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Infrastructure UK reveals early indicators of high civils costs

Infrastructure UK (IUK) has published an update on its study in to the high cost of civils work in the UK. Among the factors to blame are stop-start investments, standards, and regulation compliance, poor commissioning, a fragmented supply chain and a purely contractual approach to projects.

IUK intends to publish its full study in December but released the early findings from its qualitative investigation into why the cost of infrastructure work is so high in the UK.

“The barriers to efficient delivery of infrastructure need to be tackled,” said IUK. “Initial results confirm that the outturn costs of civil engineering infrastructure works in the UK are high in comparison with the rest of Europe and IUK is gathering evidence to understand better the key reasons for high costs.”

Among the issues, IUK identified the following areas for concern:

  • Stop-start investment - Lack of certainty of budget commitment to programme investment reduces efficiency, suppresses innovation and has a negative impact on industry’s appetite to invest in the UK.  Where the private sector is given greater clarity of the pipeline, costs have been reduced.  Significant savings have been delivered in the utilities sector as a result of the private sector being able to offer greater continuity in the pipeline for infrastructure renewal and investment. Potential exists to achieve increased savings in the roads programme and to extend the benefits to other areas, including more publicly funded infrastructure programmes. The savings generated by creating greater certainty over maintenance and renewal programmes could be used to bring forward capacity-enhancing projects.
  • Standards and regulation compliance - In the UK there is a complex web of planning, consents, regulation, process and standards, which absorb time and add considerably to cost.  While these systems are designed to protect the rights of citizens and ensure high quality, safe infrastructure, the cost impact is considerable and is exacerbated by a risk-averse culture that can lead to over specification, excessive assurance, monitoring and scrutiny throughout the delivery process,
  • Poor commissioning - Poor practice in commissioning is a major cause of inefficiencies in the specification, design, procurement and construction phases.  The public sector in the UK does not generally discharge its role as commissioner and procurer of infrastructure effectively. Ill-defined stakeholder accountability in the pre-construction phases leads to unnecessary reworking during construction.  The commissioning and procurement processes appear to be more efficient in the private sector, both for bespoke projects and renewal programmes; especially where economic regulation has added to the downward pressure on costs and encouraged innovation.  An example of this is the development of standardisation and off site fabrication in some parts of the water industry.
  • Fragmented supply chain - The private sector construction industry for infrastructure in the UK is not structured to optimise efficiencies and maximise productivity through the supply chain. The UK construction industry for infrastructure has tended towards a relatively large number of smaller construction companies acting as main contractors by comparison to its European peer group.  The various technical trades and suppliers tend to exist as separate companies engaged through sub-contracts, rather than being part of a vertically integrated supply chain.  This fragmentation of the contracting industry contributes directly to low skills development, training and productivity that add to costs of construction. 
  • Contractual approach - The UK generally adopts a more contractual approach to infrastructure projects and programmes compared to other countries, which can lead to perverse behaviour particularly in tough market conditions, where low prices achieved under competition may be increased at outturn as a result of claims.   There is concern that behaviour in the current economic climate may result in a return to an adversarial culture.

“Most of the factors identified in the IUK study so far have been recognised in previous studies,” said the report.” “But the changes have not been successfully implemented. The current fiscal environment and drive for efficiency provide an opportunity for government and industry to work together to address some of the barriers to change.”

Readers' comments (1)

  • Interesting to note that the measure of value by lowest tender price is not mentioned. I would suggest that is the root cause of many of the issues identified. There did seem to be a move away from this but it is still prevalent especially in the public sector and will no doubt become more so in these difficult economic times. Lowest price squeezes margins and as a consequence wages. How then are we to attract the good people especially graduates into the profession. The institution requires a high level of qualification for membership in an industry that consistently underpays. Its no wonder so many graduates go elsewhere! If we want to improve the industry we need the good quality people. Perhaps IUK should look at that!

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