inga l lbu s ine s se s in c lud ingSMEsto 50 p lanaheadfo rl ike lyp ro cu remen toppo r tun i t ie s .” 5 .3 .71Hen cewean t ic ipa tepo s i t ive impa c tsontheUKsupp lycha inwh i chw i l lbe inadd i t iontotheco s t sa v ing s iden t i f iedabo ve . Wecanno tquan t i f yhowla rgethe se impa c tswou ldbea tth iss tage .Wea re keentoga the rfu r the re v iden cef romthesupp lycha ina sthere fo rmsa re imp lemen tedandto mon i to r th is impa c t . Cos ts51 Poten t ia lco s tso froadsope ra to r ’s independen ce De cen t ra l i sedde c is ionma k ing 5 .3 .72Co rpo ra t is ingtheHAw i l lp ro v ide i tw i thag rea te rcomme r c ia lfo cu s ,bu t i t in t rodu ce sar is ktha ti t m igh tta kede c is ion stha tha venega t ive con sequen ce sfo rthepub l ic . Wewo u ldno te xpe c ta compan ya ta rm ’sleng thto ma ke iden t ica lde c is ion stoam in is te r who ise xpe c tedtota ke in to a ccoun taw ide rrangeo f impa c tsandv iewsandisthenhe lddemo c ra t ica l lya ccoun tab lefo rthem . Wew i l l becon s ide r ingca re fu l lyhowtoen su rethe rea ree f fe c t ivecon t ro lsonthecompan y ’s beha v iou rth roughtheR IS,theco s t mon i to randroadu se rwa tchdog ,ando the rpa r tso fthe con t ra c tua lf ramewo r k . Redu cedf le x ib i l i t yfo rgo ve rnmen t 5 .3 .73The rewou ldbe impa c tsontheGo ve rnmen tf romc rea t ingaR IS ,w i thas ta temen to ffund s a va i lab le,andunde rp inn ingi tw i thleg is la t ion .The sea rep r ima r i lya roundhowou tcome s ,some s cheme sandthe m in imumfund ingwou ldbe ‘ lo ckedin ’ ,the re fo reredu c ingf le x ib i l i tyfo rm in is te r s i f the ywan tedto ma kechange stotheHA ’sa c t iv i t ie sandbudge tsw i th intheR IScy c le .The la cko f f le x ib i l i ty intheR IS mean stha ti ftheGo ve rnmen tde c idedas chemeno tin i t ia l ly in c ludedinthe R IS cametobecon s ide redo fna t iona limpo r tan ce ,o rone in c ludedcea sedtobepe r ce ivedasimpo r tan t , i twou ldbe mo re d i f f icu l tthanp re v ious lyto ma kere v is ion se i the rwa y .Th is mean sf le x ib i l i tyto re spondtoaranges cena r io scou ldberedu ced ,fo re xamp lewhen : • ad i f fe ren tle ve lo ft ra f f icg row thisfo re ca s tduetochange s intheke yd r ive rso fdemand (e conom icg row th ,co s to ffue landpopu la t ionchange s ) ; • anewgo ve rnmen tcome stopowe rw i thad i f fe ren tv is iono r manda tefo rtheSRN ;o r 47 Commun i tyInnova t ionh t tp : / /weba r ch ive .n a t ion a la r ch ive s .gov .u k /+ /h t tp : / /www .b is .gov .u k /po l ic ie s /s c ien ce / s c ien ceinn ova t ion -ana l y s is / c is 48 Ma in ta in ingSco t land ’sroad s :AnAu d i tUpda teonCounc i l s ’P rog res s www .au d i ts co t land .gov .u k /docs / loca l /2013 /n r_130517_ road s_ma in tenan ce . r t f 49 Gove rnmen t Open sUpCon t ra c t stoSma l lBu s in es sh t tp s : / /www .gov .u k /gove rnmen t /new s /gove rnmen topen sup-con t ra c ts to sma l l bu s ine s s 50 CECA , ‘TheRoadAhead–Bene f i t so fH ighwa y sIn ve s tmen tCe r ta in t ytoth eSupp l yCha in’ ,June2013. 51 A l lf igu re s inth isse c t iona rea tcu r ren tp r ice s ;the ya recon ve r tedto2013 /14p r ice sfo re s t ima te so fto ta l s 33 • lo ca lbu s ine s sneeds change . 5 .3 .74The rew i l lbe me chan ismsa va i lab letoamendtheR ISv iaap ro ce s so fchange managemen t . Howe ve ran yre v is ion swou ldbe made inanopenandt ran spa ren twa y ,and ,impo r tan t ly ,the rew i l l bes t rongf inan c ia landrepu ta t iona lin cen t ive sfo rgo ve rnmen tno ttojeopa rd isethece r ta in tyo f fund ingandthecon t ra c tua lag reemen tsw i thsu pp l ie r stha ta rere l ian toni t .The rea renoe xamp le s f romo the rse c to r swhe re longte rmf ramewo r k sa rese t–su cha sra i l–wh i chwou lda l lowu sto mone t isethepo ten t ia limpa c to fgo ve rnmen tchang ingwha tis in theR IS ;howe ve rtheredu ced f le x ib i l i tyfo rdo ingsoisas ign i f ican tpo ten t ia lco s t . 5 .3 .75Ce r ta in tyo ffund ingfo rtheR ISw i l la lsoha vepo ten t ia lco s ts .I fHMT rea su ry iscomm i t tedto p ro v id ingfund ingo ve r4 -6yea r s ,th is imp l ie stha te veni fthe rea rep re s su re storedu cetheo ve ra l l go ve rnmen tbudge to rchangespend ingp r io r i t ie s ,thentheSRNbudge tw i l lbep ro te c ted ,mean ing sa v ing sma y ha vetobefounde lsewhe re .S im i la r ly ,a sthefund ingw i l lcomev iatheD fT ’sbudge t ,i t w i l lredu cef le x ib i l i tyfo rtheDepa r tmen t,mean ingtha to the ra rea so fcap i ta landre sou r cespend ing cou ldcomeunde rp re s su rea sneedsd ic ta ted .The re fo rewh i ls tce r ta in tyo ffund ingwi l l imp ro ve e f f ic ien cy inroadspend ing ,i tcou ldleadtoa le s se f f ic ien ta l lo ca t iono ffundsa tthec ro s s go ve rnmen to rdepa r tmen ta lle ve l s . Imp lemen ta t ionandt rans i t ionco s ts 5 .3 .76The rew i l lbeaco s ttoD fTandtheHAf romimp lemen t ingco rpo ra t isa t iono ftheHA in toa go ve rnmen townedcompan y . Wo r k inga r rangemen tsa reno tf ixed ,bu t i t ise xpe c tedtha tw i th in go ve rnmen tateamo fapp ro x ima te ly34o f f ic ia lsandoneHAd i re c to rw i l lwo r kfu l lt imeonleg is la t ion , de s ign ingtheR ISandse t t ingupthenewcompan y .O ve r21mon th s ,a s sum ingannua lsa la r ie so f £50 ,000pe rpe r son,e x cep tthed i re c to r(a ve rageannua lremune ra t iono ftheHA ’se xe cu t ive 52 di re c to r s ,in c lud ingbonu se s ,is£123 ,000 )ando ve rhead so f30%o fpa y53,r e su l ts inaco s to f£4 .1 mi l l ion . 5 .3 .77Toen su rede l ive r y iscomp le tedtoacha l leng ingt ime s ca le ,a c ro s sarangeo fwo r ks t reams inthe HAandD fT ,e x te rna lp rog rammecapab i l i tyha sbeencon t ra c tedonane xpe c ted21mon thba s is . O the re x te rna lad v iso r sw i the xpe r t ise inlega landcomme r c ia ls k i l ls a rea lsorequ i redino rde rto a ssu reane f fe c t ivet ran s i t iontothenewcompan y.O ve ra l l ,theco s tso fthe see x te rna lfun c t ion s is an t ic ipa teda tbe tween£4.1 m i l l ionand£8.2 m i l l ion ;wee xpe c tthef ina lf igu retobea tthe lowe rend o ftherange. 