The legal row that has led the Scottish Government to suspend signing of two road maintenance contracts, worth up to £700 million between them, has a number of worrying aspects.
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For a start, it is not yet clear who will carry out the routine maintenance of more than 1250 miles of trunk roads and motorways in the west of Scotland on April 1 next year.
Contractors are normally allowed a six-month mobilisation period to prepare for the handover of duties but, with a legal challenge by losing bidder Amey not likely to be heard before December, we are already well into that period.
Government agency Transport Scotland has said it is finalising “robust” contingency plans, though it is not yet apparent what these will consist of or how much they will cost.
Another worry is whether the row has the potential to damage the Scottish Government’s reputation for procuring major contracts.
To date, Transport Scotland appears to have avoided the firestorm engulfing the Department for Transport over its botched handling of the West Cost rail franchise.
(There is potential for knock-on effects on the ScotRail franchise as it is renewed by 2014, but this seems relatively remote, largely because officials in Transport Scotland have been given a longer run-in period and are undergoing none of the frantic rail policy changes and drastic staff cuts identified at the DfT in a report by Sam Laidlaw last month.
There was, of course, the collapse of the Scottish Government-run competition to build the Borders Railway last year, but that probably deserves a separate blog at some point.)
So there was surprise among industry observers that what should have been a relatively straightforward renewal of road maintenance contract has ended up in the courts.
When The Herald first reported the story on October 12, construction firm Amey had been knocked back on bids to take over the maintenance of trunk roads in the north-west and south-west of Scotland, having been told by Transport Scotland its offer was “abnormally low” and carried “unacceptable risk”.
Now, thanks to a submission to the Court of Session by Amey, we know a bit more about why this decision was reached.
In its bid for the north-west contract, Amey promised to carry out nearly 1600 tasks for just one penny. These are thought to cover smaller jobs like tree felling, grass cutting and replacing street lights and represented 70% of some 2312 “priced” items in the contract.
It also used a bizarre percentage adjustment which had the practical effect of lowering Amey’s bid price by £14m.
Altogether, Transport Scotland reckoned Amey would fall short by £121m on what it needed over the length of the contract to break even and concluded its bid was neither “economically viable nor sustainable” and was “not genuine”.
Those claims have been challenged by Amey, a major construction company owned by Spanish infrastructure giant Ferrovial with more than 11 years' experience in delivering road maintenance services in Scotland.
It has argued that both firms had enough financial firepower to ensure that they delivered on the promises in the bid. Both claims will be tested in court.
On the face of it, the Scottish Government appears to have avoided the pitfalls encountered by the DfT which, it is argued, went for the rail company which offered the biggest financial returns to the taxpayer, while ignoring the risks of forecast passenger growth not materialising.
By contrast, Transport Scotland has rejected the lowest price bid as too risky – almost the opposite strategy.
But things may not be so straightforward. One of the troubling aspects of the Scottish bidding process that construction industry observers have pointed to is Transport Scotland’s insistence that bids are assessed 90% on cost and 10% on quality.
This, it is claimed, is very different from the Highways Agency in England, where there is a 50/50 split, ensuring that higher quality bids are more likely to be chosen over those that simply go for the lowest price.
Rejecting low-priced bids as too risky might look like a sound strategy.
But if the Scottish Government is found to have designed a procurement process that encourages bidders to put in the cheapest offer possible, that would sound like a more difficult position to defend.
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