2015 -16 VCA BUSINESS PLAN - data.parliament.ukdata.parliament.uk/.../DEP2015-0675/150326_-_VCA_Business_Plan_… · VCA Business Plan 2015-16 4 Welcome to the Vehicle Certification

VCA BUSINESS PLAN

2015 -16

2015 -16

VCA Business Plan 2015 -16

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Vehicle Certification Agency Eastgate Road Bristol BS5 6XX Telephone 300 330 5797 Website www.gov.uk/vca email enquiries www.gov.uk/contact-the-vca

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Chief Executive’s Foreward ............................................................................... 4

Executive summary ........................................................................................... 5

01. Who we are and what we do ..................................................................... 6

02. Plans for 2014-15 ....................................................................................... 8

03. Supporting delivery of the plan ................................................................ 14

04. Digital ....................................................................................................... 15

Annexes

Annex A - Profit and Loss Account ................................................................. 16

Annex B – Volume Forecast ........................................................................... 17

Annex C – Volume Forecast ........................................................................... 18

Annex D – Workforce Forecasts ..................................................................... 19

Glossary of Terms ........................................................................................... 20


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Welcome to the Vehicle Certification Agency (VCA) Business Plan for 2015-2016. This sets out

our goals and objectives for the year and builds on the success of the Agency over the recent

past. VCA is part of the Department for Transport (DfT) Motoring Services Group of Agencies,

including DVSA (Driver and Vehicle Standards Agency) and DVLA (Driver and Vehicle Licensing

Agency). All DfT Agencies are undergoing substantial reform to deliver improved services to

citizens and industry, and reduce costs through greater efficiency.

In August 2013, the Department announced that it would try to find a commercial partner to

form a joint venture that would grow the work of the VCA. The formal procurement process

to find such a partner began in early 2014 but, despite interest from industry, the Department

was unable to agree a suitable joint venture. VCA will remain, therefore, as an executive

agency of DfT for the immediate future and DfT will consult with stakeholders on the best way

to deliver the agency’s services in future.

This coming Financial Year, 2015-16 we will be reflecting on a number of issues including how

to take the agency forward without a new partner, the impacts of the pace of change of

automotive legislation and how to respond to emerging technologies. The demand for VCA’s

services is increasing, due in part, to the health of the UK automotive sector. We are

attracting new customers to the world of Type Approval, as new sectors have been brought

into the European Whole Vehicle regulations. VCA has to offset this growth with a reduction

in its work for Government. Our business plan for next year expects a deficit, unlike the more

recent years of growth and surplus. We have looked at our costs and working practices, and

we have found further opportunities for improvement, but these will take 2 or 3 years to

impact positively on the Agency finances. To meet these challenges, we will continue to

invest in our staff, to build on the existing excellent reputation we have for engineering skills,

efficient, high quality services and excellent customer engagement and work hard to develop

and maintain new clients.

In April this year, the VCA will celebrate 25 years as an Executive Agency and we can look back

over our first 25 years with great pride and satisfaction, as a trusted service supplier to the UK

automotive industry. The world of automotive approvals and regulation has changed

dramatically from the National schemes of 25 years ago, to European-wide Whole Vehicle

approvals. The VCA has developed and grown over the years and we plan to build on our past

heritage, to retain our position as a leading Type Approval Authority and Technical Service.

PVW Markwick, Chief Executive


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The new Financial Year 2015-16 will be challenging for the VCA, with the loss of the

Enforcement work currently delivered for other Government departments. This is being

consolidated into the National Measurement Office, within the Department for Business,

Innovation and Skills (BIS). The lost revenue will not be recovered within the year, so VCA is

budgeting for a £700k deficit. We plan to return to surplus within the next 3 years driven by

growth in our core product and management system certification activities and efficiency

improvements and cost savings. We will also carry out a complete review of our fees strategy

and present options to ministers in the new Parliament. We will consult fully as part of this

process.

Over the past 10 or so years, Product Certification revenues have grown nearly threefold,

averaging between 6 and 7% growth per year over the past 3 years, and our MSC business has

seen a steady 10% per year growth. We anticipate this growth to continue over the next few

years. We expect that Southern Europe, South America, and the UK will lead the incremental

growth, while sales in China are expected to return to growth next year, following a slowdown

in sales over the past 2 years. South American sales will be significantly impacted with the

anticipated approval by IBAMA, the Brazilian Environmental Agency, of VCA as an accredited

technical service. The four global regions of VCA, Americas, Asia/Pacific, China/India and

UK/Europe will all contribute to the growth plan, and contribute positively to the financial

wellbeing of the VCA.

Despite the current challenging financial position, VCA remains in net surplus, considering its

25 years as an Executive Agency, and we forecast a return to a small, but sustainable surplus

over the next 2-3 years.

