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IUK to step up its cost cutting drive

Treasury body Infrastructure UK (IUK) has this week pledged to step up its efforts to seek savings from UK private sector and local authority projects.

It also said modest savings had been made in major projects to date.

In December 2010 IUK’s Infrastructure Cost Review Report identified the potential for making annual efficiency savings of 15% on infrastructure spending by 2015, equating to between £2bn and £3bn each year.

In the first year, savings of £1.5bn were identified but over the past year, total savings were less obvious. This year’s report, published this week, states that High Speed 2 promoter HS2 Limited had identified potential savings of £1bn in phase one of the project from London to Birmingham. But it gives little detail about precisely where these savings are to be made.

In addition, the Highways Agency and the Environment Agency clawed back a total of £290M on projects worth £1.165bn last year and Network Rail reduced unit costs by 4.9% on renewals expenditure in the past two years.

But the report called for more progress in the energy and telecoms sectors.

IUK is now setting up a major infrastructure tracking team in an attempt to improve the monitoring of schemes that are being held back.

“What we’ve realised is that we need to up the game in terms of tracking these projects [in the National Infrastructure Plan (NIP)],” said IUK chief executive Geoffrey Spence. “[Tracking them] to identify any roadblocks that are in the way from the point of view of the private sector as well as within the public sector.

“It’s also important to do this because we always need a better NIP. I don’t think anyone is going to say we’ve had the perfect creation. What we’ve tried to do as time has gone on is incrementally improve the NIP for the benefit of business as well as for government. This is another way of doing that.

“What this does is give us the tools to intervene when projects are going wrong at a more senior level than government.”

IUK project director Alan Couzens warned that the supply chain would be more closely scrutinised amid concerns that there has been a return to a confrontational claims culture.

“We are looking to be a bit more challenging of the supply chain,” he said. “There are instances where the supply chain hasn’t reacted as well as it could have done to those changed client behaviours. We still see some contractors reverting to previous behaviours in this current market, particularly in the local authority sector where perhaps the cost review hasn’t permeated as well as it has in central government and perhaps in some of the larger infrastructure providers.

“We’ve had anecdotal evidence of a move back towards bidding low and then being aggressive on claims.

“That behaviour is clearly symptomatic of the current market but one that an improved client-supply chain relationship would start to address.”

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