Department for Transport Efficiency Programme: Technical Note

Area

DVO Group - increase net tax yield (paid to the Exchequer)

2005-06

2006-07

2007-08

Target £m

Total savings

5

55

75

Forecast £m

Total savings (current value)

65

75

75

Activity

Vehicle Excise Duty (VED or commonly called road tax): Reduce tax evasion.

Sale of Marks (SoM - or sale of personalised number plates): Increase net sales income (treated as revenue).

Summary

This target is to increase the level of revenue yield paid to the Exchequer by £75 million a year in 2007-08. This target mainly relates to reducing the level of evasion of Vehicle Excise Duty (VED) by at least £70m per annum. In 2004, DVLA exceeded this target by reducing evasion by 1.4% (from 4.8% to 3.4%) and so collecting an extra £77 million. This was mainly achieved through the introduction and enforcement of continuous vehicle registration (CR). In addition a further £5m was generated from increased Sale of Marks leading to an overall increased payment to the Exchequer of some £82m. In 2005 £60 million was gathered. The challenge now will be to maintain reduced levels of VED evasion and higher levels of SoM revenue over the remainder of the SR04 period.

Approach

VED: The introduction of continuous vehicle registration is aimed at reducing tax evasion by ensuring that all vehicles on DVLA's database are taxed. This new approach is combined with more traditional enforcement methods (ANPR cameras, wheel clamping etc) which are used to identify and remove unlicensed (and often uninsured and unsafe) vehicles from our roads. CR was introduced in January 2004 and permits DVLA to fine owners of vehicles which are shown to be untaxed on the database - previously DVLA needed to spot these vehicles on the road before enforcement action could be taken. Some 80,000 penalty letters are sent out each month and this has been the main contributor to the reduction in evasion levels and the increase in VED collected.

SoM: DVLA is working with its external contractor to improve the financial return on the sale of cherished vehicle registration marks (number plates). The process involves identifying attractive plates, ensuring they have not already been used and the selling them via the website or for more valuable plates via special auctions. DVLA generates some £70m in net revenue each year from SoM (this is currently treated as revenue and passed directly to the Exchequer) and in 2004-05 it increased net sales by £5 million, mainly by holding additional auctions.

Cashable

Yes. Extra net revenue is passed to the Exchequer as Consolidated Fund Extra Receipts.

Type

Increased tax yield.

Measures

VED evasion levels are measured annually by a national roadside survey (over 1.3 million vehicles are checked). The 2004 survey was carried out by an external contractor at 256 sites throughout the UK and found evasion levels of approximately 3.4% (4.8% in 2003). The survey valued the 1.4% reduction in evasion as worth £77 million additional revenue. The survey was repeated in June 2005 and following analysis the results were released in November 2005. The current level of evasion was assessed at approximately 3.6%. This shows how the programme continues to be effective. The slight increase in level is not significant at this stage. The annual survey is considered to be a more accurate measure of VED evasion than actual cash receipts which are affected each year by changes in the level of VED set in the Budget and the number of; new vehicle registrations, vehicles which are scrapped, vehicles which are declared off road, vehicles in different CO2 emissions bands, vehicles which are exempt etc.

SoM revenue (less allowable costs netted off) is measured as the amount actually passed to the Exchequer and is taken from the audited Accounts.

Quality

Increasing net revenue yield is primarily a quantitative target (as measured above). However, DVLA is responsible for measuring the quality of its activities. For example it regularly monitors performance against the following targets:

• To deliver 95% of changes to vehicle registration certificates with 14 days.
• To deliver 95% of VED refunds within 30 days
• To answer 82% of calls (after Interactive Voice Recognition) within 30 seconds
• To complete 95% of cherished transfers within 7 days

Monitoring

VED evasion levels are reported annually in the autumn (once the Roadside Survey has been completed and analysed).

SoM income is reported on a monthly basis as part of DVLA's management accounts report and is reviewed on a quarterly basis by the DVLA Advisory Board.

Data

Data on VED evasion levels comes from the National Statistics survey.

Data on SoM revenue is in Annual Report & Accounts audited by the National Audit Office.

Risks

The Roadside Surveys show the positive impact when Continuous Registration was launched. However, the success of CR has led to a £15m budget gap in 2005-06 as a result of a decline in forecast fine income (less evaders means less fines). If this budget gap cannot be resolved there may be insufficient funds to continue current advertising and enforcement levels. When DVLA stopped national advertising (as a result of budget pressures) the level of penalty notices increased by some 50% each month and so sufficient financial resources will need to be maintained to effectively deal with evasion.

