Audit Committee, 09 Nov 2004

Meeting date: Tuesday, November 9, 2004

Official Report 136KB pdf

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“Maintaining Scotland's roads”

Item 3 is a briefing from the Auditor General and his team on the recent report "Maintaining Scotland's roads".

We all know that there is a huge amount of public interest in the condition of Scottish roads, with frequent media reports about potholes and the like, congestion caused by roadworks and the need to keep roads open during the winter and, this year, even to keep them open during the summer in parts of Scotland.

The timing of the study is particularly appropriate, because we have the results of the first comprehensive study of road conditions in Scotland, so we now have a fairly good idea of the condition of Scotland's roads and the scale of the problem that councils and the Scottish Executive face. The report is a joint report between the Accounts Commission and me. In it, we examine the condition of the roads, the money that is spent by councils and the Scottish Executive on road maintenance and how road maintenance is managed. My principal interest is in the 3,500km of motorways and trunk roads that are maintained by the Executive; the Accounts Commission has a particular interest in councils' responsibilities for the 51,000km of other public roads.

I examined trunk road maintenance once before. Three years ago, I published a report on the trunk road maintenance contracts and how they had been managed and let. One of the key recommendations was that the Executive should continue to monitor the performance of contractors and report publicly on performance progress under the new contracts after the first year of operation. Since then, I am pleased to say that the Executive has produced a series of annual reports on the performance of the trunk road operating companies. Those reports have formed the basis of the findings on trunk road maintenance in the latest report.

If I may, I will briefly outline the main findings. This first repeatable survey of Scottish road conditions suggests that 13 per cent of all Scotland's roads should be considered for repair now, and a third require further investigation. Generally speaking, exhibit 1 of the summary briefing shows that higher classes of road tend to be in a better condition. The survey indicated that 90 per cent of motorways and dual carriageway trunk roads are in acceptable condition. However, only two thirds of single carriageway trunk roads are in an acceptable condition and almost 14 per cent are in need of repair.

The Executive has a trunk road maintenance backlog of £232 million. Councils estimate the cost of eliminating their road maintenance backlog to be around £1.5 billion, including about £900 million for road repairs, but I stress that the method of calculating that figure needs to be refined. In other words, the figure is not wholly reliable and should be seen as no more than a general indication at this point.

In 2002-03, the Executive spent about £127 million on maintaining trunk roads, while councils' revenue expenditure was about £277 million and their capital expenditure was £44 million. Exhibit 3 on the final page of the key messages summary shows the spending trends since the early 1990s. Revenue spending on council-maintained roads fell sharply in the mid-1990s and, in real terms, it was still below the 1994-95 level in 2002-03. Spending on trunk roads also fell, but it has recovered.

The Scottish Executive has effective performance monitoring arrangements in place for motorways and trunk roads. The Executive's performance audit group has published three annual reports, covering customer service, value for money, effective management and financial performance. The reports show that contractual requirements are generally being met and that contractor performance has continued to improve. The Executive is introducing an asset management system for motorways and trunk roads, but many councils have yet to develop the basic inventory and information systems that are necessary to support proper asset management.

Our report makes a number of recommendations. The main ones for the Executive and councils are that they should publish annual information on the condition of the road networks and that they should manage the road maintenance backlog using a consistent methodology and approach.

David Pia and John Lincoln from Audit Scotland are with me. They have worked on the report and will be able to answer the more detailed questions that members may have.

The key messages report states that councils have reported that clearing the maintenance backlog would cost

"around £1.5 billion, including £900 million for road repairs".

However, the report continues:

"The Executive, using more detailed information than that available from the SRMCS, has calculated that the structural maintenance backlog for trunk roads is around £100 million, with a further £72 million required for routine repairs and £60 million for bridges."

Does the Executive accept the councils' figure? You heavily qualified your statement on whether the figure is robust, but what exactly is that qualification? Are there holes in the calculations?

The Executive has not pronounced on the councils' estimates, which are, in essence, built up from the estimates of road engineers. We qualify our statement because the estimates have not been subject to objective tests.

