Government cuts construction costs by 7%

Aaron Morby 10 years ago

The Government expects savings in its health and school building programmes of up to 7% in the first year of its war on inefficiency.

The Cabinet Office today reveals it is committed to delivering trumpeted savings of 15-20% by 2014/15 from central construction projects.

Latest cost figures show that Partnership for Schools and the Ministry of Justice have led the way in extracting cost savings of up to 7%, against benchmarked data from 2009/10.

The Department of Heath using Procure 21+ is hard on their heels with an expected 6% saving by the end of the financial year in its building programme.

The Environment Agency will also trim 3.8% from programme budgets, with the Highways Agency achieving a smaller 1% saving.

The data published by the Cabinet Office equates to around £180m being saved from all centrally procured projects this year.

Details were also released of seven construction projects to be used as test beds for new cost saving ideas.

The Ministry of Defence will trial integrated project insurance on a £7.6m contract for training facilities at Lympstone Royal marine base.

The MoD will also set savings targets for its framework contractors with the threat that if they are not met work will be tendered outside the framework.

This cost led procurement approach will also be trialed on a new hangar project at RAF Waddingdon and the Environment Agency’s £2.4m Upper Mole flood alleviation scheme and £5m Rye harbour sea wall defence project secured by Jackson.

Two-stage open book procurement will also be rolled out through two Housing and Communities Agency procurement programmes.

Francis Maude, minister for the Cabinet Office, said: “These savings are not only significant but long overdue. The commitment to reduce the cost of construction by 20% is no small thing, but it will help the Government and the construction industry.

“This strategy will stimulate growth by enabling more to be constructed within the funds available.”

The new figures come as the Highways Agency also reveals plans to roll out project bank accounts to over 20 building and maintenance projects in the next three years.

The supply chain on the M4/M5 managed motorways scheme (Bristol) and the M62 J25 to J28 managed motorway scheme (North Yorkshire) are already benefiting from the huge change in the way they are paid.

The Cabinet Office is working with public sector construction procurers to extend the use of these accounts.

This year alone, over £500m worth of projects have already been signed up to use project bank accounts and this will rise to £4bn by 2014.

This rapid roll out will see the cash flow easing initiative used for almost 20% of the spend in government construction projects in three years’ time.

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