FINAL BUSINESS AND REGULATORY IMPACT ASSESSMENT

Title of Proposal

Forth Road Bridge Bill

Purpose and intended effect

• Background

The Forth Road Bridge (FRB) is showing signs of deterioration and mayno~ be suitable as the long-term main road crossing over the Firth of Forth.The new Forth Crossing is currently under construction to safeguard a vitalconnection in Scotland's transport network by ensuring a new crossing is'in place by 2016 before any restrictions are necessary on the existing roadbridge. When the new crossing opens, the bridges will operate as a Imanaged crossing strategy: the FRB will be retained as a dedicated icorridor for public transport, pedestrians and cyclists and the new ForthCrossing will carryall other traffic subject to motorway regulations.

As part of the Scottish Government's Programme for Government, primarylegislation will be brought to the Scottish Parliament in 2012/13 to pave theway for the most cost-effective and co-ordinated approach to themanagement and maintenance of the new Forth Crossing and FRB. TheScottish Government is of the view that this can be achieved by holding acompetitive tender exercise to award a single bridge operating companyfor a contract to manage and maintain both the new Forth Crossing andthe FRB. The contract will also include the connecting roads from the M90Junction 3 Halbeath in the north through to the M9 Junction 1a in thesouth. The Scottish Government will be responsible for the bridges andthe roads over them, with the day-to-day operation and maintenancefunctions being carried out by the bridge operating company.

In order to contract out the functions of managing and maintaining theFRB, the Scottish Government must first take those functions over fromthe Forth Estuary Transport Authority (FETA), which is the statutory bodypresently tasked with managing and maintaining the FRB. The Forth Road IBridge Bill will therefore be brought to the Scottish Parliament to -

• trunk the road over the FRB (which means the Scottish Governmentbecomes the roads authority,

• transfer all of FETA's property, assets and liabilities to the ScottishGovernment, and

• dissolve FETA.

The skills, knowledge and professionalism of FETA employees are greatly

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valued. Transfer of Undertakings (Protection of Employment)2006 will apply meaning that FETA employees will be transferred to theBridge Operating Company appointed by Transport Scotland. In addition,the Scottish Government will make it a contract requirement, and willprovide guarantor status, to ensure that the appointed bridge operatingcompany gains admission to the Lothian Pension Fund to allow FETAemployees to continue with their current pension scheme.

The contract will deliver value for money, operational efficiencies, and weanticipate that it will be attractive to industry. It is anticipated that theprocurement process will begin in mid-2013, that a preferred bidder will beannounced by the end of 2014, with the contract commencing in mid-2015.The dissolution of FETA will take place at the point of the new contractcommencing .

• Objectives

The Scottish Government wishes to pave the way for the most cost-effective and co-ordinated approach to the management and maintenanceof the new Forth Crossing and FRB.

To enable this policy decision to be taken forward, the ScottishGovernment is introducing a Bill which will trunk the FRB, transfer FETA'sproperty, assets and liabilities to the Scottish Government, dissolve FETAand transfer FETA employees to a bridge operating company. Thereafter,Transport Scotland will begin the procurement process to appoint a 'ForthBridges Operating Company'.

This BRIA details the process that led to the decision that a competitivetender exercise will be held to award a single bridge operating companythe contract to manage and maintain the new Forth Crossing and FRB,whom the decision will affect and in what way .

• Rationale for Government intervention

The Forth Road Bridge Bill supports the Scottish Government's strategicobjective to make Scotland a wealthier and fairer country, and in particular,the Government's emphasis on managing public sector spending effectively.

This is evident through the Bill's policy proposals which will:

o Deliver value for money and operational efficiencies thereby makingsavings to the public purse;

o Protect all FETA staff as Transfer of Undertakings (Protection ofEmployment) Regulations apply meaning there will be nocompulsory redundancies as a result of the transfer;

o Bring a strategic and collaborative approach to the managementand maintenance of the Forth Bridges which is in line with public

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sector reform.

Consultation

• Within Government

The identification of technically feasible options and their assessmentagainst key criteria involved consultation with other Scottish Governmentdepartments including State Aid Unit, Public Service Reform Unit, ScottishGovernment Legal Department and Scottish Government HumanResource Department.

• Public Consultation

The provisions of the Bill are tightly defined and technical rather thanbroad and conceptual. The Bill Team concluded that continuousconsultation with targeted stakeholders throughout the project - frompolicy development, through the legislative process, into theimplementation of the policy including the dissolution of FETA andprocurement of a Bridge Operating Company - would be more appropriatethan a one off written exercise.