Exhibit 9 on page 15 of the report contains information on the proportion of councils' road maintenance revenue budgets that is devoted to structural maintenance. Why were two councils unable to provide a breakdown of their revenue expenditure? Will you explain the huge variations between councils and say whether the figures correlate with the state of the roads in the council areas? You make a strong case that investment lengthens the lifetime of the roads and prevents the rapid accumulation of a maintenance backlog, but there does not seem to be any linkage between what councils invest and the state of their roads—the City of Edinburgh Council is a classic example of that.

David Pia will answer the question on the councils that did not provide a breakdown of revenue expenditure.

George Lyon may find exhibit 10 on page 17 useful. As that exhibit shows, councils tend to think of the maintenance that needs to be undertaken year on year, after which they top-slice off the known costs for the year, such as electricity supply contracts for street lighting. They always then allow for their best estimate of winter maintenance, which is an increasingly difficult issue for councils because of the evidence of global warming. They then deduct the routine maintenance budget. The structural maintenance budget is quite often residual, which means that it is what can be afforded when the rest of the budget has been allocated.

That is a perfectly understandable way for councils to manage a cash-limited budget, but it runs the risk that structural maintenance, of itself, is not examined on a need-to-spend basis or a value-for-money basis. That is why a lot of the recommendations in the report are to do with encouraging councils to develop a better understanding of the condition of their road assets and to plan for structural maintenance more systematically. That will produce longer-term value for money and reduce the need for routine maintenance budgets. David, can you help with the—

On the detailed question, John Lincoln may be in a better position to answer.

I am trying to get some correlation between exhibits 3, 7 and 9. The reader cannot read through cause and impact. What is the background to this?

In relation to exhibit 9, you would need to ask the councils that could not respond why they could not respond. We asked for the information on several occasions but they were unable to provide it. As for the correlation, this is the information for one year. The road maintenance backlog has probably taken 10 to 15 years to build up, and we do not have information going back that far.

You make the point that most of the budgets are based on historical spend. Surely, the figures give you an indication of what spend was historically.

We were not able to get the specific information going back that far. A lot of it pre-dates the reorganisation of local government.

But you argue that the budget is built on historical spend. The point that I am trying to make is that, although this is a snapshot of one year, it should give you a fair indication of what was spent, year on year, going back to the formation of the councils.

We did the correlations to try to look at that; however, there are issues about what the state of the roads was in the first place. For example, some councils' roads were built up over a long time on drove roads in rural areas, whereas the roads in new towns in more urban areas will have been in excellent condition to start with. We do not really know how good the roads were when they were built. We also know that some councils spend capital on road maintenance. Some of the councils that have quite a low level of revenue spend as shown in exhibit 9 probably spent some capital on maintenance. We discuss that later in the report.

We have looked for but have not been able to find any correlations between spend and road condition. There is also variation in the amount of traffic in council areas, which causes problems, and variation in the number of roadworks: urban areas have a lot more roadworks because of cable companies and so on. A lot of factors make up what the road condition is now; we have information on some of them, but we do not have information on all of them to build up a complete picture.

The report highlights an extraordinary diversity of practice among the councils. At paragraph 22, the report states:

"The cost of bringing the road network up to standard has been estimated at £1.7 billion, but further work is needed to improve the accuracy of the estimate".

Finding out what the projected figures should be is going to be difficult. At paragraph 37, the report states:

"Constraints on road budgets have resulted in reduced spending on structural maintenance".

That is where my question is going to lie. At paragraph 58, the report says:

"There are significant differences in the unit cost of common road maintenance items reported by councils".

Therefore, it will be difficult to make comparisons.

The report highlights at paragraph 68:

"Some councils' strategies for structural maintenance do not meet Best Value standards".

It also states at paragraph 65:

"Structural maintenance is essential to achieve best value for roads expenditure".

Is there any formula by which one would be able to tell councils what it is going to cost them in the future if they do not find more money for structural maintenance on a spend-to-save basis? From the report, councils appear to me—you can correct me if I am wrong—to be building up a huge problem for themselves in the future by not spending on structural maintenance at present.

There is no such formula. Our best estimate is that it would certainly take 10 years' investment in structural maintenance, which would have to be given priority, before the backlog would be seriously eaten into. I ask John Lincoln to elaborate on that.

