Article - Issue 53, December 2012

Unlocking Infrastructure

Dr Scott Steedman CBE FREng

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Dr Scott Steedman FREng

Dr Scott Steedman CBE FREng

The television presenter Evan Davis gave a spirited performance in his series Built in Britain on BBC2 this autumn. He threw down the gauntlet to those who say that we cannot design, construct and complete major infrastructure projects in this country. Of course we can, we have and we are. Look at the Olympic Park, Heathrow Terminal 5 or the A3 Hindhead tunnel. So what about the critics who say that infrastructure in the UK costs too much and takes too long?

Major construction projects have certainly become much more expensive in real terms. John Kay, writing in the Financial Times this summer, challenged the escalating price of infrastructure, questioning whether the costs are really justified. He cited “technological overkill” as the principal culprit, together with inept clients, idiosyncratic specifications and the “plethora of consultants” attached to every project.

Unsurprisingly, this issue has exercised government and industry for years. Investments such as Crossrail and the proposed High Speed 2 (HS2) railway have focused everyone on the need for savings.

In round numbers, the UK invests around £15 to 20 billion per annum to maintain and build infrastructure. (Around 30% of this is public sector expenditure.) John Kay was right to question whether the nation is getting value for money. The design and construction of our infrastructure is increasingly complex, with many projects in the UK having to be built in heavily populated areas and designed for very high levels of use. Uncertainties in the planning process and commitments to the environment and health and safety add to the duration and cost of projects.

In 2010 Infrastructure UK (IUK), a unit within HM Treasury, published a seminal report, Infrastructure Cost Review. Terry Hill FREng chaired the Steering Group for the investigation, which included senior figures from clients and industry. IUK found that the UK is one of the most expensive places to build infrastructure in Europe.

The report said that the industry and the government, the major client for large projects, must address four key issues: publish the future work programme; make clear the respective roles of client, funder and deliverer; be clear about the specifications and the required performance from the outset and avoid changes; and take a risk-based approach to competition between suppliers. Interestingly, the IUK study found that productivity levels, the cost of labour and materials are broadly similar in comparable European countries and do not explain the differences.

Although it is difficult to compare costs between countries, drawing on data in specific areas IUK found that high-speed rail projects are around 25% more expensive per kilometre in the UK than equivalent projects in Europe. Metro stations are up to 50% more expensive for the same area. And, while the direct costs per kilometre are comparable, indirect factors such as land purchase and the planning process mean that the total cost of tunnelling projects is much higher in the UK than the European average.

There are technical issues that we need to address. For example, in the UK we tend to specify longer design life and higher specifications, which add significantly to costs. The excessive use by clients of their own standards in addition to international standards adds further burdens. But it is the structure of the industry and its use of sub-contracting and bespoke contracts, together with the biggest issue of them all, the lack of leadership by clients and the unpredictable nature of the infrastructure pipeline that has driven costs skywards. Companies cannot plan ahead if they do not know from one day to the next how much work they will have in the future.

Delivering the project pipeline under the National Infrastructure Plan, re-launched in November 2011, has proved the biggest challenge. The Chief Secretary to the Treasury, Danny Alexander, has recently set up a forum with industry and professional bodies to debate the issues. But what the nation needs is action, not words.

Earlier this summer, Sir John Armitt FREng urged the government to start more, smaller projects as a stimulus to growth. The present focus on HS2, Crossrail and airport capacity in the South-East is distracting the country from unlocking hundreds of lesser projects. Evan Davis is right to be passionate about our capability to deliver excellent infrastructure projects. Bring them on, I say.

Dr Scott Steedman CBE FREng
Editor-in-Chief

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