The decision to dissolve FETA will most obviously affect FETA employees,of which there are currently 72. Stakeholder engagement is thereforefocused on ensuring that employees are aware of developments and thatany questions or concerns are addressed in a timely and open manner.Transport Scotland has been working closely with FETA management andwill continue to do so as preparations progress for the procurementcompetition.

FETA is governed by a Joint Board made up of 10 councillors from FifeCouncil, City of Edinburgh Council, West Lothian Council and Perth andKinross Council. In advance of a decision being taken, the Minister andTransport Scotland met with the FETA Board to discuss the options. The i

Minister then wrote to the Chief Executive of FETA in advance ofannouncing the decision. Transport Scotland will meet with the FETA!Board in December to discuss the Bill and the procurement of a bridge I

operating company.

Transport Scotland established the 'Forth Bridges Forum' in November2011 to ensure that local stakeholders remain at the core of themanagement and operation of the Forth Bridges. In addition, it provides amechanism for the collective promotion of the FRB, the new ForthCrossing and Forth Bridge. Membership includes senior officials fromTransport Scotland, Network Rail, FETA, City of Edinburgh Council, FifeCouncil, West Lothian Council, Historic Scotland and Visit Scotland.

Other key stakeholder groups are local community groups and residents,businesses and bridge users.

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Business

The Bill Team has written to local businesses both north and south ofriver to seek views on the plans to dissolve FETA and to contract a bridgeoperating company to manage and maintain the new Forth Crossing andFRB. In addition, the Bill Team has sought assistance from 'QueensferryAmbition'. Queensferry Ambition is an umbrella organisation that brings aliithe businesses in Queensferry together to pool expertise and resources tomake their area a better place to do business by increasing footfall andcustom.

They have assisted by cascading questionnaires on behalf of the BillTeam to members of the Business Improvement District (BID). Sectorsrepresented include retail, accommodation and food, education andcommunity and professional services and business.

The Bill Team will set up meeting with local businesses who would like todiscuss the Bill and/or the procurement of a Bridge Operating Company inmore detail.

• Options

When the Forth Crossing Bill received Royal Assent, Scottish Ministersinstructed Transport Scotland to work with FETA officials to assess thetechnical feasibility of options for the management and maintenance ofboth the new Forth Crossing and the FRB.

The options were assessed against key criteria including the ability todemonstrate value for money; traffic management and maintenanceeffectiveness being derived through a twin-bridge strategy; utilisation ofFETA staff and assets; the nature of governance arrangements and extentof local/national accountability.

The projected costs are based on the information currently available andrepresent the operational, maintenance and administrative costs for thenetwork connections, the new Forth Crossing and the FRB. The costs alsoinclude staff costs.

The key points relating to each of the options are detailed below:

Option 1: FETA continues to manage and maintain the FRB and aseparate bridge operating company is appointed to manage and maintainthe new Forth Crossing following a procurement competition.

Summary: The FRB and new Forth Crossing would be managed andmaintained separately, therefore, any potential resource and trafficmanagement efficiencies that might be derived from a twin-bridge strategywould be lost.

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FETA would retain responsibility for managing and maintaining the FRB asa public transport corridor.

The maintenance of the new Forth Crossing would be subject to aprocurement competition thereby allowing value for money to be tested.The winning bidder would be required to provide their own resources andassets unless an agreement could be reached with the successful bidder ofthe new Forth Crossing.

Sectors and groups affected: Given the reduction in traffic volumes on theFRB it is likely that FETA would be over resourced and significant joblosses would be likely. FETA's assets would be underutilised.

The FET A Board would continue to govern the FRB and Scottish Ministerswould be responsible for the new Forth Crossing.

Local communities, residents, businesses would have separate points ofcontact for issues regarding the management and maintenance of the twobridges. Bridge users would lose any potential benefits of trafficmanagement efficiencies gained through the twin-bridge strategy.

Costs: The likely costs of maintaining the existing FRB and the new ForthCrossing were assessed in 2009, as part of the business case for the newbridge. To support this Bill, updated and revised organisational structures,revenue and capital plans supplied by FETA have been applied to the 2009base cost analysis.

The assessment focuses on OPEX costs revenue savings as these willform the basis of the bridge operating company contract. OPEX costsrepresent the routine operational, maintenance and administration costs forthe network connections, the new Forth Crossing and the FRB, and staffcosts.

Projected costs of this scenario are £9.10 million per annum.

Option 2: A single bridge operating company is appointed to manage andmaintain the new Forth Crossing and FRB following a procurementcompetition.