The detailed plans and targets are laid out in this document.


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Vehicle Certification Agency

1.1 The Vehicle Certification Agency (VCA) is an Executive Agency of the Department for Transport (DfT), part of the Motoring Services Directorate, which is part of the RTL (Roads, Traffic and Local Transport) Group of the DfT, through which VCA receives its corporate sponsorship. VCA performs a number of core activities:

Vehicle Type Approval:

1.2 As the UK Type Approval Authority for new on and off-road vehicles, systems and components, VCA is responsible for approving that these have been designed and constructed to meet internationally agreed standards of safety, security and environmental protection.

VCA takes its policy lead from DfT, through the International Vehicle Standards Division (IVS), part of the Environment, Technology and International Directorate. Some environmental policy lead comes from the Office for Low Emissions Vehicles (OLEV). VCA Chairs the DfT Vehicle Technology Forum, working with policy colleagues, other DfT agencies and the Chief Scientific Advisors Unit. This group shares knowledge, understanding and experience of emerging technologies with a view to developing a common understanding and approach.

Management Systems Certification:

1.3 Having effective management systems is an important part of the vehicle, system and component production process. Because of this, VCA is a Management Systems Certification (MSC) body and this activity is complementary to our Type Approval function. Specialising in the automotive sector, we have been able to utilise our significant expertise in the engineering, manufacturing and production fields. VCA is unique in terms of being a combined Type Approval Authority, Technical Service, and Management Systems Certification body.


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Certification of Dangerous Goods Packaging

1.4 VCA administers the operation of a scheme for the approval and packaging for the carriage of dangerous goods in the UK. Each mode of transport has its own set of International Regulations, but all use packaging as defined in the United Nations (UN) recommendations for the transport of dangerous goods. The requirements for approved packaging are put into effect by separate Statutory Instruments.

Civil Traffic Enforcement

1.5 Building on core experience, VCA provides a certification service to local authorities who wish to operate bus lane and parking enforcement camera systems. This involves the evaluation of Technical Construction Files (TCFs) to assess compliance with the relevant requirements, with the ultimate aim of ensuring the integrity of evidence gathered using such systems. This service has recently been extended to cover authorities in Wales and the Highway Agency’s Thames Link Crossing at Dartford.

Data Provision

1.6 VCA collects and publishes CO2 emissions data for new cars, underpinning the Vehicle Excise Duty and Company Car Tax schemes. Accessed through GOV.UK, the data tools continue to be popular with consumers, with around 2.4 million users over the last year alone. This supports Government’s strategic drive towards reducing CO2 emissions by helping consumers to make low carbon choices.


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The VCA has agreed an ambitious and stretching set of objectives with the Department for

Transport for 2015-16 to meet the twin challenges of delivering high quality services to our

customers while delivering value for money for the taxpayer and fee payers.

The table at 2.6 highlights the main objectives VCA has agreed with the Department for

Transport for 2015-16. The following sections explain in more detail the specific actions we

will be taking to deliver our agreed objectives:

Reform and Modernisation 2.1 Implement a strategy for returning VCA to a break even position

The transfer of enforcement services work to the NMO has had a significant negative impact

on VCA finances. We have therefore identified a series of actions that will see VCA return to a

break even position in the shortest time practicable. These will include:

2.1.1 Consulting on a new fees strategy by 31 January 2016

We provide services to industry for which we are governed by statute in terms of what we can

charge. We have held the charges flat for 8 years, and in fact have held fee increases to 3.5%

over the past 11 years. During this period largely through inflation, we have had a consistent

increase in our costs of providing the services, much of which have been offset by significant

efficiency improvements.

Whilst we continue to investigate new ways of delivering the services we provide, they are

fundamentally based around physical inspections by our staff. The time is now right to review

our overall approach to fees.

The review and any subsequent legislative process can take up to 12 to 18 months to

conclude. We will be working closely with the DfT to bring the necessary changes to the

statutory fees on a full cost recovery basis.


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2.1.2 Identifying opportunities for new or existing services and products to be delivered

in new or existing markets

We are looking to develop new products and services to complement our existing portfolio. There are a number of opportunities to support existing and potential new customers at home and across the globe. We will be evaluating the options, many of which will require investment to bring to market. We aim to have completed our initial review by the end of September 2015 but it could take longer to bring them to market depending on the level and speed of investment required. Two areas that will feature in the review will be:

Product Certification

The automotive sector continues to grow fuelled by new entrants into the market in emerging

economies, and a great diversity of product in the mature markets. This is driving the need for

increased levels of approvals. We expect this will continue to be the case over the next few

years and we will be looking to exploit opportunities wherever they present themselves.

