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Government report slams infrastructure procurement

A government report into infrastructure supply chains has slated the UK’s public procurement landscape and identified five cross-sector performance barriers.

The Department of Business, Innovation and Skills said public procurement was characterised by “ineffective industry engagement, poor and inconsistent communication of goals, short-termism, perverse contractual incentives, over-specification in tender requirements and a lack of seniority and capability of procurers”.

The BIS report, Infrastructure supply chains: Barriers and opportunities, added that clients were failing to engage construction suppliers early enough in the process.

BIS has made plain that the document, which was promised in last year’s National Infrastructure Plan, presents evidence and views from respondents rather than representing government policy.

But it is thought it will be a major contributor to the Plan for Growth and the National Infrastructure Plan Revision, both expected before the end of the year.

Business minister Edward Davey said: “Government has been working with many of these companies, engineering institutions and industry bodies to understand these barriers and also identify areas of good practice that can be transferred across sectors.

“These findings will inform the Growth Review of infrastructure that is currently under way.”

The government says it has begun to tackle procurement problems, but four other barriers to the UK’s £200 billion, five-year infrastructure requirements remain. They are: innovation, skills, policy risk and finance.

As the government will be required to stump up just 30 per cent of the required investment, additional finance has been earmarked as the most likely inhibitor to completion of the required infrastructure.

“Infrastructure UK has got procurement firmly in its crosshairs,” said Civil Engineering Contractors Association director of external affairs Alasdair Reisner. “Policy risk is very much on a sector-by-sector basis but the government has recognised the need to do something.

“That leaves us with finance. That is the big one. You can have all of the policies you like but if you’ve got no cash then it is ‘good night’.”

The report noted that there was no shortage of liquidity in international markets. However, UK infrastructure projects - in need of £140 billion of private-sector investment over the next four years - would need to ensure an attractive balance of risk and long-term returns.

The Infrastructure Growth Review due in the autumn aims to address this issue. But it exists against a backdrop of global competition for investors’ funds, from fast-growing economies in Asia and the Middle East as well as established competitors in Europe and North America.

Bank de-leveraging, encouraged by financial regulators, had also resulted in reduced debt availability, the report said.

It added that the financial landscape had created a situation where innovation in the supply chain was stymied by risk aversion on the part of funders, who mandated proven technology and processes as a condition of investment.

Meanwhile, government policy flip-flops also created uncertainty. This impacted not just on investment in infrastructure assets, but also in supporting facilities and skills, the report said.

 

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