Summary: If FETA use state funding to finance a tender bid (as they arefully funded by the Scottish Government) then this would very likelyconstitute State Aid1. In general, the European Commission considersState Aid to have a damaQinQ effect on competition and therefore takes a

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serious view of aid given in contravention of the State Aid rules.

The 2002 Order provided FETA with borrowing powers but it would need amechanism for repaying a loan if the bid was unsuccessful.

Given the risks and constraints attached to enabling FETA to competedirectly in a procurement competition, the more viable option for a twin-bridge strategy that tests the market through competitive tender is forScottish Ministers to dissolve FETA using primary legislation.

Benefits: The management and maintenance of both bridges would besubject to competitive tender allowing value for money to be tested fully.

FETA's land, assets, rights and liabilities would be transferred to theScottish Government. The land and property required for the managementand maintenance of the bridges would be leased to the appointed bridgeoperating company.

The governance arrangements would mirror those for Scotland's existingtrunk road and motorway network: the Scottish Ministers will be responsiblefor the bridges and the roads over them, with the day-to-day operation andmaintenance functions carried out by the bridge operating company.

Sectors and groups affected: Dissolving FETA would result in a relevanttransfer for the purposes of TUPE regulations meaning that FETAemployees would be transferred to the employ of the appointed bridgeoperating company.

The FETA Joint Board will be disbanded, relieving the councillors of theirrole in respect of the FRB.

Local communities, residents, businesses may benefit from having onepoint of contact for issues regarding the management and maintenance ofthe two bridges. Bridge users may benefit from traffic managementefficiencies gained through the twin-bridge strategy.

Costs: The likely costs of maintaining the existing FRB and the new ForthCrossing were assessed in 2009, as part of the business case for the newbridge. To support this Bill, updated and revised organisational structures,revenue and capital plans supplied by FETA have been applied to the 2009base cost analysis.

The assessment focuses on OPEX costs revenue savings as these willform the basis of the bridge operating company contract. OPEX costsrepresent the routine operational, maintenance and administration costs forthe network connections, the new Forth Crossing and the FRB, and staffcosts.

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Option 3: Responsibility for managing and maintaining the new ForthCrossing is delegated by Scottish Ministers to FETA, in addition to theirresponsibility for the FRB.

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Option 4: Do nothing - The FRB continues as the only crossing of the IFirth of Forth in this locality. FETA would continue to manage and Imaintain the FRS as the main road crossing of the Firth of Forth. I

ISummary - This scenario provides a baseline on which the other scenarioscan be compared. The Scottish Parliament passed the Forth Crossing Actin 2011 allowing the Scottish Government to begin construction of the newForth Crossing project. The project is designed to safeguard cross-Forthtravel by ensuring a new crossing is in place by 2016 before any restrictionsare necessary on the FRB. The project will cost between £1.7bn to £2.3bn(total outrun cost in 2016) to deliver and will be directly funded by theScottish Government

Projected costs of this scenario are £7.78 million per annum.

ISummary: Statutory responsibility for managing and maintaining the new I

Forth Crossing may be delegated to FETA by Scottish Ministers. Acomprehensive redrawing of its functions would first be necessary. There isa risk that delegating the functions to FETA may be perceived as beinguncompetitive as the market has not been tested. Without testing themarket, value for money cannot be demonstrated.

Benefits: FET A's land and assets would be fully utilised.

Sectors and groups affected: FETA employees would be given theopportunity to work on a second structure and additional employees would Ibe required. FETA has projected that the twin-bridge strategy wouldincrease headcount from 72 to 92.

The FETA Board would continue to govern the FRB. As Scottish Ministerswill be responsible for the new Forth Crossing as a trunk road, thegovernance arrangements would need to reflect the mix of local andnational accountability.

Local communities, residents, businesses may benefit from having onepoint of contact for issues regarding the management and maintenance of Ithe two bridges. Bridge users may benefit from traffic managementefficiencies gained through the twin-bridge strategy.

Costs: As it was established that FETA cannot participate in a procurementcompetition, the costs of this option have not been assessed.

FETA has estimated that without the new crossing in place, economicoutturn is likely to fall by c£1 bn, a drop in turnover in excess of £1.3bn anda loss of 3,200 jobs, many of which would be permanent.

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Sectors and groups affected - FETA employees would continue to manageand maintain the FRB and the FETA Board would continue to govern theFRB.

FETA would continue to be the point of contact for local communities,residents and businesses for issues regarding the management andmaintenance of the FRB.

Costs - The costs of managing and maintaining the FRB are projected at£5.64 million per annum based on the cost of FETA's current operations.However, the lifecycle and capital costs that would be much higher and theimpact on the Scottish economy would be untenable.

