Government response

Highways England response to the Office of Rail and Road (ORR) report on their supply chain capability

ORR have published a report into Highways England supply chain capability.

ORR have undertaken a review and published a report into Highways England Supply Chain Capability. This note is Highways England’s response to that report.

We recognise the need to understand the impact of our forward programme on the supply chain and we support ORR’s objectives in undertaking this report.

We have been working with our supply chain for some considerable time to identify areas where we can support development of supply chain capacity and capability. We are pleased to see that the areas identified by ORR are common with the areas we have identified, although we believe there are other areas we will need to pursue as well.

As set out in our Delivery Plan we are due to publish a Supply Chain Skills and Capability Plan shortly.

Our work to date has involved completing an initial assessment of demand, development of an understanding of root causes of capacity limitations and potential solutions, and selecting the key areas for further development and implementation. Consistent with our Supply Chain Strategy all this work has been carried out with input from our supply chain and key stakeholders (eg trade associations).

Our key next step is to build a plan that addresses the capacity constraints we have identified. This work is currently underway and we expect to have the first iteration of this plan by the end of Quarter 1 16/17. The plan will need to develop as we develop our understanding of each of the key themes and the most effective way of responding.

In terms of the specific recommendations identified by ORR then our observations are as follows:

Modelling of demand

We agree that achieving total accuracy of demand is likely to be challenging whether performed at a detail level and or high level and we believe it is more important to provide visibility of demand to a realistic level of accuracy. We have carried out a ‘top down’ assessment of demand of people resource (ie total number of people needed) and also built ‘bottom up’ more detailed resource profiles.

While we will continue to refine these, the first cycle of this work is now substantially complete for improvement activity and we are now working to align the bottom up analysis with the top down assessment. ORR rightly identifies that in some areas this could be done with a less granular approach.

The generation of granular information is needed though so; the supply chain has visibility of the types of resource needed; to ensure we focus on the key areas; and to shape our action plans. Our plan therefore would be where relevant to ‘top up’ and ‘aggregate’ our forecasts to summarise this information into a higher level analysis where this is valuable.

Our input data has often already been generated in conjunction with the supply chain and indeed the team working on modelling is made up of personnel from the supply chain.

We recognise the challenge of ensuring people skills are available in the sector and we agree modelling needs to be refined on an iterative basis and believe this will require ongoing activity. The output of this will inform our planning for this work.

Providing suppliers with visibility

We agree we need to, and are working towards, providing the supply chain with a more detailed view of our demand requirements and this work forms part of our plans. However the size of this potential task should not be under-estimated and we will need to strike the right priority and balance between providing granularity of visibility and setting unrealistic goals. We will therefore be focusing on key areas of the supply chain.

We have published two versions of our forward procurement plan which have been issued to suppliers and added to our supply chain portal (most recently on 1st February 2016). We plan to provide the next update of the procurement plan during Q1 2016/17 which will provide refreshed information and greater granularity around large renewals.

We plan to provide further visibility as information becomes available. We plan to share this information through the most appropriate forum / method. So for example this could include the Engagement Council, the Collaboration Board, sector specific forums, category management forums, etc. This visibility will happen over a period of time through a range of forums most appropriate for the information concerned.

Supplier engagement

We do believe the Engagement Council and Collaboration Board (EC & CB) are key elements of engaging with our supply chain and intend to continue with these forums as our primary focus. These forums have been put together to represent the range and depth of our supply chain (which include Tier 2 representation).

They offer a structured and co-ordinated mechanism to communicate with, and get feedback from, the supply chain. These forums are relatively new and we recognise they are at a relatively early stage of maturity. However the feedback we have had from the supply chain is that they welcome these forums and they represent a significant step forward on our approach.

In addition, and as an example, work on supply chain capacity has been developed in conjunction with the supply chain through a work-stream under the direction and feedback from the Collaboration Board.

It is these forums that also provide a key opportunity for Highways England to get feedback from its supply chain and these will be the forums we would use to discuss issues on procurement approach. Each event held to date has included an opportunity for the supply chain to provide feedback to Highways England and we regularly engage with the supply chain through both formal and informal channels.

We note the comment that the EC & CB were not recognised by some elements of the supply chain interviewed and will seek feedback from the supply chain by Quarter 1 2016/17 on these forums and respond appropriately.

Monitoring progress recommendations

We are committed to working with ORR on demonstrating our existing capability and future development plans relating to Portfolio Management, Reporting, HE Capability Assessment, and Baseline Plan identified in their report.

We note that Credo’s scope extended to reviewing programme management capability. We also recognised that given the focus on the supply chain that our approach in the area of project and programme management may not have been fully recognised.

We have established systems in place that monitor many of the issues ORR have identified. For example we; monitor project and programme progress and cost; we have a structured risk management process; and we assess market conditions as part of the way we estimate projects.

We have published a Delivery Plan and we regularly report our progress to ORR with granularity down to project level.

However as a relatively young organisation working in a new environment with much better forward visibility of funding and output requirements we fully recognise the need to continue to develop our existing programme and portfolio management practice.

We are therefore currently working to develop our programme and portfolio management process, systems and capability which include reviewing our approach to risk. We are committed to providing quarterly updates on the capital investment portfolio, which will include improved forecasting and reporting. These updates are part of a fixed cycle of reporting.

Our capital portfolio management team have a substantial plan of activity over the next nine months. This will improve our forecasts and our future plans, which will be reported at Quarter 1, 2 and 3 in 2016. We believe this improved forecasting and improved understanding around risk will provide the basis of a reporting dashboard.

Highways England recognises the importance of developing our internal capability. We have already engaged with, and are utilising, industry experts to enhance our programme and portfolio capability over Road Investment Strategy period 1 (RIS1). We are doing this through a structured and planned set of activities.

The plan is designed to develop the internal capability so that the external experts are replaced by Highways England staff. Our plans are based on a capability journey over the RIS period but we still have work to do to develop the approach to measuring progress. As our internal plans develop we will work with our stakeholders to provide visibility on progress.

We are currently discussing a baseline position for our portfolio with ORR.

Finally we have developed change control protocols for agreement with DfT and ORR.