The cost of delivering public sector construction projects has fallen by 5 per cent since the coalition government took office, construction minister Mark Prisk has revealed.
Speaking to Construction News, the minister said the industry had “made good progress” towards achieving the government’s aim of reducing the cost of public sector construction by 20 per cent.
He said: “The indication is that over this first year we have secured a 5 per cent improvement on value and the intention is to get that up to 20 per cent.
“I want to say thank you to industry for driving down costs. It is important because that started with many of the things we ask of contractors as a client, around bureaucracy and pre-qualification.
“Now we want to move it forward with standardisation and building information modelling towards the 20 per cent saving.
“But it is very important that we keep looking at our processes.”
The provisional figures are the first indication of the progress made on wide-ranging government reforms that have been introduced in the 18 months since Mr Prisk took office.
Among those he believes have already made a significant impact are standardised pre-qualification questionnaires and a move towards more standardisation in design.
The 5 per cent is based on initial returns from major construction-spending departments including the Department of Health, the Environment Agency and the Ministry of Justice.
They are based on what departments have already saved against initial spending estimates through reductions in overheads, profits, waste and unit cost, CN understands.
Industry leaders welcomed the news of the 5 per cent saving. UK Contractors Group chairman James Wates said: “The construction sector has shown itself to be capable of adapting to tough conditions and of frank self-assessment. In partnership with government procurement teams we can help deliver much of what’s expected of us.”
Association for Consultancy and Engineering chief executive Nelson Ogunshakin said he was pleased the government had recognised the importance of improving procurement.
“Getting public procurement practices right is crucial to delivering a fair deal for taxpayers and there is room for improvement if we are to deliver world-class infrastructure and make the UK a competitive market for inward investors.”
Wates chairman and chief executive Paul Drechsler said his company was confident it could demonstrate savings of over 20 per cent through “excellent client collaboration, better process, better procurement and design for value”.
But some questioned the robustness of the figures. Interserve chief executive Adrian Ringrose said the “lion’s share” of the saving was likely down to “basic supply and demand” as contractors bid low to win work.
He said: “There are too many suppliers and not enough work so prices have been compressed pretty markedly.”
He said concerted government and industry action to improve the procurement of major projects would help move the industry towards the target 20 per cent saving.
“We are putting way too much effort into pre-contract procurement decisions, so if there was a way to short circuit some of that it would help, but 20 per cent is an audacious goal,” he added.
UKCG chief executive Stephen Ratcliffe echoed his concerns and said a 5 per cent saving “seems quite small given the state of the economy”. He called for more detail on how the figure had been calculated, raising concerns it was based on “unsustainable prices”.