Scottish Firms Impact Test

As noted above, although it is FETA who will be directly affected by the Bill,the Bill Team has also been engaging with local businesses on the provisionsof the Bill and the procurement of a bridge operating company. This willinvolve meeting with businesses who wish to find out more. Engagement Willicontinue throughout the Bill and procurement processes.

IThe policy introduces a new contract to the market thereby stimulating Icompetition and economic benefits. The scope of the contract is for themanagement and maintenance of a cable stayed bridge, a suspension bridgeand an area of the connecting road network.

The contract will be advertised on the Official Journal of the European Unionas required by procurement law.

Although FETA is to be dissolved, the staff will be transferred to the winningoperating company.

It is anticipated that the contract will be appealing to the market due to its sizeand the provision of an already skilled and knowledgeable workforce .

• Competition Assessment

Taking account of the information provided above, we have consideredOFT's competition filter questions.

Could the proposal directly limit suppliers? - No

Could the proposal indirectly limit suppliers? - No

Could the proposal reduce ability to compete? - No

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Could the proposal reduce incentives to compete? - No

Following application of the competition filter, it has been concluded thatthe Bill will have no negative impact on competition .

• Test run of business forms

The policy does not introduce any new business forms.

Legal Aid Impact Test

It is not expected that these proposals will have any impact on the use of thelegal aid fund.

Enforcement, sanctions and monitoring

Transport Scotland will manage the procurement of the Forth BridgesOperating Company to ensure that the predicted benefits of this option aredelivered. Key stakeholders will be consulted on aspects of the contract

ibefore going to tender.

Once appointed, the operating company will be audited by the PerformanceAudit Group (PAG), and independent body appointed by Transport Scotlandto review and report on the performance of all the Trunk Road OperatingCompanies in Scotland. PAG review operating companies against a set ofkey performance indicators and the results are published on the TransportScotland website.

Implementation and delivery plan

The indicative timetable for the procurement competition is outlined below:j

June 2013 Publish PIN

July 2013 Publish OJEU Notice

December 2013 Issue Tenders

December 2014 Award Contract

June 2015 Commence Contract

2016 New Forth Crossing Complete

• Post-implementation review

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Transport Scotland's Forth Bridges Special Project Team will >eresponsible for ensuring the implementation of the Bill provisions includingoverseeing the procurement competition for the operating company and!ensuring a smooth transition for FETA staff to the new arrangements. I

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The Team will also undertake a post implementation review of the BRIAprior to the procurement process commencing in summer 2013. This willinvolve engaging with industry on the scope and content through contactsin Scottish Enterprise and through an Industry Day.

Summary and recommendation

Following consideration of the options and advice from Transport Scotland, inNovember 2011 the Minister announced his intention to take forward aprocurement competition to put in place a single company to undertake themanagement and maintenance of the new Forth Crossing and FRB. Sincethen, Transport Scotland has been preparing the legislation that will enablethis competition to take place and has begun preparations for the opencompetition. Option 2 is the recommended option.

Summary costs and benefits table

Based on current estimates, it is projected that there is potential forapproximate savings of around £1 million per annum through one bridgemanaging and maintaining both bridges as opposed to two separate futuremaintenance contracts.

Option1

2

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BenefitsValue for money for new ForthCrossing tested through competitivetender;Legislative change not required.

Value for money tested throughcompetitive tender for managementand maintenance of both bridges;Traffic management andmaintenance effectiveness gainedthrough twin bridge strategy;Utilisation of FETA assets throughtwin-bridge strategy;Protection of FETA staff;Boost for industry

Traffic management andmaintenance effectiveness gainedthrouqh twin bridqe strateqy;

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Costsc£9.10 million

c£7.89 million

As it was establishedthat FETA cannotparticipate in a

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Utilisation of FETA assets;Minimum impact to FETA staff.

Negative impact.

FETA has estimated that without thenew crossing in place, economicoutturn is likely to fall by c£1 bn, adrop in turnover in excess of £1.3bnand a loss of 3,200 jobs, many ofwhich would be permanent.

procurementcompetition, the costsof this option have notbeen assessed.

c£5.64 million

Declaration and publication

I have read the impact assessment and I am satisfied that (a) it represents thecosts, benefits and impacts of the policy, and (b) that the benefits justify thecosts. I am satisfied that the business impact has been assessed with thesupport of businesses in Scotland.

Signed: \;\ ~~~

Date:

Minister' Name and Title: Keith Brown MSP, Minister for Transport andVeterans

Scottish Government Contact Point:

Carron Flockhart, Forth Bridges Special Project Team x27377

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