Validation

DVLA's systems and Trust Statement are audited on an annual basis by NAO.

Internal audit carries out an annual assessment of DVLA's efficiency plan.

Baseline

VED: Baseline: 2003 Survey - 4.8% level of VED evasion

SoM: Baseline: 2003-04 Accounts £85.3 million net revenue

Area

DVO Group - Efficiency savings on transactional services

cumulative

2005-06

2006-07

2007-08

Target £m

Total savings

0

3

70

Forecast £m

Total savings (current value)

40

63

70

Target

Net workforce change FTEs

0

0

-500

Forecast

Net workforce change FTEs

-59

-365

-500

Activity

This section covers two inter-related targets:

• DVO Group to deliver £70m economy and efficiency savings; and
• DVLA to reduce net headcount by 500 posts.

The Group is also monitoring effectiveness gains where increases in costs are avoided and the quality of outcomes is improved.

Summary

This target is to deliver £70 million of economy and efficiency savings in 2007-08, mainly through the development of e-services and by encouraging customers to transact electronically. The Group is also planning to deliver improvements in its effectiveness by pursuing a wider business transformation agenda and from increases in productive time. For example by using Automatic Number Plate Reading cameras VOSA has detected significantly more faults at road side vehicle examination from the same amount of effort

Making economy and efficiency gains will enable DVLA to deliver its target of reducing DVLA's workforce by 500 staff posts (full time equivalents) by March 2008. DVLA made good progress towards delivering this target in 2004 by identifying some 370 reductions in staff posts. However, the net reduction was reduced to 32 posts when new requirements were taken into account. The extra posts created from these new activities included:

• 180 posts on Continuous Registration which delivered reductions in VED substantially ahead of trajectory;
• 50 posts on the introduction of the new EU Harmonised vehicle registration document;
• 30 posts on dealing with and charging for replacement vehicle registration documents (this work is entirely self funding from fees charged to owners who have lost certificates);
• 10 posts on the introduction of vehicle identity checks which has contributed to a 30% fall in vehicle crime; and
• 40 posts to absorb volume growth (see below).

The three main DVO Agencies operate as Trading Funds and therefore have to meet changes in customer demand. The charts below show the actual and predicted increases in driver licence applications (DVLA) and practical driving tests (DSA). To meet customer expectations and Secretary of State targets, staffing in these, and other, frontline services has therefore risen in line with demand.

_{Chart showing increase in First Driving Licence Applications 2001/02 to 2007/08:}

_{Chart showing increase in Car Practical test Throughput 2001/02 to 2007/08:}

Despite these pressures DVLA remains confident that it will meet its target of reducing its net headcount by 500 posts, largely from changes to its business processes arising from its e-transformation programme.

Activity

The Efficiency plan is divided into five key areas:

E-delivery - transactions with customers by web or automated voice recognition;

Productivity - absorbing increasing demand and reducing unproductive time;

Procurement - reduce / limit contract costs but maintain or improve quality;

Support services - centralisation, rationalisation, economies of scale etc.;

Policy & regulation - better regulation by targeting enforcement work.

Approach

E-delivery - the Group has already introduced a number of e-services (booking a theory or practical driving test, making changes to HGV/PSV operator licences, first registration of vehicles, renew a vehicles annual licence and pay VED etc). Other transactional services are being added (booking a HGV/PSV test, cherished transfers etc). Electronic transactions are available on the web through the Direct.gov and Business Link portal or over the telephone using automated voice recognition software. By encouraging customers to use these electronic channels we can reduce operating costs from face-to-face and telephone operator services. For example in September 2005, DSA received their one millionth on-line practical driving test booking. Over 50% of vehicle operator transactions were self-service. In 2004-05, some £550,000 was saved by using voice recognition software instead of call agents to amend driving test bookings and £376,000 was saved by taking bookings over the web.

Productivity - the Group has introduced a number of measures to help improve productivity thereby absorbing extra work with the same level of resources. For example, having invested in an integrated information management system, the Traffic Area Networks are now handling a growing number of commercial operator licence applications which would otherwise have required extra staff costing £200,000 a year to deliver.

Procurement - the Group has introduced new approaches to purchasing aimed at driving down the cost (but not quality) of bought in services. For example, in 2004-05 DVLA saved £4.2m from negotiating a below retail price index uplift on its contract for the collection of VED. In addition, a re-tendered information services contract in another agency was £40,000 a month cheaper than the contract it replaced thereby saving some £480,000 per annum. The Group has also negotiated an increase in its rebate on telephone calls which has generated an extra £194,000 for DSA.