One of the report's recommendations is that councils should get together to produce an agreed methodology to calculate the backlog of work. All 32 councils have got together and are developing such a methodology, which although not available yet should be available in the future. We have asked the councils to publish information about their backlogs every year when they have that formula, so that they can have consistent information about those backlogs and we can monitor their progress.

I was focusing not on calculating the costs of the backlog, but on how much more councils will have to spend on other maintenance of roads as a consequence of not coping and not spending to catch up. That will take 10 years. What will happen if they do not go down the route of spending to catch up? How much extra spending would be needed? In other words, it is a matter of explaining to councils the urgency of dealing with the structural maintenance problem, otherwise they will have to spend £X million more in 10 years' time.

The best answer that we can give to your questions is that there would need to be calculations on a council-by-council basis. However, a strong example is given on page 24 of the report. Glasgow City Council has calculated that the cost of dealing with its backlog would rise over a 10-year period from £50 million to £250 million. It has also considered its different options for investing to reduce the build-up of the backlog. Each of the 32 councils would have to do calculations, but we have included an example that shows things being done well and best value being achieved by investing earlier on, rather than letting a backlog build up and having to deal with it at a later point.

I apologise for missing the earlier part of the meeting.

I have three questions, the first of which is about levels of investment. What comparative data are available on current spending levels relative to spending levels in other parts of the United Kingdom or other countries and on how trends compare over the past 10 to 20 years? The report identifies Scottish Executive investment in trunk roads as being proportionately broadly similar to that in England and Wales, but I would be interested in whether the witnesses can provide any more comparative information, so that we can get a sense of where we lie with levels of investment.

Secondly, will the witnesses comment further on trunk road maintenance contracts? Given the heated debate about the award of those contracts at the time, it is interesting that the report gives their performance a pretty clean bill of health. Do the witnesses want to elaborate on that? In relative terms, can they say anything more about standards of maintenance over the most recent three-year period compared with what happened in the past with the previous arrangements that were in place, as distinct from observing that performance standards were good in absolute terms?

I confess that my third and final question displays my technical ignorance in the area. I am interested in what the report says about the guidance and various techniques that are available to manage roads maintenance effectively and in its emphasis on technology. I am aware that in our capital, for example, the council got some flak in the local press for investing in technology in order to identify the scale of the problems. It was asked whether people could not just be sent out to identify potholes, which, it was presumed, would be much more cost effective. In layperson's terms for the likes of me, will the witnesses elaborate on what the currently available technology can do to add value to the process of monitoring and maintaining roads in a way that shows that investment in that technology is necessary and worth while?

I will try to answer the first two questions and will ask my colleagues to answer the third question, on technical issues and management. At paragraph 31 of "Maintaining Scotland's roads", we record:

"Council expenditure on road maintenance was over 50% higher in England than in Scotland, at £10,300 per kilometre compared to £6,500 per kilometre in Scotland; expenditure in Wales … is slightly higher than in Scotland."

That can partly be explained by higher traffic density south of the border. In addition,

"the adoption of a … transport plan linked to maintenance funding has led to significant increases in maintenance funding in England."

The short answer is that we have some evidence that expenditure per kilometre is higher south of the border.

With regard to the trend in performance on the trunk road contracts, we have relied very much on the reports of the Executive's performance audit group, because we believe that it is analysing performance pretty robustly. In its annual reports, the group has concluded that both contractors have, broadly speaking, met their contractual requirements and that there is some evidence of performance continuing to improve over the year, which is encouraging. Some smaller problems require attention but, overall, the picture is pretty positive.

I turn to David Pia and John Lincoln for help with the third question.

We suggest that councils need to improve their information and asset management systems and we refer to the Scottish road maintenance condition survey, which produces a much better technical assessment of conditions. Those are undoubtedly important parts of the overall requirement on councils to manage road maintenance, but they are by no means the solution on their own, because we are drawing attention to the priority that has been attached to structural repairs. The technical aspects are important and there is scope for improvement, which we set out, but there are no technical answers to the problems that exist.