5 .3 .78 Ino rde rtose tupthead v iso ryfun c t ion sthego ve rnmen tisu s inge x is t ingbod ie s .The rea re va r iou sbene f i tstoth is–a sde s c r ibedabo ve–w i thoneo ftho sebe ingcheape rimp lemen ta t ion co s ts . Wee s t ima tetha tequ ipp ingPa s senge rFo cu stoa c ta saroadu se rwa tchdogandbu i ld inga road sco s tsmon i to r ingfun c t ionw i th in ORRw i l lco s ta round£3 .25 m i l l ioninto ta l . Theo ve ra l lco s to fimp lemen ta t ionandt ran s i t ionisthe re fo ree s t ima teda tbe tween£11 .5mi l l ionand £15 .6 mi l l ion .The seco s tsw i l lbe in cu r reddu r ingf inan c ia lyea rs2013 /14and2014 /15 . Newope ra t ingco s ts 5 .3 .79Inth isse c t ionwe loo ka tthenewannua lco s tsgo ingfo rwa rdtha tre su l tf romthe sechange s . The sew i l lbe in cu r redf rom2015 /16onwa rd s . Co rpo ra tes ta f f 52 HA ,Annua lRepo r t20122013,pp .65 7 . 53 UKS tanda rdCos t Mode l Manua l ,Be t te rRegu la t ionExecu t iveSep tembe r2005 .Theove rhead cove r scos t s inconne c t ionw i thf ixed adm in is t ra t ioncos t s ,su cha sexpen sesfo rp rem ise s( ren to rbu i ld ingdep re c ia t ion ) ,te leph on e ,hea t in g ,e le c t r ic i ty ,ITequ ipmen t ,e tc .Th e ove rh eada l soin c lude sab sen ceow ingtoi l lne s s .Th eove rheada l socove r sEmp loye r ’s Na t ion a lIn su ran ceCon t r ibu t ion s . 34 5 .3 .80AstheHA isrep la cedw i thana rm ’sleng thbod y ,i tw i l lha vetope r fo rmi tsownco rpo ra te fun c t ion s .Th is mean s inva r iou sa rea sthecompan yw i l lha vetota keonfun c t ion stha tD fTcu r ren t ly re sou r ce sfo ri t ,andw i l lc rea tesometo ta l lynewro le s .A rea sweha ve iden t i f iedin c ludehuman re sou r ce s ,lega l ,f inan ce ,thecompan yse c re ta r y ,pub l icre la t ion sands t ra teg icp lann ing . App ro x ima te ly40newpo s tsw i l lbec rea tedinthe sea rea s .A l lo fthe sepo s tsrep re sen taco s tonthe compan y ,bu ttosomee x ten tthe sero le sma y rep la ceaco s tcu r ren t ly in cu r redb yD fTo ra dup l ica t ionw i threpo r t ingco s tse s t ima tedbe low,the re fo reno trep re sen t ingnewco s tstothe e x cheque r.The re fo reweta kebe tween20and40newfu l lt imes ta f fco s tstoge ta lowandh ighend o ftherange ,w i thabe s te s t ima teo f30.U s ingthesamea ve ragesa la ryandde s kco s tsa sabo ve , th isc rea te sanewope ra t ingco s to f£1 .95 m i l l ionpe ryea r ,w i tharangeo f£1 .3 m i l l ion -£ 2 .6m i l l ion a yea r . Co s t mon i to randroadu se rwa t chdog 5 .3 .81Go ve rnmen tha sbeenind is cu s s ion sw i thORRandPa s senge rFo cu sabou tthes copeo fthero le andre sou r ce sp ro v idedfo rtheco s t mon i to randwa tchdogfun c t ion s .Cu r ren te s t ima te sfo rtheco st totheta xpa ye rfo rre sou r c ingtheo rgan isa t ionstope r fo rmthe sero le sa rea round £ 2 .75 m i l l iona yea rfo r ORRand£1 .5 m i l l ionea chyea rfo rPa ssenge rFo cu s .U s inge x is t ingbod ie sw i l lbecheape r thanc rea t ingnewone sdueto ma k ingu seo fe x is t ingcapa c i tyandredu c ingnewo ve rheadco s ts . 5 .3 .82The rew i l la lsobeco s tstothere fo rmedH ighwa y sAgen cyo fcomp ly ingw i ththeco s t mon i to r ’s andwa tchdog’s in fo rma t ionrequ i remen ts . The sew i l lno tbeco s tstop r iva tebu s ine s s ,a sthenew compan yw i l ls t i l lbeap ub l icse c to ren t i ty ;howe ve rthe seco s tsw i l ls t i l lbe in cu r redino rde rto gene ra tethebene f i tso fgoodqua l i tyben chma r k ing .Wecu r ren t lydono tknow wha tthe se requ i remen ts m igh tbesocanno ta s se s stheminde ta i l .Howe ve rthe re ise v iden cef romthewa te r 54 se c to rtha tthe secou ldbes ign i f ican t ;a2011re v iewb yDe f ra o f OFWAT ’srepo r t ingrequ i remen ts in c lude se xamp le so fadm in is t ra t ivebu rden : ‘ Wa te rUKs ta tedtha t“Compan ie se s t ima tethe yspen tapp ro x ima te ly£100 m i l l ioninadd i t iona lco s t s andd i re c t l yemp lo yedadd i t iona llabou requ i va len ttoo ve r500emp lo yeeyea r sino rde rtocomp ly w i ththeregu la to r yrequ i remen t so fPR09 ” .Se ve rnT ren t Wa te rs ta tedtha tthe i r“2 ,000pageF ina l Bu s ine s sP lanneededtobesupp lemen tedb yre spond ingtoa round100 O fwa tque r ie sand subm i t t inga500 pageD ra f tDe te rm ina t ionrep re sen ta t ion . . .Ou rto ta lp rog rammeco s tsfo rPR09 we rec .£20m .Th i se x c lude sthe ind i re c tco s t s ,su cha semp lo yeet ime ” .’ 5 .3 .83A l thoughwedono tin tendtoc rea teafu l lregu la to r yfun c t ionw i ththesamere spons ib i l i t ie sfo r regu la t ingp r ice s ,theS t ra teg icRoad sNe two r k Mon i to rw i l lsha resomeo fthere spon s ib i l i t ie so fan e conom icregu la to randw i l lrequ i rearobu s ts y s temo fben chma r k ingwh i ch ma yha ves ign i f ican t 55 da taco l le c t ionrequ i remen ts . OFWAT ’sope ra t ingco s tfo r2012 /13wa s£20 .098 m i l l ion;comb in ing th isw i ththeabo vesugge s tstha ti t ispo s s ib letheadm in is t ra t ivebu rdencou ldbeuptof ivet ime sa s la rgea stheco s to ftheregu la to r . We t rea tth isa sah ighrangea sth isa ccoun tsfo ra numbe ro f d i f fe ren tcompan ie s ,whe rea swea recon s ide r ingas ing lecompan yso i tis l ike lytheco s tw i l lbe mo re inl inew i ththeco s to fthe mon i to r( compa r ingSe ve rnT ren t ’s£20 m i l l ionco s ttothe£20 .1 mi l l ionope ra t ingco s to fO fwa t ) .Th issugge s tsthefo l low ingco s tsfo rtheadm in is t ra t ivebu rdenpe r yea r . We t rea tthe seco s tsa ss ta y ingcon s tan tinrea lte rms . Tab le9: Adm in is t ra t ivebu rdenes t ima tesfo rnewcompany Co s to fwa tchdogand mon i to r £mpe ryea r,2013 /14p r i ces ,und i scoun ted L o w / C e n t r a l 1 Fa cto rbywh i chadm in i s t ra t i vebu rden cou lde x ceedco s tso fregu la t ion H igh 5 £4 .25m £4 .25m £21 .25m Fu r the rpo ten t ia lco s ts 54 De f ra(2011 )Rev iewo f OFWATan dcon sume rrep re sen ta t ion inthewa te rse c to r h t tp s : / /www .gov .u k /gove rnmen t /up load s / s y s tem /u p loads /a t ta chmen t_da ta / f i le /69442 /o fwa tre v iew 2011 .pd f 55 OFWATAnnua lAccoun t s2012 /13 35 5 .3 .84I t ise xpe c tedtha te x te rna lad v icew i l lneedtobeob ta inedandre sea r chcomm is s ionedb yD fTin o rde rtop repa reea chR IS .Th isw i l lbeanongo ingco s td ic ta tedb ytheR IScy c le s .Asthede s igno f thef i r s tR IS isno tf ina l ised ,andfu tu reve r s ion so ftheR ISw i l lbede ve lopedth rougha longe r te rm p ro ce s s ,i t isno tpo s s ib letog iveana ccu ra te mone t isede s t ima teo fth isco s t . 