Support services - the DVO Group has joined with the rest of the Department for Transport to create a Shared Services Centre. This builds on the existing DVLA and DSA centre which provides shared accounting and HR systems.

Policy & regulation - the Group is exploring further opportunities to target enforcement on the non-compliant and amend legislation to simplify procedures for the compliant. In 2004-05 VOSA took on its Powers to Stop HGV and PSV vehicles. This has improved the Agency's ability to target non-compliant vehicles (thereby only stopping vehicles which are likely to be non-compliant) and has reduced the pressure on the police forces that are no longer required to provide officers to support these activities.

Cashable

Economy and efficiency savings are fully cashable within the DVO Group on behalf of fee paying customers (three out of four Agencies are Trading Funds and approximatey 75% of the Group's total income comes from fees and charges). In order of priority cashable savings will be used to:

• absorb costs associated with (non-fee generating) increases in demand (for example changes to driver licence address details)
• improve front line services (for example, rolling out Powers to Stop to improve targeting of enforcement activities); and
• limit fee increases and DfT funding through Service Level Agreements.
• cover interest and repayments of loans for investment projects aimed at developing more efficient electronic systems and processes;
• offset unavoidable increases in costs (for example, the decision to change the valuation method of the Civil Service Pension scheme has increased payroll costs by 5%);

Type

E-delivery - save (marginal) cost of supporting traditional channels;

Productivity - avoid cost of extra staff/estate/equipment to meet growing demand;

Procurement - reduce / limit contract costs but maintain or improve quality;

Support services - centralisation, rationalisation, economies of scale;

Policy & regulation - avoid cost of automatically enforcing rules on the compliant.

Outcome Measures

The DVO Group's key outcome measure is to improve road safety and as such it makes a significant contribution towards the DfT's PSA target

Quantitative

Measures

Examples of the measures used to calculate the efficiency savings include:

• Automated Speech Recognition: 1.7 million enquiry calls x 1.22 minutes average call x 26 pence a minute call agent cost = £550,000.
• Internet booking: 563,000 bookings x 2.57 minutes average call x 26 pence a minute call agent cost = £376,000.
• Extra call rebate: (70,000 call hours a month x 6 months) - (15 million threshold x 1.9 pence a minute) = £194,000 in 2004-05.
• Post Office Counters contract: Invoice paid in previous period (adjustment for volume if appropriate) - invoice paid for latest period = £4.2 million saved.

Quality Measures

At the same time as delivering significant value for money savings the Group is also committed to improving its customer services and has set targets for a number of improvements in its quality measures. For example:

2003-04

2004-05

2005-06

Offer lorry & bus test appointment

within 18 days 95% of time

within 18 days 95% of time

within 15 days 95% of time

National average waiting time for car practical driving test

9.6 weeks actual

6 weeks

6 weeks

Deliver 85% of unopposed Operator licences

within 10 weeks

within 10 weeks

within 9 weeks

Deliver 98% of first driving licences

within 10 days

within 8 days

within 8 days

Monitoring

The value for money plan for each financial year is incorporated into the Agency Business Plans. Progress is monitored on a quarterly basis by the Finance Forum (VfM Programme Board) the Agencies' Advisory Boards and by the DVO Board.

Performance against quantitative and qualitative targets is monitored monthly and reported to the DVO Board and the DfT Efficiency Programme Board.

Data

Financial data comes from monthly management accounts and end-year accounts. DVLA maintains and monitors its own headcount data which is used to report civil servant numbers through the ONS quarterly public sector employee survey.

Risks

Failure to reach the 60% e-transaction take-up target on schedule due to lack of customer awareness or unwillingness to transact in this way that on-line option is available and reliable. To mitigate this risk DVO on-line services have been placed alongside others in Direct.gov and Business Link. Further advertising may be necessary and other ways of encouraging take-up will be considered.

Net workforce reduction target under pressure from growth in demand for services and commitment to introduce new initiatives.

Validation

• DfT Internal Audit reviewed the DVO VfM Delivery Plan in January 2005.
• KPMG conducted a high level review in April 2005 reporting they had general confidence the targets will be met.
• The National Audit Office audits the Agencies financial systems and accounts.
• An OGC Gateway 0 programme review will take place towards the end of 2005.

Baseline

The operating cost baseline for the Group at the start of 2004-05 was £723 million.

