Early Contractor Involvement downgraded as the Highways Agency reviews project procurement
The Highways Agency is set to review Early Contractor Involvement (ECI) as its preferred project procurement method, as new figures reveal ECI fails to deliver cost savings consistently.
Statistics obtained by NCE under the Freedom of Information Act show that the majority of ECI roads schemes considered completed by the Agency do come in under budget. However, Ministerially Approved Budgets (MAB) are considerably higher than cost at project conception and 36% of these ECI’s have cost more money than at the MAB level.
Agency major projects commercial director Tim Eaton told NCE that he recognised ECI failed to work on all roads schemes and would therefore no longer be the de facto means of major project procurement. “It’s horses for courses,” said Eaton, “But ECI will still be used as a major weapon in our arsenal.”
“The basic principle [of ECI] we believe still applies in various cases, but not all.” Eaton added that the agency would be looking to “tweak” ECI, using practices he and Agency major projects director Nirmal Kotecha learned from their previous roles in the water industry. This would include detailed assessment of contractofs’ supply chains and capabilities.
The Agency was also reassessing the pain/gain relationships between client and contractor currently used on ECI contracts. “It is [currently] possible for the contractor to be in gain, but the Agency in pain,” Eaton said.
ECI was championed by former Agency procurement director Steve Rowsell as a way of bringing down costs on road schemes. It works by introducing a contractor and consultant team at an early stage in the project – usually prior to a public inquiry and tendering – to take the project through to detailed designs, allowing the contractor to have significant influence over the scheme.
However, when Rowsell quit the Agency after it was slammed for a £1bn overrun, it was feared that ECI would be scrapped (NCE 14 December 2006).
The basic principle of ECI we believe still applies in various cases, but not all
President of the Institution of Highways and Transportation (IHT) David Tarrant said that the ECI process was not the magic bullet that the Agency had hoped for. “Local circumstances start to become more important than, say, the size of the scheme. You have to look how projects are put through various processes, from concept to inquiry to construction, there are so many variables,” he said.
Of 68 schemes procured by the Agency using ECI, only 14 are classified as ‘complete’, the most recent in April 2006. Nine of the 14 projects were within the MAB and overall projects cost some 8M less than predicted in total. However, costs at project conception would have been considerably less than the MAB.
Since Mike Nichols’ 2007 review of Agency cost estimates, project costs are set at ministerial approved levels when most uncertainties are dealt with. A review of ECI was Eaton’s first task when he joined the Agency last year. “The issue was not with formal contracts but estimates. We have made substantial improvements in the last 12 months. We also need a better model for estimating. Before we applied resources to a bill of quantities – we will now apply it to a schedule of activity.” This he said, provides a far more accurate estimate, as this method can factor-in constraints on work.
Eaton confirmed that delays remain the largest factor for cost hikes. He also said that ECI would not be the only procurement method in the future, but a significant weapon. ECI has been the Agency’s preferred procurement model since its introduction in 2001.
Tarrant added: “There is a judgement call on the best procurement process for any particular scheme and with ECI you have to look at how the client can get the best out of pairing the contractor and consultant to get the time and costs down and achieve a successful scheme.”
“I look forward to hearing what the Agency say about their experiences so far and IHT do have a meeting with the Agency team shortly at which a range of issues are discussed. IHT is looking at procurement, and there is always scope to improve things. The Agency can draw some of the threads together and see if the industry is happy with it,” he said.