5 .4Op t iontwo –Ins t i tu t iona lre fo rm w i thou tleg is la t ion 5 .4 .1 Op t ion twoisto imp lemen tthesamere fo rmsa s op t ionone,bu tw i thou tan yleg is la t ive unde rp inn ing .The re fo rethetypeo fbene f i tsandco s ts iden t i f ieda reb road lythesamea sfo rop t ion one,abo ve ,andtherea son sfo rthema reno trepea ted .Howe ve r,inanumbe ro fa rea swewou ld e xpe c ttheab sen ceo f leg is la t iontochangethee x ten to fbene f i tsandco s ts .Th e sea rea sa re e xp lo redbe low . Bene f i ts Imp ro v inge f f ic ien cyandva luefo r mone y 5 .4 .2 The rea reop t ion stha tcou ldredu cetheneedfo rleg is la t ion .Anew lega len t i tycou ldbec rea ted w i thou tleg is la t ionino rde rtota keo ve rthefun c t ion so ftheHA .Ine i the rop t ion ,ou rp re fe r redveh ic le fo rc rea t ingago ve rnmen t ownedcompan ya rethep ro v is ion so ftheCompan ie sAc t ;the re fo reth is wou ldo f fe rs im i la roppo r tun i t ie s inte rmso fse le c t ingop t ima lgo ve rnan cea sop t ionone.L ikew ise , thoughcab ine tcon t ro lswou ldapp lyb yde fau l t ,the re ma ybeasu f f ic ien tca sefo rgo ve rnmen tto ag reetof le x ib i l i tya roundsomeo fthe setoa l lowg rea te rindependen ce .Re fo rmw i thou tleg is la t ion cou ldbede l ive red mu chsoone r ,a sacompan ycanbese tupandreg is te redw i thCompan ie sHouse a lmo s tin s tan t ly .The rewou lds t i l lbea leadint imeo fa tlea s tse ve ra l mon th stoen su ret rans i t iona l a r rangemen tsa re inp la ceandtocon su l ts ta f fonthechange s ,bu tth iswou ldapp lytoan yop t ion o the rthanthes ta tu squo . 5 .4 .3 I ftheHAwa stu rnedin toago ve rnmen t ownedcompan yw i thou tpa ra l le lleg is la t ion ,nos ta tu to ry powe r so rdu t ie scou ldbefo rma l lyp la cedw i ththecompan y ina manne rtha twou lde f fe c t ive ly e x c ludetheSe c re ta r yo fS ta teandh iso f f ic ia lsf romda y to da y in vo lvemen tw i thope ra t iona l ma t te r s. Theva s t ma jo r i tyo ftheroads cheme sand ma in tenan cetheHAde l ive r s isunde r ta kenv iacon t ra c ts w i ththesupp lycha in. W i thou t leg is la t ion ,thecompan ywou ldno tbeab letosubde lega tepowe r sto i ts con t ra c to r s ,the re fo recon t ra c tswou ldha vetocon t inuetobe madebe tweentheSe c re ta r yo f S ta teandthesupp l ie rsa sa tp re sen t .T h iswou ldg rea t ly l im i tthe independen ceanda ccoun tab i l i tyo f thecompan y ,andwou ldin vo lve i tina la rgeamoun to fbu reau c ra cy .There spons ib lem in is te r swou ld ha vetod i re c tthecompan y mu ch mo rec lo se lythanunde ra mode lse tupw i thi tsownpowe r sand du t ie s ,wh ichwou ldunde rm inethero leo ftheboa rdand ma kethee f f ic ien c ie so fa longte rm app roa ch mu chha rde rtorea l ise . 5 .4 .4 Go ve rnmen tcou ldse tou ta R IS –a sde s c r ibedinop t ionone –w i thou t leg is la t iveunde rp inn ing . Thesame le ve lo fs t ra teg icd i re c t ioncou ldbep ro v ided ,bu i ld ingonthepe r fo rman cespe c i f ica t ion s u sedcu r ren t ly .Then ,th roughsu c ce s s ivespend ingre v iews ,theGo ve rnmen tcou ldcomm i ttothe amoun to ffund ingrequ i redfo rtheR IS . 5 .4 .5 Thea ssu ran cefo rthe secomm i tmen tswou ldre s ide inas ta temen to rle t te rf romtheChan ce l lo r o rCh ie fSe c re ta r ytotheT rea su r y .Th iswou ldon lyhe lptop rodu cethee f f ic ien cybene f i tsd is cu s sed inthe Coo kRe v iew onthecond i t iontha tsupp l ie r swe recon f iden ttha tmu chg rea te rce r ta in tyanda s ign i f ican tredu c t ioninr is k wou ld ma te r ia l ise inp ra c t iceandchangedthe i rbu s ine ssp ra c t ice s a cco rd ing ly ,fo re xamp leb yen te r ingin to longe rcon t ra c tso rin ve s t ing mo reins ta f f . 5 .4 .6 T hefeedba ckf rombu s ine s so rgan isa t ion sandthecon s t ru c t ionandsupp lyindu s t r y tha tfedinto theCoo kRe v iew,wh i chha sbeencon f i rmedb ythere sponse stoAc t ionfo r Road sandthe Go ve rnmen t ’sre cen tcon su l ta t ion istha tw i thou ta mu chs t ronge rcomm i tmen t( i .e .anin ve s tmen t p lanandfund ings ta temen tunde rw r i t tenb y leg is la t ion )the ywou ldno tha vethecon f iden ceto changehowthe ydobu s ine ss .Asbu s ine s se sre cogn ise ,wha te ve rthe in ten t ion swhenagua ran tee is made ,go ve rnmen tbudge tsa resub je c ttoaw iderangeo fcompe t ingandunp red ic tab lep re s su re s wh i ch ma ke sfund ingce r ta in tyve r yd i f f icu l ttoa ch ie ve inp ra c t iceun le s sse cu redb y leg is la t ion . 36 Mo reo ve r ,the Ac coun t ingOf f ice rre spons ib lefo rthecompan y ’sspend ingma yha ve is sue sw i th s ign inglong te rmcon t ra c tsw i thou tthef i rmba s iso ffund ingce r ta in tyunde rw r i t t enb y leg is la t ion . The re fo re ,w i thou tthece r ta in ty leg is la t ionp ro v ide s,e f f ic ien cysa v ing sw i l lno tberea l isedtonea r ly thesamee x ten ta sunde rop t ionone . 