One of the advantages of the technology is that if we have good information on the condition of the roads and have a good idea of the traffic, we can have a good idea of the best time to intervene to minimise the costs in the long term. For example, if we have the best information on the resurfacing that is required for a certain amount of traffic, we can determine that we need to do that every five years, and the technology will be able to advise us on the best time to intervene and the best way of intervening to minimise the cost over a long period. However, to use that technology, a lot of information is needed and, although the Executive has most of that information, it is not yet available to most councils.

On page 34 of "Maintaining Scotland's roads", in appendix 3, we have included a description of some of the technical methods of assessing road condition, which members might find fascinating if they are taking a detailed interest in the matter. Personally, I would like to know more about what a "falling weight deflectometer" is and whether it would do me any good, but the

"sideway-force coefficient routine investigation machine surveys"

sound particularly attractive as a way of coming to terms with the issues. There is a lot of technology around for assessing road condition. It is fair to say that that is an area in which councils could get a better service by working together rather than by trying to do it separately, because it is specialist work and to do good assessments requires investment in some of the systems that are listed.

Exhibit 14 on page 22 shows that there is huge variation in the cost of reconstruction among councils, from Dumfries and Galloway Council at £23 per square metre to next-door neighbours East Renfrewshire Council and Glasgow City Council at nearly £83 per square metre and £84 per square metre respectively. That is a phenomenal range. Can someone explain why such variation exists?

I imagine that you would need to talk to the councils about that matter. I know that some councils cannot provide that information because they have not undertaken that work. It may be that the B-roads in Glasgow City Council and City of Edinburgh Council areas, for example, are wider or much larger than those in Dumfries and Galloway. There is also some variation in the way in which councils have calculated the costs. Although we have included this example of the range of variation among councils, we cannot really say much about why such variation exists. The engineers themselves were interested in examining that very issue, because it is important in calculating the cost of the backlog.

We are talking about a difference of more than £60 per square metre. If the councils that I mentioned crossed into Dumfries and Galloway and purchased the work there, they could reconstruct four times as many roads.

I want to follow up on Susan Deacon's question. You express concern that councils lack economies of scale when they are doing this work or trying to plan properly for it. I take it that there is as much of a variation in the unit cost of road maintenance as there is in reconstruction costs. Is there any evidence to support the option of rolling out trunk road maintenance contracts to reconstruct some B-roads and more minor council roads?

Many councils already contract out most major reconstruction, resurfacing or structural maintenance work because they do not have such economies of scale. If councils wanted their direct labour organisations to carry out such work—which can help matters by ensuring that there are more bidders for such contracts—they would need to have economies of scale to buy expensive equipment and recruit engineers, whom it is sometimes difficult to recruit.

In my previous incarnation—I was chief executive of Tayside Regional Council for five years—I knew something about this issue, which is why I was pleased to find that the new councils decided to continue with Tayside Contracts, the DLO that services Angus, Dundee and Perth. Life after reorganisation has been very much based on the value-for-money studies that we are discussing and, as John Lincoln has pointed out, DLOs such as Tayside Contracts had a critical mass to invest in the necessary capital equipment and specialist training to be able to compete effectively for some big contracts such as trunk roads work. When we analysed the issue, we found that such an approach helped to ensure competitive pricing in the marketplace. Tayside Contracts' tenders were always competitive. The general message that emerges is that councils should be encouraged to think about co-operating more extensively in such areas.

I should also remind members about appendix 6 on page 39, which shows that, as George Lyon indicated, there is quite a wide variation in the cost of common road maintenance items among councils. A series of charts also illustrates how the cost of mechanical sweeping, gully emptying, street lighting maintenance and street lighting energy varies among councils. As far as best value is concerned, we would urge councils seriously to consider that information when forward planning their services.

But you cannot explain what underpins those variations.

No. This study captured data that we thought that we could present in this reasonably reliable form. It is up to councils to analyse that information to find out why costs in council A are higher than those in council B.

On page 18 of the report, paragraph 55 names six councils that work together by using a benchmarking database. Do those councils benefit from lower maintenance costs because of that? That certainly does not seem to be demonstrated in the graphs in the report. For example, those six councils do not have a similar position in the graph in exhibit 14. As George Lyon pointed out, that graph shows that Dumfries and Galloway Council has the lowest reconstruction costs. How can such working together be considered good practice when it has no effect on outcomes?

