Infrastructure
Infrastructure cost review
The Government published on 21 December 2010 the report of an investigation into how to reduce the costs of delivery of civil engineering works for major infrastructure projects.
The report identified a number of drivers for the higher cost of construction in the UK compared to other EU countries and supports the view that higher costs for UK infrastructure are mainly generated in the early project formulation and pre-construction phases. The Infrastructure Cost review aims to address client organisation and supply chain issues that are barriers to innovation and sustainability of the supply chain and significant drivers for higher cost. Efficiency improvements could lower the costs of delivery and realise potential benefits of £2-3 billion per annum.
A number of specific areas where the Government is working with industry taking action to deliver these benefits have been identified, and a work programme for implementation was published in March 2011.
Infrastructure Cost Review Annual Report 2012
Government is on track to save £2-3 billion per year on the cost of delivering UK infrastructure by 2015
The Government has published the first annual report of the 3 year Infrastructure Cost Review programme launched in March 2011 and led by Infrastructure UK.
The programme is on track, with the first annual report having already identified projected savings of up to £1.5 billion through changed behaviours and practice, consistent with the Cost Review principles.
The Commercial Secretary, Lord Sassoon said:
“It is vitally important that utility bill payers and taxpayers get good value for every pound spent on new infrastructure.
“Every pound saved through this Cost Review programme is a pound more that can be spent on new infrastructure for the UK.
“This first annual report shows we are on track to deliver the savings we identified last year.
“What is particularly encouraging is that these savings are being delivered through close and fruitful co-operation between the public and private sectors.”
Examples of savings include a projected 20% saving (over £600 million) on the 20 major projects being delivered through the Highways Agency’s Managed Motorways and Trunk Road Improvement programme, and over £400m efficiency savings from the London Underground.
These examples, along with the others detailed in the report, represent evidence of good progress towards the overall objective of £2-3bn savings per annum by 2015. The Government’s focus for the next year of the programme will be to embed the behavioural changes and improved processes required to sustain these savings, with particular focus on the top 40 priority infrastructure projects and programmes identified in the National Infrastructure Plan 2011.
Industry has already reacted positively to improvements in the visibility of the infrastructure and construction pipelines, published alongside the Autumn Statement 2011.
Alasdair Reisner from the Civil Engineering Contractors Association said:
“Our industry has been calling on Government to be clearer about its investment programme and procurement needs for some time. We are now actively engaging with the Government on the development and use of these pipelines to improve supply chain growth and sustainability”.
Working with industry the Government is building on these pipelines to inform the development of “capability plans” to identify and address skills gaps and capability issues within key sectors. An example of this is the tunnelling sector where key projects like Crossrail, Thames Tideway, High Speed 2 and National Grid cable tunnels will benefit from a more coordinated approach to investment in skills and apprenticeships through the Tunnelling and Underground Construction Academy.
Other key messages from this first annual report include:
1. To improve client’s commercial capability and understanding of supply chain costs the government has for the first time put in place an agreement between the Highways Agency, Environment Agency, London Underground and Network Rail to pool data and access commercial intelligence.
2. Other key achievements highlighted in the annual progress report include:
- government and industry agreement to the Infrastructure Charter as a basis for setting out the behaviours required to improve collaboration and reduce costs;
- development of a ‘routemap’ to enable public and private clients to select the most appropriate procurement strategy and drive consistent behaviours and practice for across infrastructure programmes or projects;
- application of new approaches to the management of risk and contingency in public sector infrastructure projects;
- formation of an Industry Standards Group to remove duplication and redundancy in technical standards for infrastructure assets;
- commitment to address the problems of cyclicality in the water sector as part of a joint study with Ofwat; and
- partnerships with industry to improve supply chain skills and capability and access cross sector efficiencies – starting with pilot programmes for tunnelling across rail, waste water and energy projects.
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Infrastructure Cost Review: annual report 2012 (PDF 639KB)
Please note that this document has been amended from the initial published version. In the case of the Thames Tideway Tunnel example the text in Table 2.A and Annex A has been updated to be consistent with other references in the document and to clarify that the provision made for ‘Optimism Bias’ has not been completely removed from the budget. - Press notice: Government is on track to save £2 to 3 billion per year on the cost of delivering UK infrastructure by 2015 (20 April 2012)
The documents above are available in Adobe Acrobat Portable Document Format (PDF). You can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility, visit the HM Treasury accessibility page.
Contact us
You can contact the IUK cost review team via email at infrastructurecost@hmtreasury.gsi.gov.uk.
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