Three Billion A Year Could Be Saved

21st December 2010

Three billion a year could be saved from costs of infrastructure says report

A Government report by Infrastructure UK (IUK) today sets out a blueprint to save up to three billion a year on building and maintaining infrastructure.

Treasury Ministers welcomed the plan saying it could promote growth by freeing up more money for infrastructure investment, as well as helping keep water, gas and electricity bill costs down for consumers by reducing costs for utility companies.

The report outlines how costs of building and maintaining energy, transport, waste and flood defence infrastructure projects can be reduced by at least 15%. With between £15 and £20 billion being spent each year, this equates to savings of between two and three billion a year - between £20 billion and £30 billion over the next decade.

The savings in delivery cost would be achieved by Government working with industry to improve procurement, raise productivity, simplify processes and promote innovation and better industry integration.

Chief Secretary to the Treasury, Danny Alexander said: "One look at projects like the Olympics, where over £600million has been saved, shows that the UK can deliver big infrastructure projects on time and within budget.

"We just have to make sure that the rest learn from the best. By working with industry we can identify ways to save money for them and the taxpayer. The data gathered through IUK's investigation has enabled us to identify savings of between £400 million and £800 million from the initial cost estimate for High Speed 2.

"Savings are in everyone's interests, as it will see the taxpayer get more value for money and will make the UK a cheaper place to do business, promoting growth in the long term."

Lord Sassoon, Commercial Secretary to the Treasury, said: "I am most grateful to Terry Hill and colleagues for their work in preparing this report. It is very significant that the construction industry has been an integral part of what is fundamentally a cost-cutting review. That is because they can see this work as helping to create a step change in the way infrastructure is delivered in the UK. This should lead to a stronger UK construction chain - and a UK construction industry that is even better placed to complete globally."

The report was welcomed by key industry players, including Richard Lambert, the CBI Director-General. He said: "Investment in infrastructure will be essential for economic recovery in the UK. This important report clearly sets out how waste can be reduced in the delivery of construction projects, allowing subsequent savings to therefore be reinvested."

The report concludes that:-

there is a lack of certainty over long-term workflow;
the UK over-specifies and applies unnecessary standards;
strategic investment is constrained because industry is fragmented;
blurring of decision-making roles make governance inefficient;
competitions are burdensome and stifle innovation;
a lack of data limits capability to set challenging targets.
The evidence of the Steering Group of industry leaders found the following scope to reduce costs in the delivery of UK infrastructure by :-

eliminating peaks and troughs in the infrastructure investment pipeline;
improving client leadership, streamlining project governance and procurement;
reducing unnecessary prescription, standards and third party requirements;
improving asset management and benchmark data;
developing smarter ways to use competition; and
encouraging industry to invest more in innovation and skills.
Terry Hill, chair of the Investigation Steering Group, a member of IUK's Advisory Council and leader of Arup's Global Transport market said:

"I am delighted to have received such strong support during this investigation, not only from Government Ministers and IUK, but also from colleagues in the infrastructure industry and from the Institution of Civil Engineers. Achieving the potential benefits of £2-3 billion per annum requires a sustained and multi-faceted approach from Government and industry.

"Evidence from the investigation suggests a high degree of consensus that efficiency improvements can be achieved and that the infrastructure construction industry will respond positively to client side improvements in planning, commissioning and procurement of projects and programmes. Clients will respond in turn to improvements in industry by becoming more efficient and transparent."

The Government is working to finalise a prioritised programme for implementation to be announced by Budget 2011.

The full report can be found its key recommendations can be found at:
http://www.hm-treasury.gov.uk/iuk_cost_review_index.htm