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U.K. Aims To Slash Infrastructure Costs

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Following a recent report identifying potential infrastructure construction cost savings of 15% in the U.K., the government has pledged to draft an implementation plan by March. The report comes at a time when the government forecasts about $320 billion in all forms of infrastructure-investment demand over the next five years, as budgets for public spending are cut.

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The Infrastructure Cost Review, published on Dec. 21, says there is “a clear opportunity” to achieve savings of at least $31.9 billion to $47.9 billion over the next decade. The government’s Infrastructure UK body led the investigation, supported by the Institution of Civil Engineers and contractor interests.

Pricier than rest of Europe

The team’s investigation found the cost of the U.K.’s only high-speed railroad, from London to the Channel Tunnel, to be substantially higher than projects elsewhere in Europe.

The average total cost from the European projects considered was $33.7 million per km (£21.2million/km) compared with $42.5 million (£26.7million/km) for the U.K. line.

A comparison of highway costs with those in the Netherlands found the U.K.’s to be 10% higher.

U.K. construction is more expensive than in European peer countries partly because of unpredictable spending programs by public bodies, the report says. Insufficient preparations, unclear direction and an inclination to spend up to budget rather than optimize costs also are contributing factors.

The report also faults the U.K. contracting industry’s structure: Relatively small main contractors invest less in their operations and outsource specialty skills to subcontractors to a higher degree than Continental counterparts. None of Europe’s 10 largest contractors is British and only two U.K. firms are in the top 20, says the review.

Because of such factors, “U.K. contractors are less active in Europe than their counterparts in France, Spain and Germany. This is in direct contrast to the U.K. market, which has a range of European suppliers actively engaged,” notes the report.

But Danny Alexander, a senior government finance minister, believes all is not lost. “One look at projects like the Olympics, where over $950 million has been saved, shows that the U.K. can deliver big infrastructure projects on time and within budget,” says Alexander, adding, “We just have to make sure that the rest learn from the best.”

Five of the Best

The government aims to develop a plan by March to implement measures identified by the report. Officials say the plan will be structured around five broad objectives:

• Better visibility and continuity of infrastructure investment through updates to the first National Infrastructure Plan, published last October

• More effective project and program governance through clear accountability for key decisions

• Greater discipline in commissioning work by objectively challenging specifications and cost estimates

• More effective competition by improving risk-based assessment of procurement options

• More investment in efficiency and lower direct costs through better delivery solutions

“Evidence from the investigation suggests a high degree of consensus that efficiency improvements can be achieved,” reports Terry Hill, who chaired the investigation’s steering group. Hill is a former chairman of Arup Group Ltd., London. He now is Arup’s global market leader for transport.

Peter Hansford, president of the Institution of Civil Engineers, singles out the importance of ending the “stop-start investment” in infrastructure. Achieving the report’s goals will be challenging, Hansford acknowledges. But he adds that “the whole industry is fully behind the aims and enthusiastic about making it happen.”

 

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