Highways Agency - Category Management Frequently Asked Questions Q1. What is Category Management?

A1. Category Management is a management concept in which the range of products

required by a business or organisation is broken down into discreet groups of similar or related products. These groups are known as product categories. It is a systematic, disciplined approach to managing products including procurement.

Q2. Why is the Highways Agency going down the Category Management procurement route?

A2. After a substantial mapping study of its specialist demand, the Highways Agency decided on a Category Management route as this will -

1. Provide best value procurement through aggregation of demand 2. Improve efficiency and drive incentives with a limited supply chain 3. Deliver better visibility of costs leading to increased intelligence 4. Drive innovation and reduce waste in the supply chain 5. Achieve lower optimal costs

Q3. What are the expected benefits of Category Management, in terms of cost savings

for the taxpayer?

A3. Category Management is structured to deliver value for money through economies of scale and common development of best practice and innovation. It will also reduce areas of waste and remove cost duplication. The mini competition process will ensure commercial tension and drive lowest market price.

Q4. Other than cost savings, what other benefits will be achieved through using Category Management?

A4. By engaging with four leading UK specialists in an enabled 4 year framework there will be –

1. Most sustainable source of supply for material delivery 2. 100% utilisation of recycled pavements into new highways 3. Promotion of innovative and sustainable products 4. A collaborative approach to ECI and Value Management

Q5. How will these cost savings and other benefits be measured?

A5. A Category Management Benefits Register has been established. This register will

log all savings and other benefits achieved on Highways Agency contracts.

Q6. What Category Management frameworks exist and when can they be engaged with?

A6. Currently there are three – Gantries, Pavements and Temporary Traffic Management

(which was awarded on 26th March 2013). Pavements include the supply of aggregates; the supply of concrete; and the supply and laying of asphalt. They have been set up as enabled frameworks, which means that they are available now and can be engaged with on any current highways contract.

Q7. Who makes the decision to use the Category Management Framework – the Highways Agency or the Tier 1 Contractor?

A7. The Tier 1 Contractor. The HA Category Manager will assist the contractor in running the mini competition and the selection process, but the Tier 1 Contractor will contract with one of the Category Management suppliers.

Q8. What is the contractual relationship between the Tier 1 Contractor and the selected Category Management supplier?

A8. Exactly the same as currently exists, as a main contractor and subcontractor - contracted under one of the NEC 3 suite of contracts.

Q9. Is the Category Management mini competition and selection process long and complicated?

A9. No. The procedure is - 1. The Tier 1 Contractor informs the HA’s Category Manager of their intention to

use the framework 2. They then hold a briefing session, with the CM Suppliers, where the extent of

the work required is outlined and discussed 3. The mini competition is then posted on the HA Bravo eTendering portal, with

a three week tender period 4. The work package is awarded to the most commercially advantageous

supplier 5. The HA’s Category Manager is informed of the Tier 1 Contractor’s decision

The HA’s Category Manager will assist the Tier 1 Contractor in this process.

Q10. Is there a minimum or maximum value for the work package?

A10. No. It can be a discrete scheme or a package of schemes to be completed in a defined period?

Q11. When savings are generated using Category Management how will these be picked up and reflected through contracts?

A11. Either by 1. Target Cost Negotiation

or 2. Via a Negative Compensation Event

or 3. Any additional saving will be managed via the Scheme Pain/Gain Mechanism

Q12. How long are the rates / prices valid for?

A12. The period for the Work Package will be stated on the mini competition information. The prices will remain fixed for that period. The rates in the Category Management Schedule of Rates are ‘ceiling rates’ and these are subject to an annual inflation index.

Q13. If the Tier 1 Contractor already has a contractual relationship with a pavement supplier, do they have to use the Category Management Framework?

A13. The HA are aware that resilience is important on maintenance contracts, and would not wish jeopardise existing contractual relationships, but believes that on most Highways Agency contracts there is scope to engage with the Framework.

Q14. Can the Tier 1 Contractor award a contract to a supplier who is not a national Category Management supplier?

A14. If the Tier 1 Contractor can demonstrate that by using an alternative supplier, they are getting better value, then, with the Category Manager’s approval, they can award to a non CM supplier.

Q15. How do the Tier 1 Contractors engage with the suppliers before going to tender?

A15. The Tier 1 Contractors are encouraged to hold briefing sessions with the suppliers, either individually or as a group, to discuss best value solutions, before going to tender.

Q16. Will the use of Category Management prolong the delivery process for schemes?

A16. No, Category Management will integrate with existing processes.

Q17. How do VOP (inflation) clauses for the Category Management Pavements Framework work?

A17. Price is fixed at award for the duration of the Package Order (i.e. not adjusted for inflation during the work package). Framework suppliers may offer discount to their ceiling rates but may not bid over the agreed rate. This will allow Category Management Suppliers to offer competitive / realistic entry price costs. The ceiling rates provided by the framework suppliers are uplifted by 70% of the Baxter Indexation on an annual basis.

Q18. What support will HA business and the supply chain be given to implement Category Management?

A18. 1. The Category Manager who will assist to manage categories, identifying aggregation opportunities and with early engagement with the Framework Suppliers

2. The local Procurement Officer will advise and assist with the appointment of the Framework Suppliers to ensure easy integration with existing processes

Q19. What is the management structure for Category Management?

A19. For each Category the HA will appoint a Category Manager, who will lead the

Framework Community Board and the Framework Board. This Framework Board will report into the Category Management (Project) Board, which will consist of senior HA managers from Procurement, Commercial, NDD, TTD and Finance.

Q20. Who sits on the Community Board and what is its purpose?

A20. The Category Management Community Board consist of the Category Manager, the Framework Suppliers, and the Primary Suppliers and HA representatives from Major Projects and the Asset Support community. Its purpose is to stimulate innovation and collaborative working to improve the effectiveness of the Category.