5 .4 .7 Leg is la t ionis mo s tc ru c ia lfo rde l ive r yo fe f f ic ien c ie s incap i ta lin ve s tmen ton ma jo rp ro je ctsand p rog ramme s .I tisrea sonab letoth in ktha tthee f f ic ien c ie sduetolonge r te rmp lann ingcou ldbe de l ive redmo reea s i ly w i thou tleg is la t ionfo rsma l le rfund ingl ine s(e veni fthe re isa lowe rle ve lo f ce r ta in tythanunde rthep re fe r redop t ion ) .Hen cewere f le c tth is inou rcen t ra ls cena r iofo rre sou r ce ma in tenan ce ,ope ra t iona landcap i ta l ma in tenan ceandrenewa lsbene f i ts .Howe ve r ,a se xp la ined abo ve,i tispo s s ib letha tthe la cko f leg is la t ionwou ldno tg ive su f f ic ien tcon f iden cefo rthere fo rmed H ighwa y sAgen cyo rthesupp lycha intode l ive rrea lchange sandhen ceou rlows cena r iore f le c ts tha tthe re ma ybenobene f i ts . 5 .4 .8 Fo rcap i ta lin ve s tmen t ,thequa l i ta t ivee v iden ceweha vesugge s tstha taRoadIn ve s tmen t S t ra teg yw i thou t leg is la t ionisun l ike lyto leadtothebene f i tsou t l inedinop t ionone,sowein c ludeth is a sou rcen t ra landlows cena r io .Howe ve r ,i t ma ybepo s s ib leto ma keas t rongenoughpo l i t ica l comm i tmen tands t i ckto i to ve ranumbe ro fyea rssotha ti tdoe scometorep re sen tce r ta in ty .We ha venoe v iden ceonwh ichtoba seana sse s smen to fhows ign i f ican tth iscou ldbe ,soa sanuppe r boundweha ve in c ludedthesamee f f ic ien c ie sa sunde rthecen t ra ls cena r iofo rop t ionone.I tis un l ike lytha tth iswou ldo ccu r ,bu tcanno tberu ledou ti fapo l i t ica lcomm i tmen twa ss t rongenoughto commandabe l ie ff romthesupp lycha intha ti tcou ldno tbechangedun t i ltheR ISpe r iodhad e xp i red .Thetab lebe lowsumma r ise sthea s sump t ion s made . Tab le10:Summa ryo fop t iontwoscena r ioassump t ionsl inkedtoop t ionone Resou rce ma in tenance andope ra t iona l Cap i ta l ma in tenanceand renewa ls Cap i ta linves tmen t Low No impa c t No impa c t No impa c t Op t ion twoscena r ios Cen t ra l H igh De l ive r sthesamea s Op t ion De l ive r sthesamea s Op t ion one(a l ls cena r io s ) one(a l ls cena r io s ) De l ive r sthesamea s Op t ion De l ive r sthesamea s Op t ion one(a l ls cena r io s ) one(a l ls cena r io s ) No impa c to fre fo rm De l ive r sthesamea s Op t ion one( cen t ra ls cena r io ) Co s t mon i to ringandbe t te rse r v icefo rroadu se r s 5 .4 .9 Ex te rna lp re s su reone f f ic ien c ie sandrep re sen ta t iono froadu se rscou ldbee s tab l ishedinthe samewa y sunde rth isop t iona s inop t ionone ,w i ththeob l iga t iononthecompan ytop ro v ide in fo rma t ionbe ingse tinthe Framewo r kAg reemen t. 5 .4 .10Howe ve r,the sero le sm igh tbe le s se f fe c t ivew i thou tthet ran spa ren cyo fthere la t ion sh iptha tis po ss ib lew i ththe legis la t ive f ramewo r kthecompan ywou ldope ra te ina sah ighwa yau tho r i ty.The Go ve rnmen twou ldha ve mo re in f luen ceth roughava r ie tyo fchanne lso ve rthecompan y ,l im i t ingthe pub l ica ccoun tab i l i tyo fthecompan y . 5 .4 .11L ikew ise ,theR ISbe ingunde rp innedb y leg is la t ionwou lda lso ma keco s t mon i to r ingandroad u se rrep re sen ta t ion mo ree f fe c t ive .Th is isb yp ro v id ingthewa t chdogand mon i to rw i thac lea r oppo r tun i tyto in f luen cethepe r fo rman cespe c i f ica t ionfo rthecompan y .W i thou tleg is la t ion ,the p ro ce s sfo rse t t ingthepe r fo rman cespe c i f ica t ionanda sso c ia tedfund ings ta temen twou ldbe le s s t ran spa ren tand mo resu s cep t ib letochange . Cos ts56 5 .4 .12The mone t isedco s tsfo rop t iontwoa rebroad lythesamea sfo rop t ionone,a sde l ive r yo fthe newco rpo ra tea r rangemen ts ,R ISande x te rna ls c ru t in yfun c t ion swou lds t i l l in cu rs im i la rco s ts .We the re fo re ma kethe see s t ima te sba sedonthesamef igu re sa sabo vefo rco s ts .Howe ve r ,no t de s ign ingandpa s s ingleg is la t ionunde rth isop t ionwou ld meanade c rea sedt ran s i t iona lre sou r ce 56 A l lf igu re s inth isse c t iona rea tcu r ren tp r ice s ;the ya recon ve r tedto2013 /14p r ice sfo re s t ima te so fto ta l s 37 need ,e spe c ia l lyfo rlega lre sou r ce .I t ise s t ima ted6fewe rin te rna lfu l l t imes ta f fwou ldbeneededi f leg is la t ionisno tde l ive red , mean ingthe imp lemen ta t ionco s tis e s t ima teda tbe tween £10 .9 m i l l ion and£14 .9m i l l ion unde rth isop t ion . 5 .4 .13Asw i thop t ionone,co rpo ra t isa t iono ftheHAtoc rea teana rm ’s leng thcompan y wou lda lso redu cego ve rnmen t ’sin f luen ce .Howe ve r ,th is is a mu chle s ss ign i f ican tco s tinop t iontwob e cau se leg is la t ionwou ldno tbeinp la cetot ran s fe rpowe r s , mean ing m in is te r swou ldre ta inas ign i f ican t ab i l i tyto in f luen cede c is ionsda yto da y . 5 .4 .14TheR ISwou lda lsoredu cef le x ib i l i tyfo rgo ve rnmen t.Howe ve r ,a sthe rewou ldbeno leg is la t ion toen su retheR ISandfund ingce r ta in ty ,go ve rnmen twou ldbeab letochangethes cheme s ,p lan s andfund ingintheR ISmu ch mo reea s i ly.Th iswou ld ,the re fo re ,no tbeas ign i f ican tco s taga in s tthe ba se l ine . 6 .R is k s 6 .1Re fo rmp re sen ts impo r tan toppo r tun i t ie sfo rg reate rin ve s tmen tandanimp ro vedqua l i tyo fse r v iceto roadu se r s .Howe ve r ,a tth iss tageke yr is k s inde l ive r ingthebe ne f i tsrema in . 6 .2Po ten t ia ld i f f icu l tyach iev ingsus ta inedsp l i tf rompo l i t ica lp rocess :The mo s ts ign i f ican tga in s in th is mode la ree xpe c tedtocomef rome s tab l ish ingasu s ta inab leRoadIn ve s tmen tS t ra teg y. A l thoughwean t ic ipa tetha tthes ta tu to r yfoo t ingcande l ive rth is ,roadbu i ld ingha sbeenthesub je c t o fs ign i f ican tpub l icp ro te s tin c lud ingd i re c ta c t ioninthepa s t .Un t i lthesupp l ycha iniscom fo r tab le tha tune xpe c tedpo l i t ica landbudge t a ryp re s su re sw i l lno t in te r fe rew i th the in ve s tmen tp rog ramme andfund inggua ran tee ,thego ve rnmen townedcompan y ma yno tbeab letode l ive rthee f f ic ien cy ga in san t ic ipa ted .Th isr is kcou ldbe in c rea sedwhe resomere sou r cee lemen tso ftheope ra to r ’s budge trema insub je c tto mo ref requen tbudge tde c is ion sands t r ingen tcon t ro ls,howe ve rthe Go ve rnmen tw i l l loo ka twa y stoen su rea le ve lo fce r ta in tytha ta l lowse f f ic ien c ie stobea ch ie ved . 