The database that is mentioned is for what is called the bill of quantities, which the DLOs use to price the work. The database allows those councils to ensure that their DLOs cost them about the same amount for similar jobs. That is one aspect.

We are not sure of the source of the variation in those costs. We know that the DLOs for those councils were competitive in comparison with one another, but each council would need to be asked why its costs were different. It may be that the councils have used different methodologies for calculating the costs. For example, some councils might have added in the costs of central support services, whereas others might not have done so. We tried to prescribe which method should be used, but some councils might have used a different one.

There would need to be a huge amount of corporate services to account for the variation, given that Dumfries and Galloway Council is shown as having the lowest costs.

Another issue, which I have noticed especially in my own local authority area, concerns the planning consents that are granted to developers. Such consents can sometimes include a requirement that several metres of the highway outside the development be upgraded or that the street lighting on two or three surrounding streets be improved. However, your report does not seem to contain any evidence on whether local authorities are being innovative in finding ways of skinning the cat. Do you have a feel for whether such practices are widespread or are they particular to my council?

All we know is that roads in new developments and new estates need to be built to a reasonable standard before the council will agree to adopt them as part of its network.

That is not what I am talking about.

Occasionally, local authorities will receive additional money from the developer to assist in improving the surrounding roads so that they can deal with the traffic entering the development. However, we have no further information on that. We did not really consider that issue.

Planning gain lets councils get roads upgraded at somebody else's cost. That might well keep down the costs of some DLOs.

The report did not consider the question of planning gain, but a future report might return to the wider question of how local authorities use that system.

Will that issue be included in Audit Scotland's report on the best-value regime, which I see will be reissued next year?

For councils that have a lot of development taking place in their area, we might home in on the issue of how their planning system works and how they use planning gain. However, such things will vary from council to council.

My next question is on the work force. The report mentions that there is a scarcity of staff, but that is not broken down into structural engineers or civil engineers or road design people. At what level do those staffing scarcities exist?

From our discussions with those who participated in our advisory group—their names are listed at the back of the report—we know that there is a shortage of particular engineers, such as bridge engineers and civil engineers. However, we did not specify that further because we did not collect any information on the level of those shortages.

That leads me to ask a further question. If, for some miraculous reason, funding were available to bring every road in Scotland—from unclassified roads to motorways—up to scratch, we would not be able to deliver the improvements if we did not have the people to carry out the work. What are you recommending that the Scottish Executive, local councils and the professions do in order to make up that shortfall?

This report is our analysis of what we have found, but the decisions about how various bodies respond to that are policy matters for them. The point has to be well taken that there are capacity constraints in civil engineering. The issue is widespread and covers the fact that the water industry takes up a large proportion of the industry capacity in Scotland and that there will be challenging expectations of the construction industry as a result of the Executive's forward programme for transportation in Scotland. The question that you suggest be asked is a good one, but it is not addressed in this report.

We recommend that the development of road maintenance strategies should take place in the wider context of transportation and road strategies. Obviously, those strategies have to address the issue of the range of resources that are required, including human and specialist resources. That is not only a road maintenance issue, as it relates also to the broader issue of transportation.

In your recommendations to the Executive and councils, you suggest that it would be useful if they could calculate the size of the structural maintenance backlog using a common accepted methodology. To what extent might we be hopeful that that can be achieved? Has progress been made on that front already or is it something that they will have to start afresh.

I am aware that the UK roads board, which covers the whole of the UK, is considering developing a methodology. The Society of Chief Officers of Transportation in Scotland is working on that project. Consultants have been employed to consider the issue of the methodology of measuring backlog and of determining how much needs to be spent in future.

If such a methodology were adopted, would that mean that the doubt that hangs over the council estimates of the backlog would be removed?

It would result in a lot more certainty. However, we would need to see the details of the scheme and, more importantly, the information that councillors can put into the process.

If there are no further questions, I will thank the Auditor General and his team for giving us that briefing and take the committee into private session.

Meeting continued in private until 12:41.