Report sets out blueprint for £3bn infrastructure savings

The government could save £3 billion a year on building and maintaining infrastructure by working more closely with the construction industry, according to a report for the Treasury.

The report, by Infrastructure UK, identifies a series of issues that make it more expensive to deliver major projects here than on the continent.

It claims that efficiency improvements implemented by clients and contractors could deliver efficiency savings of 15 per cent.

The improvements include:

  • Eliminating peaks and troughs in the infrastructure investment pipeline
  • Improving client leadership, streamlining project governance and procurement
  • Reducing unnecessary prescription, standards and third party requirements
  • Improving asset management and benchmark data
  • Developing smarter ways to use competition
  • Encouraging industry to invest more in innovation and skills

Chief secretary to the treasury Danny Alexander welcomed the report’s findings.

He said: “One look at projects like the Olympics, where over £600 million has been saved, shows that the UK can deliver big infrastructure projects on time and within budget.

“We just have to make sure that the rest learn from the best. By working with industry we can identify ways to save money for them and the taxpayer.”

Outgoing chair of IUK James Stewart said the report would be followed by an implementation plan that would be prepared in time for the March budget.

He said: “The implementation of this is so important we do not want to rush it. A lot of what we say here has been said before but not been implemented, that is why it is vital we get the implementation right. In the next three months we will look to find some projects that we can test.”

Mr Stewart said the combination of major cost cutting by government and the need for massive investment in infrastructure would help create a “real chance for a step change”.

The report was compiled with significant input from industry, with more than 300 organisations feeding into the process. Its findings are based on detailed interviews with 120 “industry practitioners”.

The interviews were split into two types – the first looking at what procedures were in place and why, and the second focusing on specific costs in projects.

Terry Hill, steering group chairman and chair of the global transport market at Arup, said projects at the Highways Agency and High Speed 2 were obvious examples of where the new approach could be tested.

Mr Hill said: “Evidence from the investigation suggests a high degree of consensus that efficiency improvements can be achieved and that the infrastructure construction industry will respond positively to client-side improvements in planning, commissioning and procurement of projects and programmes.”

But he stressed that fragmented implementation of the recommendations would fail to deliver results and that industry would have to follow up on improvements made.

The report said fragmentation of the supply chain had a very real impact on cost. Mr Stewart said that the uncertainty of long-term work led the industry to fragment its cost base.

This, he said, made it difficult to produce innovation in the supply chain – a vital ingredient to achieving the cost savings.

To arrive at an annual saving of £2-£3bn per year, the report’s authors began with the five-year spending commitment on infrastructure of £200bn.

Divided by five to give an annual figure of £40bn, they estimate that approximately half goes into major infrastructure projects.

They then took 15 per cent - the average range of data sources compiled in the report - from the remaining £20bn figure to arrive at the £3bn.

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