DVLA Workforce baseline: 6,557 FTE's at 31^st March 2004

Area

Roads Procurement

Activity

Strategic Roads - Procurement

Target £m

05-06

06-07

07-08

Total savings cumulative (current value)

66

132

200

Cashable

Cashable savings are only applicable to new contracts to be let in SR04 period. All existing contracts had their cashable savings taken into account when SR04 settlements were made. However, existing contracts will still deliver increased quality (improved levels of service) as non-cashable savings.

Type

Additional outputs, such as enhanced quality or quantity of service, for the same level of inputs; or Improved ratios of output per unit cost of input.

Measures

The Agency's Procurement Strategy set out the overlying principles to be applied to all categories of Highways Agency procurement to help deliver best value. They will remain central to our work during the next three years for delivering efficiency gains.

A significant amount of the Agency's efficiency gains are to be delivered by existing contracts delivering increased output or outcome for the same input. The Agency therefore set out to develop specific measurement methodologies for the purpose of reporting efficiency gains in monetary figures. These apply to the three main types of contract that the Agency uses to procure strategic roads related services;

1. Maintenance Contracts

2. Framework Contracts (Small Improvements (LMNS) and infrastructure renewals)

3. Major Project Contracts (Major Improvements)

Specific measurement methodologies have been developed for each of the above types of contracts, and they have been designed to reflect the needs of the business by:

• Allowing flexibility;
• Ability to adapt to new initiatives;
• Requiring a minimal burden on operational teams; and
• Help to promote continuous improvement.

Maintenance Contracts

The Agency's measurement methodology attempts to demonstrate efficiency through showing that it has provided additional outputs (extra service, productivity, safety etc) for the same inputs. This has been achieved by establishing relationships between the actual spend as the input and the Area Performance Indicators (API) score change as the output.

Built into the maintenance contracts is a requirement for the provider to measure and report against 14 Area Performance Indicators (API) each month. Each API is broken down into a number of sub-measures designed to capture all the variables that reflect on a particular subset of performance. Each API can be traced back to a relevant outcome that is of value to the public as a whole.

Framework Contracts

The way in which framework schemes are managed and paid for in the Agency allows activity prices (on a first principles pricing basis of labour, plant and materials) to be monitored on an individual scheme basis. The Agency's measurement methodology combines the complete price of these activities with the quantity of work done (i.e. cubic metres of earth moved; square metres of surfacing) to determine the unit rate for major activities. These unit rates are then used as inputs for calculating cashable efficiency gains.

Quality crosscheck is undertaken using the Agency's Performance Management Toolkit of Key Performance Indicators (KPI). These are based on the industry standard Construction Best Practice indicators.

Major Project Contracts

The Agency's measurement methodology uses Earned Value Analysis (EVA) for measuring the efficiency gains of Major Projects. The principle of EVA allows savings to be calculated at the close of each financial year on the basis of actual work completed against a planned baseline/schedule.

Quality crosscheck is undertaken using the Agency's Performance Management Toolkit of Key Performance Indicators (KPI). These are based on the industry standard Construction Best Practice indicators.

Monitoring

The actual and projected gains are reported and monitored against the expected gains by the DfT Efficiency Programme Board, Agency's Project Board and by the Agency's delivery teams.

Data sources

Agency's financial systems, Agency's delivery teams and suppliers.

Quality

Quality of the data is assured by the suppliers own audit procedures and audits by the Agency. Key/Area Performance Indicators (KPI/API) measure quality of service delivery.

Validation

Where possible we will seek to use centrally available indicators (e.g. National Road User Satisfaction Survey, Partnership Surveys, National Safety Targets, Congestion Index etc.) to validate the efficiency gains.

These provide an outcome level assessment against the Highways Agency's aims, which are safe roads, reliable journeys and informed travellers.

Baselines

All cost baselines are 2004/05; Performance base lines are either 2004/05 or 2003/04.

Timeframe

Outline measurement methodologies developed and agreed with OGC - May 2005

Measured and reported 2004/05 efficiency gains - June 2005

Measure and monitor 2005/06 efficiency gains - June 2006

Area

Roads Procurement

Activity

Local Authority Roads - Procurement

Target

Savings £m

05-06

06-07

07-08

Total savings cumulative (current value)

0.0

60.0

190.0

Cashable

Activities undertaken by local authorities achieve both cashable and non-cashable efficiency gains. Each council specifies the level of cashable and the amount of non-cashable efficiencies achieved.

Type

Reduced inputs/same/improved quality outputs

Measures

Local Authority (LA) road procurement efficiencies will be achieved through improved and collaborative methods of procurement. To demonstrate that efficiencies have been gained, Local Authorities are required to submit Annual Efficiency Statements (AES) to ODPM. See ODPM ETN for more information.

