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Isle of Wight roads PPP

Island roads

The PPP leading the way in highways services

Residents of the Isle of Wight (IoW) and a large number of seasonal holidaymakers have seen the condition of the island’s road network go from being the worst in the UK, to among the very best. By summer 2020, over 800km of roads and 29km of cycleway will have been resurfaced, as part of a programme of work which has also improved bridges, street-lighting, drainage, urban footways and street furniture on the island.

All of this has been done through a Public Private Partnership project undertaken between Isle of Wight Council and Island Roads – a partnership between Meridiam and Vinci Concessions.

Now over six years old, the advantages of the PPP procurement model adopted on the island can be seen in the condition of its roads and streets, as well as numerous other benefits that the island, its inhabitants and visitors are now experiencing.

Island Roads has injected £150m in the IoW network of roads and streets, as part of a PPP project worth £800m in total, including contributions to be made by central Government over the 25-year length of the concession. The size of the investment forms the basis for the first – and arguably the clearest – comparison between PPPs and conventional highway maintenance services.

The PPP model was applied to solve a common and chronic problem of insufficient funding. Local authorities have historically struggled to find sufficient resources from their capital budgets to halt the decline of the condition of their road networks. Highway engineers will be familiar with the process of ‘patch and mend’ that has resulted in most places due to annual maintenance budgets only being sufficient for minimal reactive repairs.

Getting on top of this problem, to reverse the deterioration, takes much bigger sums than those usually made available for local authority highway budgets and such was the case on the Isle of Wight.

According to a report by one of the UK’s largest unions, the GMB (General, Municipal and Boilermakers) Union, back in 2012 the IoW road network was the worst of all in the UK. Over half of it needed urgent attention and in places some major civil engineering was needed due to the island’s geology.

Fast forward to the present day and the situation on the island has become very different. Island Roads has met all of its contractual targets for raising road condition and the highway maintenance service has scored highly in an independent benchmarking report. Produced by consultant RPS, the benchmarking study has compared Island Roads with other highway services across the UK. It finds the IoW now leads the UK in repair of Category 1 defects within agreed timescales. It also comes top in safety performance and is either in the upper quartile or ‘improving towards’ it in all other categories.

These results are reflected in views expressed by the islanders. In 2015, a customer survey showed the quality of road surfacing on the island was rated as ‘average and above’ by 25% of residents and local businesses. By 2019, this had risen to 65% of people surveyed. The same rating for highway maintenance in general rose from 46% to 66% and for street-lighting the surveys showed an increase to 78%.
Councillor Ian Ward is a Conservative Elected Member of Isle of Wight Council.

“I have been a Councillor on the island long enough to know how bad our roads were before the PPP began, the PPP has made a tremendous difference. People are now actually saying how good the island’s roads are.”

Despite such an improvement, however, some are still opposed on principle to the PPP model, partly on political grounds. There is also the argument that the public sector can borrow more cheaply, so the private sector represents poorer value.

“That is true, the cost of private finance is usually higher than government borrowing,” says Island Roads Chief Executive, Phil Horton. “Some local authorities have obtained financing through the UK Prudential Borrowing scheme, but in the order of tens of millions of pounds; not sufficient funds for substantially improving the condition of whole networks.
“The blunt reality for the island, accepted by the majority of the Isle of Wight’s councillors, was that there was no other viable option than to embrace the PPP model for making a big difference to the island’s road network.”

Several other observations show there is a lot more to the comparison than simply the cost of finance. Transfer of risk, for instance, is a major plus point that comes with handing over responsibility to a private sector supplier, for delivering all that is specified in the contract. The Council has the certainty that Island Roads will bear all of the labour, materials and other costs involved in carrying out the work.

“In one or two cases, specific parts of the IoW road network have proven more expensive to fix than anticipated in the contract, but the price was fixed. The Council was not liable for these additional costs,” Phil says.

The transfer of responsibility, over a 25-year term, also brings a significant shift in decision making – towards the greater efficiency of managing assets on the basis of whole-life cost rather than annual budgets.

“Typically, in most local authorities, decisions are made on a four-year cycle aligned with political cycles. The benefit of having a longer term investment is that the money is ring-fenced. Decisions on where to invest it are made on the basis of the best, most cost-effective long-term benefit, rather than fixing assets in the worst condition first,” Phil says.

Shifting to such an asset management approach is widely recognised to increase efficiency. Direct comparison is complicated by the IoW’s highway service now being quite different to that carried out before, Phil says. But the cost of the Council’s reactive road maintenance activity has reduced, by around £1m every year, in line with findings where a similar approach has been applied elsewhere.

The UK’s Department for Transport has introduced a funding system to incentivise more authorities to adopt asset management approaches. Savings of up to 15% are possible for councils that fully embrace the principles, according to the DfT sponsored Highways Maintenance Efficiency Programme.

The long-term nature of the PPP is crucial. A significant financial benefit comes from Island Roads being in a position to invest over a 25-year period.

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