Civil engineering in the UK costs more than in any other European country except Scandinavian ones, and is more than 50% costlier than in Germany. That is one of the preliminary findings by Infrastructure UK (IUK).
The June 2010 Budget announced that IUK would carry out an investigation into how to reduce the cost of delivery of civil engineering works for major infrastructure projects, chaired by Terry Hill of Arup. This investigation is being led by IUK in collaboration with wider government, the Institution of Civil Engineers and industry. The investigation will report by the end of 2010.
It has already identified that, across the whole of the EU, only in Sweden, Denmark and Norway is civil engineering more expensive. There are opportunities to achieve sustained reduction in the costs of delivery and maintenance of infrastructure, IUK says, by increasing certainty of the investment pipeline, removing wasteful process and strengthening the capability of those involved in procurement and the supply chain.
It adds: “Whilst many of the factors identified by IUK have been recognised in previous studies, there has not been sufficient concerted effort by government and industry in the past to make the changes necessary to resolve them. The current fiscal environment and drive for efficiency provide an opportunity to ensure that, this time, the necessary actions will be taken... The challenge is to make investment go further by reducing the costs of infrastructure construction; by removing wasteful process and strengthening the capability of those that procure projects; and by supporting the supply chain. “
Key emerging findings from the investigation blame the high cost in the UK on several factors. The report lists these as:
- Standards and regulation compliance: In the UK there is a complex web of planning, consents, regulation, process and standards, which absorb time and add considerably to cost. While these systems are designed to protect the rights of citizens and ensure high quality, safe infrastructure, the cost impact is considerable and is exacerbated by a risk-averse culture that can lead to over specification, excessive assurance, monitoring and scrutiny throughout the delivery process.
- Stop-start investment: Lack of certainty of budget commitment to programme investment reduces efficiency, suppresses innovation and has a negative impact on industry’s appetite to invest in the UK. Where the private sector is given greater clarity of the pipeline, costs have been reduced. Significant savings have been delivered in the utilities sector as a result of the private sector being able to offer greater continuity in the pipeline for infrastructure renewal and investment. Potential exists to achieve increased savings in the roads programme and to extend the benefits to other areas, including more publically funded infrastructure programmes. The savings generated by creating greater certainty over maintenance and renewal programmes could be used to bring forward capacity-enhancing projects.
- Poor commissioning: Poor practice in commissioning is a major cause of inefficiencies in the specification, design, procurement and construction phases. The public sector in the UK does not generally discharge its role as commissioner and procurer of infrastructure effectively. Ill-defined stakeholder accountability in the pre-construction phases leads to unnecessary reworking during construction. The commissioning and procurement processes appear to be more efficient in the private sector, both for bespoke projects and renewal programmes; especially where economic regulation has added to the downward pressure on costs and encouraged innovation. An example of this is the development of standardisation and off site fabrication in some parts of the water industry.
- Fragmented supply chain: The private sector construction industry for infrastructure in the UK is not structured to optimise efficiencies and maximise productivity through the supply chain. The UK construction industry for infrastructure has tended towards a relatively large number of smaller construction companies acting as main contractors by comparison to its European peer group. The various technical trades and suppliers tend to exist as separate companies engaged through sub-contracts, rather than being part of a vertically integrated supply chain. This fragmentation of the contracting industry contributes directly to low skills development, training and productivity that add to costs of construction.
- Contractual approach: The UK generally adopts a more contractual approach to infrastructure projects and programmes compared to other countries, which can lead to perverse behaviour particularly in tough market conditions, where low prices achieved under competition may be increased at outturn as a result of claims. There is concern that behaviour in the current economic climate may result in a return to an adversarial culture.
IUK acknowledges that most of these factors have been recognised in previous studies but changes have not been successfully implemented. IUK said: “The challenge is to change behaviours within the public and private sectors by realigning incentives and providing an environment within which savings can be achieved. IUK will be considering the detailed measures associated with each of the areas identified for action to deliver the identified cost saving benefits for UK infrastructure projects and renewals programmes.”
IUK is developing recommendations for achieving cost reductions in the infrastructure sector and will publish these with its report. Where these have common themes with the wider public sector construction programme IUK is working with the Construction Client Board, chaired by the Government’s Chief Construction Adviser, to agree how to effect change consistently across the public sector.
The consultation and evidence gathering phase of the investigation is in its final stages. The investigation is now completing its analysis of the evidence and developing its conclusions and recommendations for achieving cost reductions in the infrastructure sector. It will publish these with its report by the end of 2010.