A 'Roads Efficiency Toolkit' has been developed which provides an alternative cross-check approach using a high level framework of measures that align core processes to service outcomes such as safety and serviceability. It draws on performance indicators already in use, including Best Value Performance Indicators (BVPI), to avoid an increase in data collection by LAs. The Toolkit has been developed in alignment with the Roads Liaison Group's Code of Practice for Highways Maintenance Management which is a well-respected industry standard.

Monitoring

The progress being made in promoting best practice and collaboration will be reported regularly to the Programme Board and in turn to the DfT Efficiency Programme Board. LAs will report the actual efficiency gains to ODPM through the Annual Efficiency Statement process. The frequency of formal reporting will be annual, although a mid-year review will also be undertaken. LAs will provide a statement on forward and backward-looking efficiency gains in the required format. Quality cross checks will be monitored as part of this process.

Data sources

The Roads Efficiency Toolkit incorporates statutory BVPI so LAs already hold data. Some Performance Indicators are also available through the various Best Value Benchmarking Clubs. Data for demonstrating the actual efficiency gains will come from individual local authorities.

Quality

All the performance data to be used by LAs for the Roads Efficiency Toolkit will be quality assured by individual LAs, in some instances by Best Value Bench Marking Clubs. The toolkit sets out measures that LAs can use as Quality Cross Checks.

Validation

Local Authorities will be subject to checks by the Audit Commission.

Baselines

The self-assessed Annual Efficiency Statements and agreed 2004/05 baseline expenditure data provides the primary source of information on efficiency gains for each LA from which the forward-looking strategy and achieved backward-looking efficiencies are derived.

Timeframe

LAs to measure performance and report to ODPM annually

Area

Non-Roads Local Authority Spend

(Revenue Support Grant (RSG) and Local Transport Capital (LTC))

Target

£m for RSG and LTC

2005-06

2006-07

2007-08

Total savings (current value)

15.0

67.0

122.0

Activity

Bus Tendering/Concessionary Fares/Accessibility Planning/major and minor Capital Schemes

Revenue Savings

We are supporting local authorities to achieve efficiencies through improvements to their administration and tendering processes and better targeting of services through new ways of accessibility planning. We do not anticipate this requiring additional costs/staff as improvements will be made in line with day-to-day activities.

On bus tendering, the DfT has developed 'Best Practice' Guidance to enable local authorities to secure best value through the tendering process. The guidance was published in February and a series of regional seminars has been held to secure buy-in.

Efficiencies in supported bus services will also be achieved through changes to tendering rules, giving local authorities greater flexibility to negotiate contracts under the de minimis provisions and increasing the maximum length of contract which are designed to enable local authorities to get a better price from bus operators. The first of these changes was implemented in April 2004 (SI2004 No 609); the second proposal has been included in a draft Regulatory Reform Order which has been through its consultation stage and is now awaiting Parliamentary consideration.

Streamlining the administration of concessionary fares is a further area identified where significant savings can be made. For example, through the joint administration of schemes with other authorities or by issuing passes bi- or tri-annually instead of yearly. Following the announcement by the Chancellor of the Exchequer on 16 March 2005, we will be increasing the statutory entitlement from half to free local bus travel. The DfT is working with local authorities and industry to produce standard guidance on re-imbursement factors.

New Accessibility Planning software and guidance will help local authorities better identify demand for socially necessary services and therefore use existing resources more effectively. This will enable them to achieve better-targeted delivery and identify ineffective services thereby improving efficiency.

Local authorities are also able to make efficiency gains in other areas of local transport and some of these are listed in the toolkit.

Capital Savings

There are two elements to savings in capital schemes. Firstly, in the Integrated Local Transport (ILT) block we will make an allowance for future efficiency gains when making decisions on the overall future capital budget for local transport.

In addition, we will encourage efficiency through:

• incentivising efficient local transport planning through the Local Transport Plan (LTP)2 Guidance;
• incentivising delivery through annual performance assessment;
• engagement with Local Authorities to encourage good LTPs/ challenging targets; and
• the use of Accessibility Planning software

The second element in the capital section is the major schemes (costs estimated to be over £5m) where DfT will aim to support Local Authorities to achieve efficiencies in the development and costing. For newly developing schemes, Local Authorities are required to appraise a realistic low-cost alternative to their preferred scheme. This will help establish whether the objectives of the scheme could be largely met by spending less.

