The UK Government has said that it is on target to make up to £3 billion of annual savings on infrastructure projects with the publication this morning of the first annual report of the three-year Infrastructure Cost Review programme. 

The first year programme of work also included a commitment to address the problems of cyclicality in the water sector as part of a joint study with Ofwat.

Launched in March 2011 and led by Infrastructure UK, the report says there is “evidence of good progress” towards making the delivery of infrastructure more efficient and that the programme is on course to make the savings.

First published in 2010, the Review identified that between £15bn and £20bn per annum is being spent in the UK directly on infrastructure construction and set out plans to reduce the cost of providing infrastructure in the UK via efficiency savings of at least 15 per cent by £2 to £3bn a year by 2015.

Today’s Government report is in line with the first annual report which identified projected savings of up to £1.5bn through changed behaviours and practice.

The Government says it will achieve a projected 20 per cent saving - over £600 million through managing projects more strategically on 20 major schemes being delivered through the Highways Agency’s Managed Motorways and Trunk Road Improvement programme, while London Underground is also expecting to deliver over £400m efficiency savings through more effective project management.

Commenting on the report, Lord Sassoon, Commercial Secretary to H.M. Treasury, said:

“It is vitally important that utility bill payers and taxpayers get good value for every pound spent on new infrastructure.

“Every pound saved through this Cost Review programme is a pound more that can be spent on new infrastructure for the UK. This first annual report shows we are on track to deliver the savings we identified last year.”

Alasdair Reisner, head of external affairs at the Civil Engineering Contractors Association, said:

“Our industry has been calling on government to be clearer about its investment programme and procurement needs for some time. We are now actively engaging with the government on the development and use of these pipelines to improve supply chain growth and sustainability.”

Key achievements during the first year of work include:

• Commitment to address the problems of cyclicality in the water sector as part of a joint study with Ofwat.
• Partnerships with industry to improve supply chain skills and capability and access cross sector efficiencies – starting with pilot programmes for tunnelling across rail, waste water and energy projects.
• Government and industry agreement to the Infrastructure Charter as a basis for setting out the behaviours required to improve collaboration and reduce costs.
• Development of a ‘routemap’ to enable public and private clients to select the most appropriate procurement strategy and drive consistent behaviours and practice for across infrastructure programmes or projects.
• Formation of an Industry Standards Group to remove duplication and redundancy in technical standards for infrastructure assets.

Infrastructure UK’s upcoming priorities for  2012/13 include a commitment to build on the joint study with Ofwat and consider further measures to mitigate the impacts of cyclicality and stop-start investment in other areas. The Government is also aiming to improve strategic pre-procurement dialogue with industry by jointly developing plans to address existing skills and capability gaps to establish sustainable and efficient supply chains. Infrastructure UK will also continue to work with industry to develop the following enabling mechanisms:

• complete development of new Green Book infrastructure risk and contingency guidance;
• to develop, in conjunction with industry, templates for extending the use of the NEC33; review and consult on construction bonds and the use of innovative and cheaper insurance based products;
• suite of contracts in establishing collaborative working arrangements;
• work with industry to extend the project performance datasheet pilots and publish the first wave of project reports;
• consider the benefits of adopting industry standard principles for asset management, such as PAS55.

Peter Hansford, Executive Director at the Nichols Group, who chairs the Cost study’s Infrastructure Steering Committee and past ICE president, said:

“The progress made in year one is encouraging and I have seen close, constructive working between government, clients and industry to achieve the goals. The National Infrastructure Plan and future pipeline of funded infrastructure have improved visibility for industry and provide a platform for change in procurement practice that will help achieve cost savings. Looking to year two, active engagement with the implementation of the cost review across the whole industry will be key to ensuring the principles are put into practice.

“In my role as chair of the Infrastructure Steering Committee, I will continue to advocate industry engagement and maintain enthusiasm for this important programme.”