ITC explores achieving better value for money

How can Britain achieve better value for money from her transport infrastructure?

The Occasion

In an age of austerity it is increasingly apparent that Britain needs to extract better value for money from her national transport infrastructure. How can we affordably build and maintain networks that will serve our transport needs in the coming decades? What changes are needed to improve the cost-effectiveness of our infrastructure? And what lessons can we learn from the way other nations build their networks? In the light of a number of recent reviews of our national transport infrastructure the ITC hosted an expert Discussion Evening on 30th January 2012 to investigate these questions.

The event welcomed more than 40 senior experts from the worlds of finance, engineering, infrastructure provision, transport operations, consultancy and the civil service. The discussion was chaired by Steven Norris, ITC Commissioner and Chairman of the National Infrastructure Planning Association. Leading the discussion was a highly distinguished panel comprising: Alan Cook CBE, Chairman of the Highways Agency; Andrew Wolstenholme OBE, Chief Executive of Crossrail; and Andrew Rose, a partner at AgFe and former Chief Executive of Infrastructure UK. Dr Heiner Bente, Chairman of the advisory board for the German consultancy group Civity, offered a response from a European perspective.

Summary

How can we improve value for money from our transport infrastructure? – key issues raised by the speakers:

• Alan Cook argued that long-term planning is critical if we are to improve the cost-effectiveness of our transport infrastructure. He highlighted a number of areas where this should be applied in the strategic roads network, including the development of a clear, outcome-based network strategy for at least a 5-year period and the need for greater permanence within the decision-making leadership. These issues were reflected in his recent green paper calling for a remodelling of the Highways Agency.

• Alan Cook noted that, in the case of the road network, the public should be encouraged to use the network more cost-effectively. In order to do so, there needed to be a greater strategic focus on the needs of road users in order to prevent over delivery of services. It is crucial that infrastructure agencies understand what needs to be delivered.

• Andrew Wolstenholme suggested that many value for money issues were interchangeable across the infrastructure field rather than mode specific. He highlighted the need to achieve the correct balance between the Client/Sponsor, the Owner/Operator and the delivery partners in the supply chain. Where there were multiple sponsors of a project it was particularly important that their strategic visions were aligned.

• Andrew Rose focused on the need to think carefully about procurement models, particularly where infrastructure development involved both public and private sector stakeholders. He noted it was important that strong procurement teams in the private sector were matched by equally competent and skilled teams from the public sector. Inefficiencies were caused by having too many procurement teams.

• Heiner Bente responded by noting that most national treasuries struggle to comprehend the long-term planning necessary for building and maintaining infrastructure. However, he argued that the situation was improving in Britain, observing that Network Rail was diminishing the efficiency gap between the UK and European rail networks.

Key issues raised in the discussion:

• Streamlining the supply chain. Guests drew attention to the cost-inefficiencies that were incurred by using long chains of subcontractors. One problem was that contractors often had no certainty over workload, having been poorly guided by project sponsors. Infrastructure Ontario was raised as a good example of the efficiencies that could be obtained by using a single, highly skilled, infrastructure sponsor, capable of offering good guidance to contractors.

• Long-Term Vision. Some attendees highlighted the need for a holistic infrastructure vision that looked a generation or more ahead. The example of the Spanish rail network was offered as an illustration of the way in which visionary planning could transform national infrastructure. It was noted that one of the key obstacles facing such visionary planning in Britain was a media culture geared towards the short-term public response to infrastructure proposals.

• Developing better procurement skills. Some participants suggested better procurement skills were needed within the public sector in order to ensure that taxpayer money was spent wisely. It was suggested that the civil service should move some of its emphasis away from policy expertise towards delivery skills.

• Value for money has a social dimension. Concern was expressed that ‘value for money’ should not only be interpreted in economic terms but should also embrace social aspects. In this respect, guests noted that there was a need for social impact analysis as well as cost-benefit analysis when developing infrastructure schemes.

• The problem of consensus. It was observed that one of the reasons why Britain struggled to meet long-term infrastructure challenges was an obsession with achieving public consensus. Some argued that the resulting indecision, causing major infrastructure projects to be delayed or indefinitely postponed, resulted in higher economic costs later. The lack of finalised national policy statements on subjects such as energy and aviation was symptomatic of this problem.

• UK infrastructure can be innovative. Some participants stressed that we should be alive to the ways in which Britain does provide value for money through its infrastructure. The road network was highlighted as an example, with many projects embracing innovative technologies, while aspects of the procurement process were also less cumbersome than in other nations. Furthermore, the UK had in many cases pioneered the involvement of the private sector in the building and maintenance of national infrastructure.

• Smaller infrastructure issues are also important. It was noted that to achieve widespread efficiency savings small and medium scale schemes required attention as well as the largest infrastructure projects. In the Highways field, for example, improving the efficiency of maintenance schemes such as line painting could significantly reduce costs.

Future ITC Research:

It is apparent we face a number of structural problems obstructing the delivery of a fast, efficient programme of investment in major transport infrastructure projects in the UK.
These include: different private/public ownership models across our transport sectors; inconsistent public procurement procedures; skill shortages when handling contractual negotiations with the private sector; and a planning system that exercises a unique drag on the speed of decision making.
 Nevertheless, the Government is heavily committed to a growth strategy and is working hard to remove barriers to infrastructure investment. The ITC’s future programme will include research investigating how to overcome these obstacles and achieve the progress needed to realise these objectives.