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Government looks to measure supply chain and share results

The Treasury is looking to scrutinise supplier performance in more detail and potentially share results with other clients, it said today.

The government department said the Infrastructure Client Working Group has recognised that “a more consistent approach to measuring and reporting supplier performance may help drive improvements and support sharing of best practice”.

It said: “They will investigate introducing a high level supplier performance measurement report to inform future engagement and procurement.

“Consideration will be given to sharing this data between clients and aggregating the output into a high level supplier performance report. The group will report in winter 2013.”

The Treasury said it will also continue to work with regional infrastructure providers “to help improve the visibility and planning of local pipelines”, and expand the north west hub scheme, where it has been supporting the establishment of the North West Infrastructure Hub.

A new Major Infrastructure Tracking (MIT) team will be established within Infrastructure UK to track the top 40 priority projects, while new reporting requirements will be piloted over the summer and rolled-out from autumn 2013 alongside an improved infrastructure pipeline.

IUK will also consider issuing guidance on pragmatic insurance and bonding requirements, to raise awareness of risks faced by the supply chain and support “a more consistent approach from infrastructure clients”.

The plans are all set out by government in its second annual report on the three-year Infrastructure Cost Review programme, launched in March 2011 and aimed at improving delivery and cutting cost.

The report says government is on track to cut the price of UK infrastructure delivery by 15 per cent.

The government claims its work is uncovering large efficiency savings across major projects, including £1bn in the first phase of High Speed 2.

But while the highways, rail and water sectors were seen to have improved in their governance of projects, waste, energy and communications have “regressed” in 2012.

The review found that the highways and rail sectors were “reported as demonstrating improved governance through grouping similar infrastructure projects as part of a longer term programme to improve efficiency”.

It added: “The water sector also was reported as showing improvement over 2012. However, waste, energy and communications were reported to have regressed from 2012.”

A survey accompanying the review reports improved behaviours and “more successful outcomes”, but says there is work to do in energy and telecoms in particular.

Cost review – what Treasury says it has meant for projects*

The Highways Agency and Environment Agency saw £290m of efficiency savings on sample projects worth £1.165 billion – a saving of 25 per cent.

High Speed 2 has identified potential efficiency opportunities of over £1bn in phase 1.

Network Rail has ‘demonstrated’ a 4.9 per cent reduction in unit costs in its illustrative ‘cost benchmarks’ for renewals expenditure between 2010/11 and 2011/12.

There has been progress in implementing ‘Cost Review principles’ across other Top 40 projects such as the Thames Tideway Tunnel, where IUK says it has been giving “support to project team on risk assessment methodology and procurement approach”.

Others include in flood and coastal defence, the strategic roads programme and Transport for London investment.

*CN has asked Treasury for a breakdown of the detail of these savings

The Treasury today reiterated that visibility of the infrastructure pipeline, longer-term investment planning and a programme based approach are “vital components in establishing more effective delivery environments”.

It said the cost review has helped to underpin the calls for a longer-term approach to capital funding as part of the 2015/6 spending review on 26 June.

Commercial Secretary to the Treasury, Lord Deighton said: “It is vital that government and industry continue to work together to ensure a lasting legacy from this programme, to continue to bear down on the cost of building the infrastructure vital to sustained UK growth.

“I want to ensure that going forward we have much better visibility of the performance of these projects and a means to continually measure and monitor performance.

Director General of the Institution of Civil Engineers Nick Baveystock added: “The cost savings identified, and the evidence of changing behaviours in the supply chain are very encouraging and the drive for further efficiencies from both industry and government must continue.”

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