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IPA boss on PF2, contractors' woes and the offsite revolution

Today the government is set to release its £600bn Infrastructure Pipeline covering the next 10 years.

The driving force behind the pipeline is the Infrastructure and Projects Authority, the body charged with ensuring strong project delivery on government projects.

Construction News spoke with the IPA chief executive Tony Meggs ahead of the pipeline being released on why it is closely monitoring the contractors performance, why the East West Corridor will be a test case for future infrastructure, and the future of PF2.

What does the IPA do?

The IPA was born in the early part of 2016 following the merger of Infrastructure UK and the Major Projects Authority. Mr Meggs, who was chief executive of the MPA, was promoted to head up the newly formed group. 

But why was this needed?

He says the merger came as part of the government’s plan to rationalise its functions – and has provided a number of benefits. “The merger gave us the opportunity to bring all of these skills across both bodies together,” he says.

Put simply, the IPA’s role now is coming up with a pipeline of public projects, then ensuring project teams have the right skills and capabilities to deliver them successfully.

“Our ultimate goal is early project engagement. We are moving further and further up the chain in government”

So far, it has a decent track record.

“We have been delivering pipeline since 2010, which have included 157 priority projects,” Mr Meggs says. “Of these, about a third have already been delivered, a third are in progress, and a third are in the plans. This shows our pipeline is not just a pipedream – only three of these projects have been cancelled.”

He uses Tideway as an example of the impact of the IPA and its predecessors, where it was instrumental in creating a project structure, facilitating the financing and carrying out continued independent reviews to monitor its delivery.

Nevertheless, Mr Meggs says the body’s influence could go further. “Our ultimate goal is early project engagement. We are moving further and further up the chain in government and I have examples of where announcements from government have been deferred until the IPA has done analysis on it.”

Thames Tideway Tunnel Shafts at Beckton

Thames Tideway Tunnel Shafts at Beckton

Tideway is cited as an example of the IPA’s impact

He does concede that it is often still difficult to get between a ministerial decision and announcement, but says this is an area over which the IPA is working to exert more influence.

More than an eye on struggling contractors

The IPA’s pipeline comes as a number of the government’s biggest construction suppliers face financial difficulties.

Asked whether the IPA has an eye on struggling firms across the market, Mr Meggs says: “We have got more than one eye on these firms.”

He believes one of the critical aspects is to look at how the government procures on big projects. “A strong economy and good infrastructure requires strong companies that can deliver that; we need to procure for value and use more sophisticated methods of procuring where you form more of a partnership with suppliers.”

Last week, the construction sector was one of four sectors to be handed a sector deal, which included £170m of direct funding from government for firms to invest in research and development. “In order to achieve investment in skills and technology we need a strong industry, and as the biggest client in the country, we need to look very hard at how we procure and our relationship with suppliers,” he says.

“The reason why people get into haggling over thin margins and so on, a lot of that is down to inexperience”

Crucial to this is bringing in modern collaborative ways of procuring. To ensure these new ideas are able to be brought through, he says more experience is needed. “In order to do that procurement, you need very experienced people – you can’t have junior folks that don’t have that experience. 

“The reason why people get into haggling over thin margins and so on, a lot of that is down to inexperience; you need to be experienced and more confident to bring through these more modern contracting arrangements.”

A moment in time for construction

The construction industry is often known for its adversarial nature, with commercial models preventing collaboration. But Mr Meggs says now more than ever, things appear to be changing.

“This is a moment in time when something really serious can occur. The whole industry and government is now waking up to the notion that we need to make some serious changes to improve productivity, to improve skills, etc.”

He believes this is being driven by a number of people including Andrew Wolstenholme, who he says has “banged heads together over the sector deal”, as well as Sir John Armitt and Andy Mitchell, describing the latter as a “powerful individual” that gets “shit done”.

The IPA will also help to drive this change – and has started by coming up with its Transforming Infrastructure Performance plan. The plan is based around four core aims.

Andy Mitchell chief executive Thames Tideway Tunnel

Andy Mitchell chief executive Thames Tideway Tunnel

Andy Mitchell – a “powerful individual”

These are ensuring that the outcomes of projects are properly thought through before being taken forward; ensuring all projects are delivered in an integrated way in government, focusing on social and economic benefits; procuring better with both supply chain and taxpayer in mind; and to embrace technology in the delivery and operation of infrastructure assets in order to increase productivity.

“The problem with offsite construction has been volume. In order to create effective manufacturing factories, you have to have volume”

The implementation of these, the IPA believes, could save the construction industry £15bn in efficiencies every year.

Offsite by 2019?

As part of the Budget two weeks ago, the Treasury revealed that all government departments would favour offsite on all public projects by 2019, where it was deemed value for money.

Mr Meggs believes this represents an important step forward. “The problem with offsite construction, apart from low margins in the industry, has been volume. In order to create effective manufacturing factories, you have to have volume.”

He says the government’s objective as construction’s biggest client is to create this volume for offsite to flourish. The government’s construction board, which brings together all departments, will work together to ensure this commitment is put into practice.

But, he is keen to stress, this will not be mandated. “We don’t like the word ‘mandated’. We always preferred to work by persuasion rather than force. We are trying to build a critical mass here.”

Oxford to Cambridge ‘test case’ for future infrastructure delivery

As part of the new approach to infrastructure delivery, the government will take a much more integrated view when putting forward infrastructure projects. It will use test cases to this end, with the first being the Oxford-to-Cambridge corridor.

“There is still an appetite, there is actually quite a big appetite – I see the potential for more PF2 coming”

After being endorsed by the National Infrastructure Commission, the corridor will see hundreds of millions of pounds of investment in roads, the new East West Rail line, and eventually the construction of 100,000 homes.

Mr Meggs says this should offer a model for how infrastructure is discussed and planned. “When we are planning infrastructure now, can we not just talk about building a road, not just talk about building a railway; can we talk about the social infrastructure, the million homes, the hospitals – look at it in a much more integrated way. This is something the government has not been good at in the past, working across the departments.”

PF2

In the 2016 Autumn Statement, the government committed to publishing a new list of PF2 projects “early in 2017”. The pipeline was eventually shelved earlier this year.

Mr Meggs says it’s a shame the IPA was unsuccessful in creating a major pipeline in the time given, but confirms PF2 is not dead and he that expects projects to come through in the coming years.

The Treasury is now working on a review of the PF2 standard form of contract to be published in the new year – the first review of PF2 since 2012. Projects lined up to adopt PF2 models include Highways England’s Stonehenge Tunnel and Lower Thames Crossing projects.

Asked whether there is still appetite from UK contractors to get involved, Mr Meggs says: “There is still an appetite, there is actually quite a big appetite – I see the potential for more PF2 coming.

“But I’m not hung up on PF2.”

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