Product certification has increased steadily year on year (at a rate of 6.5% on average) for the

past three years and as a planning assumption we have assumed that this growth rate will

continue over the planning period as we continue to offer extended services to our customers

and actively market our services to new customers in this product line.

Management System Certification

We have grown the MSC business over the past three years in a very competitive market

place. There are a number of much larger organisations competing directly with VCA in the

same customer sector and territories that we operate in but, as is the case for product

certification, we have seen our MSC sales grow steadily year on year. We have confidence in

our ability to continue to grow this part of the business. We have identified 10% growth in

2015-16 as a realistic target for planning purposes.

An initial assessment of the wider opportunities for increasing sales is to be completed by the

end of September 2015 but will be kept under continual review to ensure we are ready to

exploit growth opportunities as they present themselves.

2.1.3 Explore the potential for VCA to deliver additional services for DfT and other

Government departments

VCA has historically delivered a unique package of services back to its parent Department and

to other Government departments. The services we provide across Government have

declined over the past three years by almost £1m since 2011-12 and there will be further

reduction of c£1.4m in sales in 2015-16 with the transfer of the BIS/DEFRA activities to NMO.

As part of our drive to identify new opportunities, we will complete a review by the end of

September 2015 of how we use our existing skills base to provide more, value added services

to DfT and other Government departments.


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We have built no growth into our plans for this product line, and have forecast revenues of

£752k for the 2015-16 planning period.

VCA delivers a distinct group of services to Government which are not directly related to our

core automotive activities, including Dangerous Goods Packaging certification. We see the

underlying sales in the area remaining at current levels for the planning period.

The “other” element includes sales of VISTA (regulatory library) and Point of Sale services,

which have potential to grow, but we see the real opportunities to grow in new products

which are covered in more detail below.

2.1.4 Efficiencies

In addition to looking for new opportunities to grow the business, we will also be focusing on

our costs to drive efficiencies wherever we can. Our plans will include reviewing how we

currently allocate our engineers’ time and ensuring we improve their utilisation to deliver

better returns. This work will cover how we charge for administration and travel time to

clients over the life of the jobs we work on.

We have also identified a number of overhead cost savings at a high level for VCA to deliver

over the planning period.

We will develop the plans that will ensure that VCA delivers the savings. This will be a

challenge for VCA to deliver at the same time as we are looking to grow the business but if we

are to deliver the surplus in line with the overall plan, we will need to ensure we implement

further cost reductions as a number of the growth plans do come with a degree of risk if they

are not realised.

2.2 Identify a suitable site for re-locating the VCA Bristol HQ by end of September 2015 VCA leases its headquarters building in Bristol, and land at the Motor Industry Research Association site for the Midlands Centre as well as an office for the Dangerous Goods activities in Leatherhead, adjacent to testing facilities. The overseas offices are all leased. The lease on the headquarters building in Bristol was renewed in 2014 but this will expire in July 2016. We will work with the DfT in the interim period to explore potential sites that are suitable for our long-term business requirements, and align with the Government Property Services Strategy to support Ministerial targets relating to vacating leased premises. Our plan is that, by the end of September 2015, we will have identified a new site for our HQ that will meet our plans for growing in an environmentally sustainable way. 2.3 Take forward the Government Digital Strategy

Our plans for 2015-16, which are set out in more detail on page 17, will include the migration of appropriate VCA website content to GOV.UK, considering the implications for and providing a solution to the overseas operations. We will also update and enhance our existing Point of


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Sale Software (POS) to enhance the existing service that provides environmental labels for new cars at the POS.

2.4 Finance

We have budgeted to deliver a deficit of (£700k) in 2015-16; this is primarily due to the transfer of work to BIS/Defra for enforcement activities. We are confident that we can deliver additional sales to offset the loss of work; however the margin of these sales is at a lower level. We anticipate that by 2016-17, along with a revision of the fees and more mature sales growth from emerging markets such as Brazil and the efficiencies we have identified, we can return the VCA to breakeven in line with prior historical performance levels. A summary of the financial performance can be found in Annex A.

2.5 Workforce

We will retain FTE staff numbers at current levels of 204 for 2015-16; we will be transferring 11 staff to the NMO, which we anticipate will be back filled in our frontline operations to support additional demand in the market. We are facing challenges to retain our experienced engineers as they are highly skilled and in demand. We will continue to do our best to retain staff who are key to the success of the VCA. VCA anticipates no increases in staff in back office functions during the coming year. We will look at ways of improving our efficiency across the organisation and align ourselves with best practice across the Department of Transport. In recent years, the VCA has seen an increase in the average number of working days lost to sickness. We have managed to return to the agreed target levels of 7.5 days in 2014-15. We anticipate that this will stabilise further in 2015-16 to 6.5 days, we are confident that we can provide an excellent working environment for our staff, where they are fully supported to deliver first class services to our customers.


