Fluff from the naval of my mind

… are the new bane of my life. Mercifully I only have to contend with them twice a week; Monday and Friday. But when I am heading home on Friday evening it is frustrating to be held to fifty miles per hour on roads that normal whisk me along at seventy. Add to this the generally slow traffic and congestion over the ninety miles of M1 I cover and the whole process becomes intensely tedious. The upshot of all this is that a journey that should take about two hours takes three.

Roadworks are in some respects interesting. For example, it is often observed (particularly by people regularly caught in traffic) that motorway roadworks seem to be in place forever and no one is ever seen working on them. The truth is that companies tasked with motorway maintenance and improvement are charged for closing lanes. This chargeback encourages efficiency because the longer lanes are closed the more it costs the contractor. In other words, the lane closure becomes an overhead on the contract, and one that continues to burn into the contractors margin if they overrun. This is a neat example of smart thinking.

The contractor will program into their estimates the lane closure costs, but obviously this cost is directly related to their estimate of how long the job will take. Suppose they estimate ten weeks for a piece of work requiring two lanes to be closed (one on each carriageway) over one mile. The highways agency might charge one million pound a week for one mile of carriageway. So the total cost of the lane closure for the project would be twenty millions. If the contractor overruns by two weeks they receive no additional funds, but must pay an additional four millions in lane closure costs. If the contractor finished early then they save money, so the onus is on the awarding body to ensure that timescales are kept tight while the contractor attempts to extend them. In reality the cost of a project will be well understood by now. The standard cost for, for example, a lane resurfacing will already be established, so contractors only have a limited scope for extending estimates of work.

The dynamics of contract bid and awards is more dynamic than this because of two significant factors; there are only a limited number of contractors capable of performing such work (perhaps six in the UK) and each contractor has a limited capacity. The government, of course, puts all work out to tender. Each tender is bid on my two or more of the pool of capable contractors and the work awarded to the lowest bidder. This leads inevitably to collusion, both implicit (which it okay) and explicit (which is a violation of the terms of the tender, but let’s be realistic when we’re dealing with multi-million pound contracts). Collusion leads to situations in which bids are arificially inflated by contractors who have already reached capacity. This then allows other contractors to bid higher without losing the contract. In the long run this arrangement results in quid pro quo as contractor benefit from a sort of inverse prisoner’s dilemma. In an attempt to limit this sort of bid manipulation the contracting agency insists on sealed bids, terms on the bid to expressly forbid collusion, and so on. In truth these things have a limited effect.

Love them or hate them, roadworks are here to stay.