On existing schemes, we will carefully scrutinise any bids for increased funding to meet cost increases to see whether these could be avoided. If not, we will ask the Local Authority to re-appraise the scheme to establish whether the scheme continues to offer the best value for money at the increased cost. We are confident that this tougher stance on recommending approval of cost increases to Ministers will result in these schemes demonstrating better value for money, on average, in future.

We hope to encourage Local Authorities to seek and deliver efficiencies in order to minimise the level of any cost increases, to reduce the risk of cost increases occurring, and to maintain or improve the value for money offered by the scheme.

The scrutiny and approval of larger schemes will be subject to consideration of project management arrangements and the requirement for the largest or riskiest schemes will go through OGC style Gateway Review. The DfT produced draft guidance on major schemes in April 2005 which set out the Department's more rigorous arrangements for appraising and monitoring major schemes.

Cashable/non-cashable?

Both cashable and non-cashable

Type

Same inputs/better or improved quality outputs

Reduced inputs/same/improved quality outputs

Measures

Detailed methods of measurement for all the workstreams can be found in the DfT 'toolkit' published on the Regional Centre of Excellence website.

Monitoring

Local Authorities will report their efficiency gains through the Annual Efficiency Statement process. Each year they will produce a forward look statement showing what they expect to achieve in that financial year, and a backward look statement showing what has been delivered.

Data sources

Sources of data for the measurements are given in the Local Transport non-roads 'toolkit' (www.rce.gov.uk)

Quality

Some measurement data will be taken from existing standard data sets. Other data will be taken from local authorities own internal monitoring and reporting systems.

Validation

Local Authorities will be subject to checks by the Audit Commission.

Baselines

Baselines will be developed and agreed as part of the ODPM-led project to manage the Efficiency Programme across Local Government.

Timeframe

First phase of project delivered in Autumn 2004, with full benefits not being realised until 2005-6 due to contract renewal time lag.

Area

Non-Roads LA Spend (Transport for London (TfL))

Activity

Transport for London Business Plan

As part of their business planning process, and in order to meet the challenges of the TfL Spending Review (SR) 2004 settlement, TfL have identified the outputs to be achieved with the resources available and the level of efficiency this will require in individual areas.

Target £m

2005-06

2006-07

2007-08

Total savings (current value)

117.0

103.0

125.0

Cashable/ non-cashable?

Cashable and non-cashable.

Type

Reduced inputs/same/improved quality outputs

Measures

As part of their development of efficiency proposals, TfL will develop methods of measuring the delivery of efficiency gains.

Monitoring

TfL report quarterly to their finance Board on progress with their efficiency programme.

In March 2005, DfT, TfL and the Greater London Authority (GLA) agreed a series of projections of the impact of TfL's business plan on DfT national priorities in order to generate overall agreed TfL planned outcomes. These outcomes are monitored annually in the case of air quality, monthly with a 3 to 4 month lag for road safety, and four weekly for London Underground (LU) and public transport.

Data sources

Data comes from TfL's own data collection processes, which are subject to external validation.

Quality

Data is mostly derived from automated systems, which is subject to internal and external audit, and considered satisfactory.

Validation

TfL accounts are subject to both internal and external audit.

Baselines

2004-05 baseline of £2.25bn.

Timeframe

TfL's business plan is subject to annual review. Efficiencies are identified for delivery in relevant year.

Area

Non-Roads LA Spend (TfL)

Activity

London Underground (LU) Public Private Partnerships (PPP) contracts

We will measure the efficiency gain from improved running and capacity of the London Underground. This reflects the improvements from the PPP, and improved and more efficient LU operations. It is important to note that these are not savings locked into the PPP contracts, which were gained before the 2004-05 baseline. They are the measurable benefits accrued to passengers that arise as a result of the LU PPP contracts implementation.

Target £m

2005-06

2006-07

2007-08

Total savings (current value)

34.0

48.0

71.0

Cashable/non-cashable?

Non-cashable

Type

Same input for improved/additional output

Measures

To measure this we will calculate the improvement of actual journey time, which is based on the scheduled journey time and weighted excess journey time. Scheduled journey time is calculated on the basis of an 'ideal journey' from entering a tube station to leaving the destination and will include ticket purchase, barriers, lifts and escalators, wait at platform, and train journey time. We have calculated a value of about 15 pence per minute for 2005.

Monitoring

Data is collected monthly from TfL.

Data sources

Data comes from LU's own long-standing data collection processes. It includes a 29% uplift on non-working time values of time, and reflects the LU journey purpose splits.