6 .3F iveyearcyc l ica l i ty(asin wa te r ) :Se ve ra lre v iewe r sha ve iden t i f iedas ign i f ican ttenden cyfo r cy c l ica lin ve s tmen tinthewa te rse c to r ,l in kedtothe5 yea rpe r iod icre v iewp ro ce s swh ich iss im i la rto wha twep ropo sehe re .The re fo rethe re isar is ktha tth ise xpe r ien ce isrepea ted .Ch r isNewsome ,o f Ang l ian Wa te r ,isquo teda ssa y ing:“C y c l i ca lin ve s tmen tha sbeenanis sueinthewa te rse c to rs in ce p r iva t isa t ion .Thee f fe c tso fth iss tops ta r tcy c lew i th inthesupp lycha inre su l tin lo s tp rodu c t iv i ty a c ro s sthef iveyea rcy c le ,redundan c ie sandanen v i ronmen to fun ce r ta in ty inwh i chsma l land 57 med iumen te rp r ise sa repa r t icu la r lybad lya f fe c ted .” Inh isre v iewo fO fwa tin2011Da v id G ra y commen tedtha t :“Thee x t rao rd ina rydeg reeo fcy c l i ca l i ty inbu s ine s sf lowsf romthewa te rcompan ie s tothese c to rsupp lycha in ,wh ichappea r stobe la rge lyare spon setothep r icere v iewp ro ce s s ,is ob v iou s lyunde s i rab le .I t ishopedtha tthep ropo sa lsto ma keregu la t ionle ss in t ru s iveandg ive compan ie s mo reowne r sh ipo fthe i rbu s ine ssp lan sw i l l imp ro vethepo s i t ion ,bu ti t ma ya lsobe ne ce s sa r ytocon s ide rsome mo rep roa c t iveapp roa che s inthesho r te rte rm . ”Inse t t ingupthe co s t mon i to ringfun c t ionweneedtopa ya t ten t iontoth is is sue ,anden su rethenewcompan yha s 58 owne r sh ipo f i tsbu s ine s sp lan .Afu l le rrepo r t –“ Smoo th ingin ve s tmen tcy c le s inthewa te rse c to r” – ha sbeenunde r ta kenb yIn f ra s t ru c tu reUKwh i chde ta i lsthe impa c tso fth iscy c l ica l i tyandpo ten t ia l so lu t ionsapp l icab letothewa te rregu la to r yreg ime . 6 .4Accoun tab i l i tyno tapp l iedasexpec ted :Somego ve rnmen tcon t ro lsde s ignedtoensu rethebe s t va lue in manag ingpub l ic mone ycou lde x is to ve rthef reedomo fthenewcompan ytose tle ve lso f remune ra t ionandtop ro cu re .I tisimpo r tan ttha tspend ingcon t ro lsu seth er igh te xpe r t ise ,powe r s andrem i ttos c ru t in iseva luefo r mone ye f fe c t ive lywh i ls ta lsoa l low ingthecompan ytheope ra t iona l f le x ib i l i tytode l ive r mo ree f f ic ien t ly .Theco s t mon i to rw i l lhavearo lehe re ,bu ta son lyonecompan y w i l lbefo rmed ,the recou ldbea la cko f in fo rma t iononwh ichtoba seana s se ssmen to fpe r fo rman ce andhen ced r ivee f f ic ien cyb yben chma r k ing .The re isare la tedr is ktha t ,intheabsen ceo fan e conom icro le ,themon i to r ma ysee ktoe xpandi tsrem i tandin te r fe re in managemen tdec is ion s .A su i tab leba lan cemu s tbefoundu s inggo ve rnan cea r rangemen ts ,the mon i to rand –insomeca se s – 57 h t tps : / /www .gov .u k /gove rnmen t /new s /gove rnmen t ca l lsfo r a c t ionto add re s sdamag ingimpac t s o fc y c l ica l i ty in the wa te rse c to r 58 Smoo th ingIn ve s tmen tCy c le s inthe Wa te rSe c to r ,HMT rea su r y 38 con t ro lswh ichen su re sva luefo r mone ybu tdoe sno timpa c tonthee f fe c t ivene sso fthere fo rm sin de l ive r inge f f ic ien cysa v ing sandsuppo r t inge conomicg row th . 6 .5R isko fundes i rab lecos tsav ingsbyus ingpoo rcons t ruc t ions tanda rds59:Es tab l ish ing con s is ten tp re ssu reonco s te f f ic ien cyha sthepo ten t ia lto leadtosa v ing s madeno tth rough e f f ic ien cybu tth roughcu t t ingqua l i ty inunde s i rab lewa ys .Th iscanbed i f f icu l tto mon i to rfo ran ou ts ideob se rve r ,a sthe la cko fqua l i ty ma yno tbeob se r vab lefo r man yyea r sbu tcou ldthenleadto s ign i f ican tin c rea se s inwho le l i feco s t . Wea reawa reo fth isr is kandw i l lsee kto m i t iga te i tb ya comb ina t iono fsomeo ra l lo fthebe low : a . In c lud inga s se t managemen te xpe c ta t ions inthepe r fo rman cespe c i f ica t ionandsee k ing to mon i to rqua l i ty ind ica to r sc lo se ly . b . Es tab l ish ingqua l i tys tanda rd s inthene two r k l icen ce ,sotha t ma in ta in inga sse tqua l i ty andcon s t ru c t ions tanda rd s isake ypa r to fhowthenewope ra to rise xpe c tedtobeha ve. c . En su r ingtheco s tmon i to r andwa tchdogha vec lea rrem i tsto mon i to randrepo r tonthe o r ig ino fco s tsa v ing s ,toc la r i f y i fthequa l i tyo rs copeo fou tpu tha sredu ceda longs ide co s t . 6 .6Lacko fin teg ra t iono fSRNdec is ionmak ing w i th inw ide rpo l icy : In c rea sedpowe rfo rde c is ion ma k inga tcompan y le ve lm igh tleadto lo s so f in teg ra t ionbe tween managemen to ftheSRNand o the ra rea so fgo ve rnmen tpo l icy in c lud ingt ran spo r t ,p lann ingandhou s ing .Howe ve r ,se cu re longte rmp lann ingth roughtheR IScou ldredu cep lann ingr is kb yg iv ingg rea te rfo re s igh ttoo the ra rea so f go ve rnmen t ,a s i tw i l ldotobu s ine s s . 6 .7Env i ronmen ta landsoc ia lgoa lsno tba lanced w i theconom icp r io r i t iesinnewf ramewo rk: C reat ingago ve rnmen townedcompan ydoe sno tgua ran teetha ten v i ronmen ta landso c ia lgoa lsw i l l beba lan cedw i thgoa lsfo re conom i cg row thande f f ic ien cy .Th isro le mu s tbefu l f i l lede i the rb ythe Depa r tmen tfo rT ran spo r tth roughtheRoadIn ve s tmen tS t ra teg ya ndo the re lemen tso fthe pe r fo rman ceandgo ve rnan cef ramewo r k .En v i ronmen ta lp ro te c t ion se x is tinaw iderangeo f leg is la t iona l readyandthe sew i l lcon t inuetoapp ly .And ,a swesa idinou rre sponsetothe con su l ta t ion ,“ thecompan yw i l lha vec lea ren v i ronmen ta lre spon s ib i l i t ie sandthepe r fo rman cereg ime w i l lsuppo r tandin cen t iv iseanimp ro vemen tintheen v i ronmen ta lpe r fo rman ceo fthes t ra teg icroad ne two r k ” . 