Source: The Construction Index
Virtually the whole of Cabe’s staff have been put on notice of redundancy
Letters have gone round Cabe’s headquarters in London’s Kemble Street warning “the majority” of staff of the imminent loss of their jobs, a legal requirement after the DCMS pulled funding in the wake of the Comprehensive Spending Review.
Last year, the DCMS funded Cabe to the tune of almost £5 million – almost 40% of its entire budget.
Following the department’s withdrawal of support last week, the CLG confirmed it too would not be funding the design watchdog. Instead it would work with Cabe, the DCMS and the construction industry to “ensure the most valuable areas of Cabe’s work are retained, and local communities can put great design at the heart of shaping new development in their area”.
Matt Bell, Cabe’s director of education and external affairs, who is among those who have received the letters, stressed that design reviews would continue until at least March 2011, the end of the financial year.
He refused to say exactly how many staff had been put on notice, or to reveal who had been spared.
“The majority of staff have been put on notice that they are at risk of redundancy because the DCMS funding is being withdrawn,” he said.
The precise terms of redundancies are the subject of a “massive legal debate” with the Cabinet Office, “which adds an uncomfortable layer of uncertainty”, added Bell.
The Cabinet Office has been involved in a battle with unions over proposed reductions in redundancy payouts.
The Superannuation Bill, currently pushing through Parliament, would cap payoffs at one year’s salary or 15 months for voluntary redundancies.
However, this weekend’s Sunday Times reported that public sector workers who take voluntary redundancy will be able to retire early, at 50, on a full pension.
The London Development Agency’s £480 million budget has been axed following last week’s spending review by Chancellor George Osborne.
The move leaves dozens of organisations and projects in the capital at risk – including Design for London.
The LDA had been expected to be merged into the mayor’s in-house functions at City Hall following an announcement by mayor Boris Johnson in June.
But a senior LDA source told the Evening Standard: “The Treasury seems to have pulled the rug out from under us. We expected to be merged but the plan was for the majority of funding to remain in place.”
The LDA is being wound up along with all the regional development agencies.
The remainder schemes within the Building Schools for the Future (BSF) programme are being hit with a further 40% of cuts, affecting some 600 projects.
Tim Byles, chief executive of BSF delivery body Partnerships for Schools, told affected councils the news in a conference call, according to reports in The Guardian.
The cuts will affect all schemes, including academies and ‘sample schools’, that were saved in the Department for Education’s cull of the scheme in July.
It is expected that schools that are further ahead in the process will survive with minimal intervention. Sean Griffiths, director at Fat, said: “I cannot see how savings could be made unless you’re starting from scratch - the costs would far outweigh the benefits.”
Austerity drive to hit key public sector workload areas
The scale of cuts to the key public sector areas of work for architects were finally revealed in the Chancellor's Comprehensive Spending Review yesterday. Capital spending reductions are on an epic scale, with the key sectors of housing, schools and the health all facing dramatic cuts to their capital programmes.
Housing – social housing will be hit hard by the CSR almost immediately. Headline capital spending will fall by 60% compared with the last three years under Labour. That's £4.4 billion over the next four years, compared with £8.4 billion over the last three.
Earlier this week, the National Housing Federation was warning that cuts on this sort of scale would mean hardly any new approvals in 2011/12, because the Homes and Communities Agency will be left only with enough funding to meet its existing pipeline commitments.
But this week also marks the dawn of a new era of social housing provision, one in which providers will be able to charge up to 80% of market rates for new homes and offer fixed-term tenancies rather than automatic tenancies-for-life. Five- and ten-year tenancies are being discussed.
The government claims that the new flexibility over rents and tenancies will allow housing providers to deliver 150,000 new homes over four years. But housing experts are warning that this will depend on the ability of providers rapidly to adopt and embrace innovative funding mechanisms with the support of the private sector. There is also the danger of some developer housing associations opting out of providing schemes on what looks like pseudo-commercial terms.
The degree of innovation that will be required, and the hiatus about to be caused by disruption of the annual HCA bidding round – the HCA is to become a shadow of its former self – suggest that affordable housing prospects could decline significantly from here over the short term.
Schools – coming in the wake of the cancellation of Building Schools for the Future, the schools settlement initially looked like good news. Osborne announced that over 600 school rebuild and refurbishment projects will be salvaged from the BSF and Academies programmes.