Quality

The value of the reduced journey time to passengers has been calculated using the latest DfT Value of Time guidance, and is based on that advised by DfT's own economists as to the value of time according to purpose of journey. The value of time has been adjusted for inflation. The weighted figures take account of the peak demand at certain times.

Validation

Data collected pre-implementation of LU PPP contracts will enable us to produce a cumulative calculation of the value of improved journey times.

Baselines

2003-04 baseline - £1bn of TfL baseline. Due to the start date of the PPP contracts, December 2002 and April 2003, the most appropriate baseline for measuring these savings is 2003-04, rather than 2004-05 which is being used for the other measures.

Timeframe

LU PPP contracts are in place and monitoring has commenced.

Area

Departmental Reform

Activity

Central Department Headcount Reduction

Reduction in Headcount

2005-06

2006-07

2007-08

Total reductions cumulative

135

200

200

Target £m

Total savings (current value)

3.8

7.7

10.7

Cashable

Yes

Type

Lower inputs for same or improved outputs

Measures

DfT(C) has made a commitment to reduce its workforce by 200 full time equivalents outside areas designated as front-line by 31 March 2008.

A reduction of 70 FTE was achieved in 2004/05.

A reduction of a further 65 FTE, to make a total of 135, is planned for 2005/06. The measures for achieving this are a further voluntary early retirement / severance (VER/S) scheme, close control on recruitment, and more active management of priority movers. Those accepted under the VER/VES scheme have been notified; they must leave DfT(C) by 31 March 2006.

The programme has measures to ensure that output quality and priorities are not adversely affected by the headcount reduction. These include the Flexible Deployment Programme, better Business Planning, and Improving Financial Management. The Flexible Deployment Programme aims to ensure the effectiveness of DfT(C) is maintained, in the light of headcount reductions, by achieving a better match of staff resources and skills to delivering departmental priorities. The Business Planning round is also matching resources to priorities, so that resource reductions - both headcount and financial - can be targeted so as not to impact on key priorities. Improving Financial Management aims to improve financial capabilities and processes with reduced staff numbers.

In measuring staff numbers DfT(C) has to take account of changing responsibilities, for example, the take-on of Strategic Rail Authority responsibilities. This means that baseline changes have to be agreed with the Treasury.

Monitoring

Headcount: The monitoring methodology comprises the production of a monthly headcount report from the DfT(C) Human Resources (HR) system, which is validated with line managers and reported to the DfT(C) Executive Committee. The report includes progress against the headcount profile agreed with the DfT Executive Committee.

HR has an internal meeting fortnightly to discuss headcount issues, including progress against planned trajectories and obstacles to progress.

Data sources

Headcount: The main data source is the staff in post information on the DfT(C) HR system. This is supplemented by consultation with line managers, the collection and collation of data on recruitment and transfers, and the fortnightly HR meeting to discuss headcount issues and review progress.

There is also a database to keep track of the numbers of agency staff, contractors and consultants working for DfT(C).

Quality

The quality of headcount data will be maintained by ensuring the data on the HR system matches with the understanding of line managers. The quality of outputs will be monitored through the introduction of Flexible Deployment and the Business Planning processes, and overseen by the DfT Executive Committee.

Validation

Headcount: Staff in post information obtained from HR system is validated monthly with line managers. The HR system data is compared monthly with data from the Accounting System and with a "back feed" file from the Payroll system. Discrepancies are identified, investigated and resolved.

Baselines

The baseline is the number of staff in post at 1 April 2004, as adjusted with the agreement of the Treasury to reflect changes in DfT(C) responsibilities.

Timeframe

A reduction of 200 full time equivalent staff to be achieved by 2006-07, in an approximate 70, 65, 65 profile in 2004-05, 2005-06 and 2006-07 respectively. This is one year ahead of the Efficiency Programme target of delivery by 31 March 2008.

Area

Shared Services programme

Activity

Shared services - Proposed move to shared services for finance and HR

Approach

The strategic direction is to provide DfT support services in HR (including payroll), finance and purchase to pay procurement from a shared service centre, using a single common technology platform (SAP) and simplified, standardised processes. The objectives are to reduce costs and maintain or improve service standards to the Department's HQ and agencies. This strategy involves:

• simplification and standardisation of processes for HR (including payroll), finance, purchase to pay procurement (excluding operational procurement, e.g. roads) and the ICT which supports these functions across DfT(C) and the agencies;
• establishment of a shared service centre (SSC) within DVLA Swansea with a customer focused governance structure; and
• a programmed move of support functions from DfT(C) and the agencies into the shared services centre.

