UK civils costs are 4th highest in Europe

Aaron Morby 14 years ago

Civil engineering projects cost 20-25% more in the UK than schemes in countries like Ireland and France.

The initial research findings from the high-level probe into civil engineering by quango Infrastructure UK confirms big inefficiencies plague major civil engineering projects in this country.

The interim report also warns that the economic downturn risked a return to adversarial contracting because clients were fixed on a strong contractual to delivering major projects.

“This leads to perverse behaviour particularly in tough market conditions, where low prices achieved under competition may be increased at out-turn as a result of claims.”

The report also blames greater numbers of smaller contractors acting as main contractors compared to peers in Europe for a failure to develop appropriate skills in the civils industry.

So far the benchmarking study found only Nordic countries suffer from higher costs in Europe.

Now the review panel chaired by Arup’s Terry Hill will draw up a set of recommendations to cut outturn costs in a final report due at the end of the year.

These will see fresh measures aimed at increasing certainty of the investment pipeline, removing wasteful process and strengthening the capability of those involved in procurement and the supply chain.

The interim report said: “Whilst many of the factors identified by IUK have been recognised in previous studies, there has not been sufficient concerted effort by government and industry in the past to make the changes necessary to resolve them.

“The current fiscal environment and drive for efficiency provide an opportunity to ensure that, this time, the necessary actions will be taken.”

Reports on the costing of High Speed 2 and benchmarking studies conducted on roads scheme and metro systems unearthed further evidence of higher costs in the UK.

IUK said: “In some instances, higher relative capital costs in the UK can be attributed to greater intensity of use and enhanced design life of assets, together with geographical factors such as the UK’s greater density of population.

“However, these factors do not fully account for the differences in cost – the cost of labour, plant and raw material inputs, including public and private sector investments.”

Stop-start investment, the complex web of regulation, planning and standards compliance come in for heavy criticism, along with poor public sector commissioning and cost management.

IUK will now draw up a detailed action plan to deliver the identified cost saving benefits for UK infrastructure projects and renewals programmes.

Emerging measures for consideration

Increase certainty and continuity of pipeline for committed projects
  • Explore opportunities to extend investment programmes across regulatory review periods.
  • Enable other public sector and regulated commissioning bodies to commit to longer term programmes and set cost reduction targets.
  • Through alliancing and partnering agreements encourage greater investment by contractors in trade skills, innovation and supply chain development.
Create clearer distinctions between the roles of commissioner, client, funder, and delivery agents
  • Measures to implement effective leadership and governance so that key decisions vest through individuals or bodies capable of discharging their function as a ‘single controlling mind’.
  • Incentivise unified management of costs, risks and contingency between stakeholders.
Instil  greater discipline to commissioning
  • Encourage greater use of outcome based specification and the removal of unnecessary prescription of standards to encourage innovation.
  • Introduce greater objective challenge of the specification of requirements and budget costs.
  • Explore the benefits of separate management of contingency budgets outside of the promoter or delivery body, particularly on larger one-off infrastructure projects.
  • Improve the availability and transparency of asset condition and benchmark data, including cross-sector access to UK and international benchmarks.
  • Consider the opportunities to derive better value for money from a portfolio management approach to risk transfer, for example in contingency budgets, project insurance and cost indexation.
Develop smarter ways of using competition
  • Encourage the use of effective competition and procurement to realise cost savings through the whole supply chain and minimise wastage in the procurement process.
  • Develop mechanisms to encourage greater alignment of interest between contractors and clients in reducing costs.
  • Continue to encourage increased early contractor involvement.
  • Where appropriate, encourage further standardisation of contracts, including payment and incentive arrangements.
Reduce the direct costs of construction
  • Develop measures to improve productivity, for example through site project management, supervision and skills.
  • Encourage standardisation, the use of off-site fabrication and other means of improving efficiency.
  • Review the way in which standards and regulations are applied with a view to developing more efficient means of ensuring safe and high quality construction.
  • Support the development of better structured and incentivised partnering between supply chain providers.
  • Improve the standardisation and processes around change control under the current preferred standard forms for infrastructure and consider ways to avoid escalation of a ‘claims culture’.

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