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2.6 2015-16 Key Performance Indicators

Reform VCA measure Target date in 2015/16

1. Reform and Modernisation

1.1 Implement a strategy for returning VCA to a break even

position. 30/09/2015

1.2 Identify a new site for the Bristol HQ 30/09/2015

1.3 Take forward the Government Digital Strategy. 31/03/16

2.Operational 2.1 System and component approval certificates issued

within 9 working days of the completion of technical

clearance.

92%

2.2 Audited test reports deemed to have no critical defects. 99%

2.4 New Type Approval clients that do not hold ISO 9001 or

ISO/TS 16949 management systems certification to be

subject to Conformity of Production assessment, in

accordance with the agreed risk-based approach, before

approval issue and 100% of surveillance audits on non ISO/TS customers to be conducted using the risk based approach, before CoP renewal.

100%

2.5 Maintain or improve the satisfaction of our customers.

90%

3. Finance and efficiency

Agency finance:

3.1 Deliver financial performance in line with the 2015/16

budget.

(£700k)

31/03/2016

Workforce:

3.2 FTE staff numbers as at 31st March 2016 will not exceed

204.

204 FTE

3.3 Ensure average number of working days lost to sickness

absence does not exceed 7 days per FTE. 7 days

4. Customer Service

Prompt payment:

Payment of invoices within 5 working days 80%

Freedom of Information: 93%


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Provide a response within 20 working days

Parliamentary Questions:

Provide a response within due date 100%

Other Parliamentary correspondence:

Provide a response within 7 working days 100%

Official Correspondence:

Provide a response within 20 working days 80%


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Human resources:

3.1 VCA Human Resources (HR) will continue to provide people processes aligned to wider Government HR strategy and underpinned by the Civil Service core values.

During 2015-16 we will:

Continue our successful graduate development programme, recruiting high calibre engineering graduates, and training them through the Institution of Mechanical Engineers accredited Monitored Professional Development Scheme (MPDS), supporting a fast track route to becoming Chartered Engineers

Develop an apprenticeship initiative involving both internal and external stakeholders as part of a wider DfT scheme

Diversity

3.2 VCA values and utilises the potential and strengths of all staff in the Agency by treating people as individuals, embracing variety, rejecting prejudice and accommodating changes in working patterns. VCA believes that using a flexible people management approach motivates staff and creates an environment that enables all members of the Agency to be productive.


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4.1 The Government’s Digital Strategy sets out its vision for the digital landscape, providing services that meet the needs of customers. VCA continues to work towards providing a range of digital services that complement the existing multi-channel options available to customers. The nature of VCA activity in the testing and certification arena necessitates a high degree of face to face interaction but where the process can be supported by digital services, this is being done.

Digital service delivery:

4.2 VCA corporate website – VCA will continue to work with the Department and the Government Digital Service (GDS) to migrate content to GOV.UK

4.3 Point of Sale Software (POS) – Update and enhance the existing software to provide environmental labels for new cars at the point of sale.

Information services:

4.4 VCA ICT services provide day to day ICT infrastructure support, Help Desk services, and IT Security. During 2015-16 we will:

Continue to support the Government’s Digital by Default agenda Ensure that we continue to comply with the requirements of HMG Security Policy

Framework 5 (April 2014) Provide Information Assurance to VCA and DfT Senior Information Risk Officers Look for further opportunities to reduce the cost of ICT services through use of centrally

let framework contracts Further enhance our disaster recovery capability for business continuity Improve remote access capability across the agency along with the deployment of smart

devices


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A. Profit & Loss Account


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B. Volume forecast


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C. Volume forecast

Transaction Description

2012-13

2013-14

Forecast outturn 2014-15

Type Approval

Whole Vehicle Type Approval Certificates/Test reports issued

708

882

1,601

Systems & Components Type Approval

certificates/Test Reports issued 9,780

12,151

11,243

Commission Notice Applications processed

3,685

3,185

3,330

Technical Support to the Automotive

Industry

On average VCA responds to 55 technical questions per month from internal and external customers

Through its VISTA information system, the VCA supports industry in keeping up to date with

legislative requirements

Documents published in VISTA

195

208

100

Pages authored in VISTA

4,327

3,909

4,664

Enforcement

Under WEEE and Batteries enforcement regulations, on behalf of BIS, VCA will have

carried out 500"mystery shopper" inspections and 2700 enforcement visits in 2014-15.

In 2015-16 this work will transfer from VCA to another Government Agency


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D. Workforce Forecasts

Workforce FTEs

Total VCA

FTE's Front Line

FTE's

Back Office FTE's

March 2015 195.0

173.0

22.0

March 2016 204.0

179.0

25.0


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Glossary of Terms


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