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Highways Agency fears low cost, low quality culture

Highways Agency chief executive Graham Dalton this week warned consultants against shaving costs by sacrificing design quality.

Dalton is concerned that suppliers are striving to make savings demanded by the Agency by using less experienced staff.

“I do fear that some of the shaping of costs is coming from the quality of input,” said Dalton, “for example by using lighter people in design.

“I do fear that some of the shaping of costs is coming from the quality of input”

Highways Agency chief executive Graham Dalton

“It is something we are watching very closely,” he said, adding that as yet he had no clear evidence that the practice was happening.

Many consultants are now sending design work to overseas design offices to reduce costs. In the water sector it has emerged that Hyder is sending most of the detailed design and CAD work it is doing for Thames Water as part of London’s Crossrail project to its Bangalore design office in India (NCE 28 July).

De-skilling the UK supply chain risk

Dalton said he was not in favour of such practice as it risked de-skilling the UK supply chain.

“We have got to consider the bigger interest that we want to sustain a [UK based] professional services capability to support our market,” he said.

“But we recognise that our biggest suppliers have offices around the world and that with modern communications networks you can send stuff elsewhere to be designed. Even if we wanted to stop that happening, it would be almost impossible to enforce.

“But I am not going to encourage it,” he said.

”I do want my suppliers to make a profit. If they don’t then something somewhere is going to go wrong”

Highways Agency chief executive Graham Dalton

Dalton insisted that he did want suppliers to make a fair profit margin on their work.”I do want my suppliers to make a profit,” he said. “I don’t mind if it’s a small one, but I do want them to make one.

“If they don’t then something somewhere is going to go wrong and it’s probably going to be at an inconvenient moment and it’s going to cost me money [to put right].”

Close to cost cutting targets

Dalton said that the Agency was on target to cut the cost of the 14 major projects it will deliver between now and 2015 by 20%, as set out in its 2011/12 business plan.”We are not there yet, but we are close,” he said.

Savings were being achieved by taking costs out of design, incentivising contractors through a “commercially sharper” optimised contractor involvement (OCI) contract. This bears down on scope and manages down risk.

Fierce competition in the market was also helping, he said.

The first new managed motorway contract to be let since the review − for the M62 − came in at £150M, a saving of £48M on the Highways Agency’s cost estimate. This was awarded to a Bam Nuttall/Morgan Sindall joint venture in July. Work is due to start in October.

The second managed motorway contract to be awarded will be a £75M scheme on the M4 and M5 around Bristol. The Agency is in advanced discussions with Balfour Beatty and expects to announce the award soon.

Carillion is also due to start work next month on the widening of the A23 in West Sussex. It was originally expected to cost between £87M and £103M but should now be less.

HIGHWAYS AGENCY CAPITAL PROGRAMME

Between now and March 2015, the Highways Agency will start work on 14 projects.

2011/2012:

  • A23 Handcross to Warninglid improvement in West Sussex by December 2011
  • M62 J25 to J30 managed motorway with hard shoulder running, West Yorkshire − by December 2011
  • M4 J19 to J20 & M5 J15 to J17 managed motorways with hard shoulder running, Bristol by March 2012.

2012/2013:

  • A11 Fiveways to Thetford dualling scheme, Norfolk;
  • M6 J5 to J8 Managed Motorway with hard shoulder running, Birmingham;
  • M1 J32 to J35a managed motorway with hard shoulder running, near Sheffield.

2013/14 or 2014/15:

  • M25 J5 to J6/J7 managed motorway with hard shoulder running, Kent to Surrey
  • M25 J23 to J27 managed motorway with hard shoulder running, Hertfordshire to Essex;
  • M1 J28 to J31 managed motorway with hard shoulder running, Derbyshire;
  • A556 Knutsford to Bowdon improvement scheme, south of Manchester;
  • M60 J8 to J12 managed motorway with hard shoulder running, Manchester;
  • M60 J12 to J15 (Lane Gain) managed motorway, Manchester;
  • M62 J18 to J20 managed motorway with hard shoulder running, Manchester; and
  • M1 J39 to J42 managed motorway with hard shoulder running, Wakefield.

Readers' comments (4)

  • "Savings were achieved by taking costs out of the design" and the HA is then concerned with "low cost, low quality" from Consultants...hardly surprising then is it??

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  • I can never understand the logic of cutting costs on design work. If you save 20% on 5% of the total cost of a project it is not a huge saving. Cheap design often results in inefficient design and off the shelf solutions. It is the only way a consultant can achieve the saving. Much better to spend more on the design and save the 20% on the remaining 95% through good quality efficient design. This way everyone wins, the consultants, contractors, clients and the environment.

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  • Interesting that Graham is concerned about de-skilling the UK supply chain but this is certainly happening as some large UK consultants have sacked UK staff and sent their work overseas. A whole category of technical work is in danger of being wiped from UK capabilities.

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  • If his concern lies only with the design office, what does he imagine is happening on site ?

    He appears to forget that the supply chain extends way beyond his Consultants and Managing Agents.

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