7 .Summa ryw i thp re fe r redop t ionandp lanfo rimp lemen ta t ion 7 .1Ou re v iden cef romp re v iou ss tud ie s ,a swe l la stha tp ro v idedb ybu s ine ssandindu s t r y ,s t rong ly sugge s tstha ti twou ldbeve r yd i f f icu l ttoa ch ie vetheob je c t ive so f imp ro v ingva luefo r mone yand boo s t ingthee conomyw i thou t in s t i tu t iona lre fo rmtoa l lowfo rtheroad sope ra to r ’sope ra t iona l independen ceandce r ta in tyo ffund ing ,a l lunde rp innedb y leg is la t ion .Es tab l ish ingtheHAa san independen tcompan yw i l lenab lea mo recomme r c ia lgo ve rnan ces t ru c tu reandope ra t iona l independen ceto mee ttheou tcome sunde rtheR ISin the mo s te f f ic ien t manne rpo s s ib le .W i thou t e s tab l ish inganindependen tcompan yw i thasepa ra te lega liden t i tyandi tsownpowe r sunde r s ta tu te ,re spon s ib i l i tyfo rda y to da y managemen to ftheSRNwou lds t i l lre s idew i ththeSe c re ta ryo f S ta te .Th iswou ldl im i t thev is ib i l i tyandc red ib i l i tyo fchangetothesupp lycha in . 7 .2We wou lde xpe c tre fo rmtoo f fe rsomebene f i ts i fthecompan ywa sse tupa ta rm ’sleng thw i than op t ima lcomme r c ia lgo ve rnan ces t ru c tu reandfewe rcen t ra lgo ve rnmen tre s t r ic t ion s ,e veninthe ab sen ceo f leg is la t ion .Howe ve r ,ino rde rtose cu refund ingce r ta in ty,i t isc ru c ia ltha tleg is la t ionis pa ssedtounde rp intheR IS,o the rw isethe rewou ldbeno imp ro vemen tpe r ce ivedb ytheHA ’ssupp ly cha ino ve rthese cu r i tyo fthefo rwa rdp rog rammeo fwo r kandar is ko fno imp ro vemen tine f f ic ien cy o ve rthes ta tu squo . 7 .3Toc rea tea mo rea ccoun tab leroad sope ra to r ,theHAneed stoope ra tea ta rm ’sleng thf rom go ve rnmen t ,w i th leg is la t ionha v ingt ran s fe r redthedu t ie sandpowe r stoenab le i ttodoso .Th is wou ldc rea teac lea re ra ccoun tab i l i tyl in kbe tweenope ra to randroadu se r s , wh ichwou ldbe 59 “Gove rn ingandPa y in gfo rEn g lan d ’s Road s ,S .G la is te r ,2010 ( h t tp : / /www . ra c founda t ion .o rg /a s se t s / ra c_ founda t ion / con ten t /down loadab le s /gove rn ing_an d_pa y in g_ fo r_en g lan ds_ road s_g la is te r_ma in _ repo rt . pd f) 39 re in fo r cedb ythec rea t iono fawa tchdogtha ten su re sroadu se r s ’in te re s tsa re inpu ta ttheke y s t ra teg icle ve l–aR IS ,se cu redw i th leg is la t iveunde rp inn ing . 7 .4The re fo reon lyop t ionone-in s t i tu t iona lre fo rmw i th leg is la t ion–ha sthepo ten t ia ltode l ive rthepo l icy ob je c t ive s . 7 .5Leg is la t ionisnowbe ingin t rodu cedtoPa r l iamen tto imp lemen ttheabo ve .S ub je c ttoPa r l iamen ta r y app ro va lwean t ic ipa tetheB i l lre ce iv ingro ya la sse n tinea r ly2015 ,andthenewgo ve rnmen towned compan ywou ldcome in toope ra t iona ssoona spo s s ib lea f te rth is .Asd is cu s sedin‘o the rimpa c ts ’ , be low ,ape r iodo fcon su l ta t ionandengagemen tw i thun ion sandHAs ta f fo ve rthet ran s fe ro fs ta f f w i l lp re cedethenewcompan ybe com ingope ra t iona l .Thef i r s tR IS iscu r ren t lyp lannedfo r pub l ica t ioninau tumn2014andin t rodu c t ionin2015. 7 .6TheGo ve rnmen tw i l lre v iewth ispo l icytoa s se s s i tse f fe c t ivene s sa timp ro v inge f f ic ien cy .In2018 , wee xpe c ttobeg intode ve lopthese condR IS ,andake ypa r to ftha tw i l lbea s se ss ingthede l ive r yo f thef i r s tone ,bo thfo re f fe c t ivene s sande f f ic ien cy . Wew i l la lsocondu c tane va lua t iono fthe in s t i tu t iona lde s ign ,toe s tab l ishwhe the rthede s ignha sen cou ragedg rea te rt ran spa ren cyandhow theco s t mon i to randwa tchdoga reab leto in f luen cethecompan y . Wee xpe c te f f ic ien cyto imp ro ve o ve rt imea ssupp l ie r sandthecompan yadap tto longe rte rmfund ing ,the re fo rethee va lua t ionw i l l con s ide rthet im ing so fthee f f ic ien c ie s ,andwhe the rthe re imp ro vemen ts innews cheme sshowthe typeo fchange se xpe c ted .Theco s t mon i to rw i l lbeacon t inuou ssou r ceo fe va lua t ione v iden ceon howe f f ic ien t lythecompan y ispe r fo rm ing ,ta k inga ccoun to fthequa l i tyands copeo ftheou tpu ts de l ive red .U s ingtheda taandin fo rma t iona va i lab lef romthecompan yandtheco s t mon i to rwew i l l e va lua tehowsu c ce s s fu lthe sere fo rmswe re .. 8 .D i re c tco s tsandbene f i t stobu s ine s s 8 .1The sep ropo sa lsshou ldha ves ign i f ican tbene f i tstobu s ine s sth roughabe t te rin ve s tmen t en v i ronmen tfo rs t ra teg icr oadsin f ra s t ru c tu re .Howe ve rwea s se ssthe sebene f i tsa s ind i re c tbe cau se the yre lyontherea c t iono fthesupp lycha intothere fo rmsandwea reno tremo v ingregu la to r y r bu rden sd i re c t ly , inl inew i thpa rag raph1 .9 .8( i )o ftheBe t te rRegu la t ionF ramewo r k Manua l .60 Fo th isreasonthesere fo rmsa reno tinscopeo ftheGove rnmen t ’spo l icyo f One In TwoOu t . 8 .2Wea rep ropo s inge s tab l ish ingwa tchdog andco s t mon i to r ingfun c t ion sa sde s c r ibedabo ve ,wh i ch cou ldha vesomer egu la to r ybu rden sonthenewgo ve rnmen townedcompan y .Howe ve r,a sthe compan yw i l lbeg o ve rnmen towned ,th isw i l lno tbeabu rdenonp r iva tebu s ine sse sandhen cewe a sse s snod i re c tco s to rbene f i the ree i the r . 