6.35 The Infrastructure Cost Review reported in December 2010 the results of an investigation into the costs of delivery of the UK's infrastructure. The report concluded that infrastructure delivery in the UK was more expensive than in European peers. It set out a series of recommendations in an Implementation Plan published in March 2011 to reduce the costs of delivery by up to 15 per cent by the end of 2014-15. To achieve this objective the Government:
• published the first consolidated list of the Government's funded construction pipeline. This will be updated quarterly. This is being published alongside the wider infrastructure pipeline;
• is working to reduce costs to industry by establishing an Industry Standards Group, chaired by Terry Hill (chair of Arup Group Board of Trustees), to help drive out duplication and redundancy in technical standards for infrastructure assets in the Transport sector. This Group aims to reduce by more than 50 per cent the number of bespoke in-house standards that apply to infrastructure projects. The Government will report in 2012 on progress, quantification of costs and benefits and ways of extending this approach across other sectors;
• has worked with public authorities to eliminate any unnecessary customisation of specifications which can add to cost and complexity. For example, London Underground has simplified escalator specifications which has reduced the cost of an escalator installed at Charing Cross by over 50 per cent (a £900,000 saving on a similar project);
• has worked with the Highways Agency to implement a programme-based, rather than project-based based approach to asset procurement, targeting a £443 million cost reduction against an expenditure of £1.4 billion over the lifetime of the programme, a cumulative reduction of 20 per cent;
• has worked with Network Rail's Efficient Infrastructure Programme which has introduced modular solutions to its signalling and track points saving over £50 million in the past year;
• has initiated pilots to test the use of Project Bank Accounts starting with a number of Highways Agency and flood defence projects and Crossrail. This initiative reduces the risk of supply chain members going out of business due to excessive delays to payment by principal contractors, which currently average 63 days;
• published the Infrastructure Charter, with the support of industry, which sets targets for both clients and industry to collaborate in finding ways to deliver infrastructure cost-effectively. The Industry Alliance Group will publish an independent progress report in March 2012 on achievement against the aims of the charter1;
• will smooth out investment and workflow in the water sector by working with Ofwat and the water companies to consider introducing measures into the next regulatory determination process that could provide incentives to maintain investment either side of the regulatory price control process. This will seek to avoid the combined impacts on the supply chain of reduced workload occurring simultaneously across all the water companies either side of the price control period;
• will support work by industry and regulators to bring forward investment in the regulated energy sector where this can realise savings through greater efficiency and supply chain sustainability. For example, partly as a result of supply chain considerations, Ofgem has approved in principle the £1bn Western high voltage link from Scotland to England, subject to the completion of certain conditions;
• will enable SMEs to compete for more infrastructure construction work by reviewing Government requirements for construction bonds (which can be 10 to 15 per cent of capital costs), particularly where the use of Project Bank Accounts has reduced some of the risks of contractor default. The Government will consult with industry and publish recommendations in 2012;
• will consider additional measures to reduce costs by introducing greater flexibility to infrastructure programmes, building on the Infrastructure Cost Review evidence and the conclusions of the independent Highways Agency Strategy Review (published on 24 November) of the benefits of longer term planning and funding certainty;
• will update the Treasury Green Book Guidance in 2012 to provide clarity around the need for optimism bias in budgeting for projects and programmes;
• will develop a toolkit to be published by summer 2012 building on the announcements on improving public procurement, including new models to enable and incentivise early supply chain participation, and greater standardisation of contract terms and incentive mechanisms;
• will implement the use of a standardised template as a means of tracking vital infrastructure project cost and performance data based on the international pilots undertaken by the Construction Sector Transparency Initiative; and
• will implement a memorandum of understanding between public sector and private sector infrastructure clients to facilitate the exchange of benchmark data across sectors.
Box 6.A: Case study - sustainable construction There are important lessons to be learnt from the construction of the Olympic Park in terms of how significant infrastructure projects can be delivered sustainably. For instance, the decision to remediate heavily contaminated soil on site saved approximately £68 million. There are also good examples of work from private sector utilities providers which have demonstrated simultaneous cost and carbon savings. By 2015, Anglian Water intends to reduce the embodied carbon in the assets it constructs by 50 per cent, compared to 2010, in the context of a five-year, £2 billion programme of work. The challenge has resulted in the redevelopment of its sewage treatment works in Bedford, a project driven by population growth in the region, now forecast to be delivered 25 per cent cheaper than budgeted, with an embodied carbon saving of 67 per cent, and a future operational cost saving of about £230,000 each year. These examples demonstrate that it is possible to achieve sustainability objectives and reduce costs. The Government's Green Construction Board will set up an infrastructure working group to examine this further and to ensure best practice is deployed on future infrastructure projects. |
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