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Government on track to make £3bn of savings on rail and roads

The government is on track to make up to £3 billion of annual savings on infrastructure projects after cutting costs on highways and London Underground schemes, it said today.

The first annual report of the three-year Infrastructure Cost Review programme - launched in March 2011 and led by Infrastructure UK - was released today, and claims there is “evidence of good progress” towards making the delivery of infrastructure more efficient.

The Infrastructure Cost Review - first published in 2010 - set out plans to reduce the cost of providing infrastructure in the UK by £2 to £3bn a year by 2015.

It identified that between £15bn and £20bn per annum is being spent in the UK directly on infrastructure construction, saying there is the opportunity to make efficiency savings of at least 15 per cent by 2015, worth £2bn to £3bn per annum.

Today’s government report says the programme is on course to make those savings. It is in line with the first annual report which identified projected savings of up to £1.5bn through changed behaviours and practice.

It reports a projected 20 per cent saving - over £600 million - on 20 major projects being delivered through the Highways Agency’s Managed Motorways and Trunk Road Improvement programme, through managing projects more strategically and “allowing them to work better with their supply chain”.

London Underground also expects to deliver over £400m efficiency savings through more effective project management.

Achievements have included a Memorandum of Understanding between the Highways Agency, Environment Agency, London Underground and Network Rail. to tackle supply chain costs and pool data and access commercial intelligence.

The Commercial Secretary to the Treasury, Lord Sassoon said: “It is vitally important that utility bill payers and taxpayers get good value for every pound spent on new infrastructure.

“Every pound saved through this Cost Review programme is a pound more that can be spent on new infrastructure for the UK. This first annual report shows we are on track to deliver the savings we identified last year.”

Alasdair Reisner, head of external affairs at the Civil Engineering Contractors Association, said: “Our industry has been calling on government to be clearer about its investment programme and procurement needs for some time. We are now actively engaging with the government on the development and use of these pipelines to improve supply chain growth and sustainability.”


Achievements:

improve clients’ commercial capability and understanding of supply chain costs the government has for the first time put in place an agreement between the Highways Agency, Environment Agency, London Underground and Network Rail to pool data and access commercial intelligence.

government and industry agreement to the Infrastructure Charter as a basis for setting out the behaviours required to improve collaboration and reduce costs;

development of a ‘routemap’ to enable public and private clients to select the most appropriate procurement strategy and drive consistent behaviours and practice for across infrastructure programmes or projects;

application of new approaches to the management of risk and contingency in public sector infrastructure projects;

formation of an Industry Standards Group to remove duplication and redundancy in technical standards for infrastructure assets;

commitment to address the problems of cyclicality in the water sector as part of a joint study with Ofwat; and

partnerships with industry to improve supply chain skills and capability and access cross sector efficiencies – starting with pilot programmes for tunnelling across rail, waste water and energy projects.

Priorities for year 2012/13

ensure that infrastructure projects and programmes adopt best practice from the procurement ‘routemap’ to drive consistent characteristics, behaviours and practices

across public and private sector infrastructure clients;

improve strategic pre-procurement dialogue with industry by jointly developing plans to address existing skills and capability gaps to establish sustainable and efficient supply chains;

publish the autumn update of the funded construction pipeline and wider National Infrastructure Plan updated pipelines;

consider further measures to mitigate the impacts of cyclicality and stop-start investment in other areas, building on the joint study with Ofwat and Alan Cook’srecommendations for alternative funding models for the Highways Agency;

consider the recommendations from the Industry Standards Group report and initiate specific pilot programmes with the Highways Agency to ring-fence selected projects and provide industry with the opportunity to challenge existing standards and fasttrack the process of agreeing departures;

• continue to work with industry to develop the following enabling mechanisms: complete development of new Green Book infrastructure risk and contingencyguidance; to develop, in conjunction with industry, templates for extending the use of the NEC33; review and consult on construction bonds and the use of innovative and cheaper insurance based products; suite of contracts in establishing collaborative working arrangements; work with industry to extend the project performance datasheet pilots and publish the first wave of project reports; and consider the benefits of adopting industry standard principles for asset management, such as PAS55.

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