8 .3Bo thAF re shS ta r tfo rtheS t ra teg i cRoadNe two r kandA c t ionfo rRoad swe rew r i t tena f te rs ign i f ican t engagemen tw i thbu s ine s so rgan isa t ion sandtheHA ’sUKw idesupp lycha intha tcon f i rmedthe bene f i tso fth isapp roa chfo rUKbu s ine s se s .In Ma y2013 ,theC iv i lEng inee r ingCon t ra c to r s As so c ia t ionca l ledonthego ve rnmen tto : “…de ve lopanew mode lfo rtheowne r sh ipand managemen to ftheEng l ishs t ra teg i croad sne two r k , fo cu s s ingonp ro v id ing longte rmce r ta in t yo ve rthein ve s tmen trequ i red inthene two r ktoen su retha t 61 i ti sab leto mee tfu tu redemand inana f fo rdab le manne r . ” 8 .4As ta temen tf romAdam Ma r sha l l ,d i re c to ro fpo l icya ttheB r i t ishChambe r so fComme r cewe lcomed thep ropo sa ls inAc t ionfo rRoad s : “ Bu s ine s sg row threqu i re saroadne two r ktha t ’ swe l l ma in ta ined ,conge s t ionf reeandupg raded whe rene ce s sa r y .Fo rtoo long ,theH ighwa y sAgen cyha sbeenunab letode l ive ronthe se requ i remen ts . 60 h t tp s : / /www .gov .u k /gove rnmen t /up load s / sy s tem /up load s /a t ta chmen t_da ta / f i le /211981 /b is131038be t te rregu la t ion f ramewo rk manua lgu idan cefo r o f f ic ia l s .pd f 61 CECA ,Se cu r ingou rEconomy :TheCa sefo rIn f ras truc tu re ,Ma y2013 ,p .5 . 40 Sowewe lcometheannoun cemen ttha ttheH ighwa y sAgen c yi stobe comeapub l i cco rpo ra t ion , managedina mo rebu s ine s sl i kefa sh ion ,andtha t i tw i l lha ve thesameso r to ff i ve yea rfund ing ce r ta in t ytha tha she lpedto imp ro vethera i lne two r kinre cen tyea r s . 62 Bu s ine s sha shadenougho f‘ s tops ta r tB r i ta in ’ .” 8 .5There spon se sf rombu s ine s se sandtheHA ’ssupp lycha intoou rcon su l ta t iononT ran s fo rm ingthe H ighwa y sAgen c yha sa lsobeenla rge lypo s i t iveanda f f i rmsthebene f i tso fou rapp roa chandthe ana ly s is inthep re v iouspub l ishedimpa c ta s se s smen t . 9 .O the rimpa c t s S ta f fandequa l i t ie s 9 .1Oneo ftheg roups mo s ta f fe c tedb ythe sep ropo sa ls istheH ighwa y s Agen cy ’swo r k fo r ce.The rea re o ve r3 ,200fu l l t imes ta f fwo r k ingintheHAth roughou tEng landinarangeo fro le s ,a l lo fwhoma re c iv i lse r van ts . 9 .2TheDepa r tmen tha sadu tyunde rtheEqua l i tyA c t2010tocon s ide rwhe the rpo l ic ie sw i l lha vean y ad ve rse impa c tonequa l i t ie so rredu cee x is t inginequa l i t ie s .63 TheD fTequa loppo r tun i t ie sand d ive r s i typo l icyg ive se f fe c ttotheEqua l i tyA c trequ i remen ts .I tsuppo r tsandp romo testhep r in c ip le s o fequa l i tyandfa i rne s sanden cou ragesad ive r sewo r kfo r ce . 9 .3Shouldthe go ve rnmen townedcompan yop t ionbeta ken ,s ta f fwou ldbet ran s fe r redtothenew compan yf romtheHA .The i rte rmsandcond i t ion so femp lo ymen twou ldbep ro te c tedunde rthe 64 p r in c ip le so ftheT rans fe ro fUnde r ta k ing s(P ro te c t iono fEmp lo ymen t )Regu la t ion s2006(TUPE ). Unde rthePub l icSe r v icePen s ion sAc t2013 ,pub l i cse c to rwo r ke r swhoa ret ran s fe r red ou to fthe c iv i lse r v iceunde rTUPEp r in c ip le sw i l lbeab letorema in membe r so ftheC iv i lSe r v icePen s ion Scheme ; mo s tHAs ta f fa re intheP r in c ipa lC iv i lSe r v icePen s ionScheme .Ascond i t ion so fse r v ice wou ldbep ro te c tedunde rTUPEfo l low ingan yt ran s fe ro fs ta f ff romtheHA ,the reshou ldbeno ad ve rse impa c tonan yp ro te c tedg roup s . 9 .4Regu la t ion13o fTUPEp la ce sanob l iga t iononbo ththeo ldandnewemp lo ye rto in fo rm t radeun ion rep re sen ta t ive so fs ta f fa f fe c tedb ythet ran s fe r‘longenoughbe fo reare le van tt ran s fe r ’ .In a cco rdan ce ,D fTandtheH ighwa y sAgen cyw i l len su retheapp rop r ia tep ro v is iono fin fo rma t ionto su chrep re sen ta t ive s . P lann ing 9 .5TheH ighwa y sAgen cyha sadu tytofa c i l i ta tesu s ta inab lee conom i cde ve lopmen t .Howe ve r ,th is mean stha ti t mu s t dea lw i ththe impa c tso f lo ca le conom icde ve lopmen tontheSRN .Newe conom ic a c t iv i tycanleadtoagene ra lin c rea se indemand,wh i chcanbesub s t an t ia lintheca seo fthe la rge s t de ve lopmen ts .Ono cca s ion ,thecumu la t ivee f fe c tscanre su l tinconge s t ion .Spe c i f icde ve lopmen ts ma ya lsopo seasa fe tyr is k ,pa r t icu la r lywhe rethe yc rea teo ra l te rad i re c ta cce s son toas t ra teg ic road .TheAgen cywo r k sw i thde ve lope r sto m i t iga tethe impa c tso fthe sede ve lopmen ts ,b yadap t ing thede s igno rb ya r rang ing m i t iga t ion mea su re s .Thecu r ren tD fTpo l icyonp lann ingandtheSRN is se tou tinC i r cu la r02 /2013"TheS t ra teg icRoadNe two r kandtheDe l ive r yo fSu s ta inab le De ve lopmen t ". 62 ‘ Roadne two rkre fo rm s mu s the lppu tanen dto‘s tops ta r tB r i ta in ’ ,sa y sBCC’ ,Ju ly2013 ,h t tp : / /www .b r i t ish ch ambe r s .o rg .u k /p re s so f f ice /p re ssre lease s / road ne two rkre fo rm s mu s the lppu tan en dto %E2%80%98 s tops ta r tb r i ta in%E2%80%99 ,sa y s b c c .h tm l 63 Th ep ro te c tedcha ra c te r is t ic s ,a sde f in ed intheEqua l i t yAc t2010 ,a re :age ,d isab i l i t y ,raceande thn ic i ty ,gende r ,p regnan c yand ma te rn i ty , gen de rreass ignmen t ,sexu a lo r ien ta t ion ,re l ig iono rbe l ie f . 