These changes will lead to:

• a reduction in administration costs with reduced size of retained functions in individual business units and the SSC servicing the whole Department using improved processes and technology;
• savings in IT investment costs arising from economies of scale and potentially some estates savings from lower headcounts; and
• effectiveness gains from, for example, improved management information, more efficient procurement, and more user-friendly self-service for staff and managers.

Savings

The outline business case estimated average annual savings in the order of £16 million once all business units had migrated to the new processes and systems. These are currently being validated as part of the detailed organisational and process design phase.

Cashable

Yes, for headcount-related savings.

Type

Reduced inputs to deliver the same or improved outputs.

Measures

Main measures will be:

• aggregate cost of delivering HR and finance services across the Department;
• performance ratios e.g. support service staff to overall headcount compared with relevant benchmarks; and
• quality and customer satisfaction measures (e.g. "before" and "after" surveys).

Monitoring

A benefits management strategy, endorsed by each business unit, to ensure savings are delivered. Individual business units will be responsible for capturing and measuring their own efficiencies, but with a central monitoring and policing function.

Data sources

The potential headcount savings identified in the outline business case were calculated by comparing current staffing levels with median public sector performance benchmarks for key performance indicators such as full-time employee costs and support service staff to headcount ratios in the provision of finance and HR/payroll support services. These benchmarks are drawn from various sources, including Office of Government Commerce/Cabinet Office.

A re-baselining exercise is currently underway to confirm the current staff numbers in HR and finance support services and identify any changes since the initial exercise.

One to one discussions will be held with HR and Finance directors to confirm the revised baseline.

Quality/

Risk

The current re-baselining exercise will establish the current pay and non-pay costs of providing HR and finance support as well as volumetric data on outputs. Customer surveys will be conducted before and after migration of each business unit to capture non-cash benefits and to ensure quality of service is assessed.

To mitigate the risk of inaccuracy of baseline data, the results from questionnaires will be discussed with HR and finance contacts to pick up any omissions or exceptions before function directors sign off the results for each business unit. The statistical validity of customer survey questionnaires will be determined by the number of replies. Advice is being sought from DfT statisticians and business unit change directors to help determine how to achieve this.

Validation

Baseline figures and savings targets are being developed by the project team in collaboration with functional contacts from business units. Results will be submitted to HR and finance directors for agreement and sign off.

The benefits management strategy will address how efficiency savings are validated and monitored against the baselines.

Baselines

Baselines are being re-established to avoid double counting where headcount/cost savings have already been made by business units since the last baselining exercise in June 2004. This will provide a greater level of detail of the current provision of HR and finance support services and inform the detailed process and SSC organisational design workstreams.

Timeframe

August 2005: The DfT Board and Ministers have endorsed the recommendation of moving to shared support services for HR and finance based on a single SAP platform and a single shared service centre.

The detailed design of the standardised and simplified processes, as well as the organisational structure of the shared service centre, is planned to be completed by the end of January 2006. The building and testing of the IT and of the shared service centre itself is scheduled to be completed in time for the go-live of the first business units (currently planned to be DVLA & DSA finance and HR, VOSA finance only) planned for August 2006. Remaining business units are planned to be migrated by April 2008.

Area

Minor Programmes

Activity

Covers around 20 separate departmental activities

Target £m

2005-06

2006-07

2007-08

£30m

£30m

£30m

Cashable

A mixture of cashable and non-cashable savings

Type

Lower inputs for same or improved outputs; same inputs for improved benefits

Measures

Measures vary between activities, but include:

- higher benefit cost ratios (BCRs) compared to average BCR of projects in previous years (pre 2005/6) for rail and water freight schemes; by only approving schemes with higher BCRs, the same level of funding will produce more benefits; for instance, in respect of projects which transfer freight movements from road to inland/coastal waterways, the reduction in road traffic and the consequential benefits (lower congestion, better air quality, safety) will be much greater.

- reduced cost of ship inspections; for instance; the introduction of new data recording systems for marine surveyors has led to an increase in the number of inspections.

- reduced costs of ramp checks for aircraft; improved processes negotiated with CAA has resulted lower costs for each inspection.

Monitoring

Regular interrogation department's expenditure database (SAP) to access data on expenditure/budgets. Dialogue with Programme managers for additional supporting information. Periodic reviews to assess progress.

Data sources

SAP - the Department's computer system for recording expenditure against budget

Records of individual programme managers responsible for each efficiency saving