64 Fo rfu r the rde ta i l sonTUPEsee(h t tp : / /www . leg is la t ion .gov .u k /u k s i /2006 /246 /pd fs /u k s i_20060246_en .pd f) 41 9 .6TheSe c re ta r yo fS ta teha sanumbe ro fp lann ingdu t ie sanda s so c ia tedpowe r s,wh icha ree xe r c ised onh isbeha l fb ytheH ighwa y sAgen cytohe lpw i thth isw ide rp ro ce s so fde ve lopmen t managemen t . The sepowe r s mean : • TheAgen cy isas ta tuto r ycon su l teew i thadu tytocoope ra te inthep repa ra t iono fLo ca lP lan s . Th rough th is isab le to in f luen cepa t te rn so fde ve lopmen tandthecon sequen tcumu la t ive impa c ton theSRN . • TheAgen cy iscon su l ted inre spe c to fp lann ingapp l i ca t ion sfo rp ropo sedde ve lopmen tstha tw i l l a f fe c ttheSRN ,andisunde ras ta tu to r yob l iga t ion top ro v idesub s tan t ivere spon se srega rd ing po ten t ia l impa c ts(TownandCoun t r yP lann ing(De ve lopmen t Managemen tP ro cedu re )(Eng land ) O rde r2010 ,A r t i c le16S chedu le5) . • The ycanrequ i re thede ve lope rtop rodu ce mo re in fo rma t ionabou tthee f fe c t sthe i rp ropo sa lw i l l ha veont ra f f ic(A r t i c le s25and26 ) . • I fne ce s sa r y ,theSe c re ta r yo fS ta tecanrequ i respe c i f i ccond i t ion sbea t ta chedtoan yg ran to f p lann ingpe rm is s ion ,andcane vend i re c ttha tp lann ingpe rm is s ionbew i thhe lda l toge the r(A r t i c le s 25and26 ) .65 9 .7A round3 ,000p lann ingca se sea chyea rin vo lvetheH ighwa y sAgen cy ,o fwh icha round20%a re judgedl ike lytoha veas ign i f ican timpa c tonthene two r k .TheAgen cyu sua l lynego t ia te sw i th de ve lope r stose cu rebe t te rin fo rma t iono rtop lanapp rop r ia te m i t iga t ion mea su re s .Howe ve r , p lann ingpowe r sa reu sedtorequ i re mo re in fo rma t iononimpa c ts( ‘ho ld ingd i re c t ion s ’ )andtocon f i rm o rspe c i f yt ra f f ic m i t iga t ion mea su re stha tthede ve lope r mu s tp ro v ideo rpa r tp ro v ide .Inave r ysma l l numbe ro fca se s ,the ya rea lsou sedtod i re c tre fu sa lwhe recon ce rn scanno tbere so lvedandwhe re ade ve lopmen twou ldha vee i the ranadve r se impa c tonsa fe tyo rad isp ropo r t iona tee f fe c tone x is t ing 66 t ra f f ic . Tab le11:D i rec t ionsissuedonp lann ingapp l ica t ionsbytheH ighwaysAgency ,Ap r i l-Decembe r2013 Responsetype Re fusa l( “pe rma nen t nonapp ro va l ” ) Ho ld ing( “no na pp ro va l fo rade f inedpe r iod ” ) App ro va lwi thcond i t ions Noob je c t io n To ta l Sa fe tyRe la ted O the r To ta l 2 1 3 58 167 225 99 157 256 - - 2158(81% ) 159(6% ) 325(12% ) 2642 9 .8Se t t inguptheH ighwa y sAgen cya sago ve rnmen townedcompan yw i l lchange i ts lega liden t i ty ,and acon sequen ceo fth is istha tthecompan yw i l lno tbeab letoa c tonbeha l fo ftheSe c re ta ryo fS ta te u s ingpowe r sbe long ingtoh imins ta tu te .Howe ve r ,thecompan yw i l lbe come theh ighwa yau tho r i ty andw i l lrema inthebe s tp la cedbod ytop ro v ide inpu ttothep repa ra t iono fLo ca lP lan sandtoa s se s s p lann ingapp l ica t ion s inre spe c to f impa c tsontheSRN. 9 .9Wedeemi tunde s i rab letot ran s fe rthere le van tpowe r sf romtheSe c re ta r yo fS ta tetothecompan y , a sthe ya rede f inedtoob road lytove s tinana rm ’s leng thbod yw i th i tsown d is t in c tbu s ine s s in te re s ts .Bu ti no rde rtoen su rene two r ksa fe ty ,thecompan yw i l lneednewpowe r stha to f fe rsome p ro te c t ion .Asse tou tonpage s40-42o ft heGo ve rnmen t ’sr e sponsetocon su l ta t ion ,thep lann ing s y s temw i l lbere fo rmedsotha t : • “ Thecompan ybe come sas ta tu to r ycon su l teeonre le van tp lann ingapp l i ca t ion sa f fe c t ingthe ne two r k.Th is in c lude stho ses i tua t ion swhe rea napp l i ca t ionma ya f fe c tthesa fe tyo fne two r k u se r s .Thecompan yw i l lbee xpe c tedtocommen tonthep ropo sa ls ,to in fo rmthede c i s ionb ythe 65 Th esepowe r sa rese tou t inth eTownandCoun t r yP lann ing(De ve lopmen t Managemen tP rocedu re)(Eng land )O rde r2010 , wh ich intu rns i t s unde rtheTownandCoun t ryP lann in gAc t1990an dth eP lann ingan d Compu l so r yPu r cha seAc t2004 . 66 Th eseth reeca se s we rea l lsma l lde ve lopmen t s ,twoo f wh ichp roposeddan ge rou sa cce s se sd i re c t l ytoth ene two rk .Thepowe rh a sn o tbeen u sedtore fu sea ma jo rde ve lopmen tinre cen tt ime s . 42 lo ca lp lann ingau tho r i ty .Inl ine w i ths tanda rdp ra c t icefo rs ta tu to r ycon su l tee s ,thecompan y wou ldbee xpe c tedtop ro v idei t sv iew sw i th in21da y s . • Thelo ca lp lann ingau tho r i tywou ldthenbeab leto ma ke i t sownde c i s iononwhe the rtoapp ro ve thede ve lopmen t ,whe the rtoa t ta chcond i t ion stotheg ran to fp lann ingpe rm is s ion ,o rwhe the rto re fu sepe rm is s ionou t r igh t .Th i s mean stha tthenewcompan y ,un l iketheH ighwa ysAgen c y ,w i l l no tbeab letod i re c tthewa ythe lo ca lp lann ingau tho r i tyt rea t stheapp l i ca t ion . • G iventhee xpe r t i seo fthecompan yon ma t te r sre la t ingtothes t ra teg i croadne two r k,su cha s roadsa fe t y ,wewou lde xpe c ttha tthelo ca lp lann ingau tho r i t yw i l lfo l lowthe i rad v i ce ina la rge ma jo r i tyo fca se s . Whe rethe lo ca lp lann ingau tho r i tye xpe c t stoo ve r ru lethecompan y ’ s con ce rn s ,the yw i l lberequ i redtono t i f ytheSe c re ta r yo fS ta tefo rt ran spo r tinad van ce .The Se c re ta r yo fS ta tew i l lre ta inh i se x is t ingpowe r sto i ssued i re c t ion sonp lann ingapp l i ca t ion s ,and whe rehebe l ie ve sthe rew i l lbead i sp ropo r t iona teimpa c tontheroadne two r khe ma y 67 in te r vene . ” 9 .10 B road ly ,th ischangeupda te scu r ren tpo l icyandp ro ce s se s inawa ytha ta l lowsthenewSRN managemen tf ramewo r ktoope ra teonap ra c t ica lle ve l ,bu tw i thnod i re c t impa c tstha tcanbe a sse s seda saco s to rbene f i t .H owe ve r ,fo r mo s tde ve lope r s i tshou ldrep re sen tas ign i f ican t s imp l i f ica t iono fthecu r ren tp ro ce s s ,a s i tremo ve sthepo ten t ia lfo rtheH ighwa y sAgen cyandi ts su cce s so rtop la cerequ i remen tsonde ve lope r s independen to fthe lo ca lp lann ingau tho r i ty .In s tead , i tshou lden su retha tthe la rge ma jo r i tyo fca se sa rede c idedb ythe lo ca lp lann ingau tho r i ty ,w i th ad v icef romthecompan y ,andw i thou ttheu seo fp lann ingd i re c t ion sb ycen t ra lgo ve rnmen t . 67 Depa r tmen tfo rT ran spo r t ,Go ve rnmen tRe spon setocon su l ta t ionont ran s fo rm ingthe H ighwa y sAgen cy in toago ve rnmen townedcompan y, Ap r i l2014 ,pp .401 . 43