The total capital settlement for schools over the four-year spending period will be £15.8 billion, with funds targeted at provision of new places in areas of severe need and essential maintenance needs. Compared with the last three years, however, this will amount to a major 60% reduction in capital spending. The imminent review on capital spending commissioned by Education Secretary Michael Gove will show just how the government plans to spend its reduced settlement.
Health – the coalition is pledged to increase spending on the health service in real terms, and sure enough the CSR confirmed that it will grow – by 0.1% a year. Capital spending is set to fall, however, from £5.1 to £4.6 billion, equivalent to a cut of 17%.
Osborne's preferred comparison is that health's capital budget will be higher in real terms in each year than the average spend over the last three spending review periods. The focus will be on essential maintenance and equipment, he said, although priority hospital schemes (including St Helier, Royal Oldham and West Cumberland) will go ahead.
The Department of Culture sees spending overall cut by 25%, but capital spending is down 32%. Sponsored sports and arts organisations all see cuts around the 30% mark, including a 32% spending reduction at English Heritage. One crumb of comfort is that the threatened Listed Places of Worship scheme has been saved, but on a reduced scale (see 'Listed churches lose VAT...' below).
Justice capital spending will be another loser, with the value of projects dropping from £600m this year to £400m in 2011/12 and then to £300m for the next three years.
There were winners: defence capital spending will rise modestly over the next three years before falling off slightly in year four (although this amounts to a slight decline after inflation); transport infrastructure fares relatively well, being pegged next year before rising slightly the following year as high profile transport projects are preserved; energy projects will actually see a 41% rise.
Devolved governments in Scotland, Wales and Northern Ireland will see capital budgets from Whitehall cut by 38%, 41% and 37% respectively.
More detail on spending programmes will emerge as departments produce their business plans for the next four years, expected next month, and flesh out new policies and initiatives.
RIBA President Ruth Reed commented in an email message to members: "In general, the Comprehensive Spending Review has provided some clarity in areas of departmental budgets and in areas such as schools capital spend. Further scrutiny and much more detail will be needed before the real impact of these measures on architects and the wider construction industry can be seen."
The DCMS, Cabe's sponsor department, is to cease all funding for the design watchdog while English Heritage is facing a funding cut of almost a third, it was announced today.
Last year, the DCMS funded Cabe to the tune of almost £5 million - almost 40% of the watchdog’s entire budget.
But because the department is the sponsor body, the withdrawal of funding will see the body wound up with a small amount of remaining funding provided for the associated costs of shutting Cabe down.
A DCMS spokesman said: “Unfortunately the state of our public finances dictates that difficult choices had to be made. The most pressing need is to protect and maintain other parts of our culture and heritage.”
English Heritage’s funding cut meanwhile is well above the 25% cut facing parent department DCMS.
In a statement released today, chairman Kay Andrews described the result as “most disappointing”.
She added that the cut in the EH grant – which follows a funding decline amounting to £130 million in real-term cuts over 13 years – would be “exceptionally challenging” to manage.
“We understand we must play our part in reducing the deficit along with the entire public sector,” she said. “However, it is most disappointing that English Heritage’s grant from government will be cut by 32%.
“We will do all we can to protect those front-line services which people tell us they value most, such as the expert advice we give to local authorities within the planning system.
“The 32% cut…will require us to make some tough decisions. We will work with the Heritage Lottery Fund to ensure there is no overlap or duplication in the services we provide. We are proud that we generate over 25% of our income from commercial activities and we shall also look at ways to increase this amount to help us look after the collection of over 400 historic sites and properties which we care for on behalf of the nation.
“We are pleased that the Listed Places of Worship Scheme will continue, albeit reduced, providing support for the congregations caring for historic places of worship.
“We will make a further announcement following the meeting of our Commissioners on 27 October.”
The full statement from Cabe:
“We are bitterly disappointed by the decision. CABE has worked hard with Government in recent months to create low-cost ways to ensure that people can still get the practical advice and support they need to create a good quality built environment. The quality of housing, schools, streets and parks has a major impact on everyone’s life, every day. Indeed, the quality of your local neighbourhood matters even more in tough economic times. So we are surprised to see that no resources at all can be found from the Culture programme to deliver the Government’s commitment to this area of public life.
“Paul Finch, chairman of CABE, said: “I would like to pay tribute to the huge efforts made by staff and commissioners over CABE’s first life. We are very proud of our achievements so far, from the high profile design reviews of the Olympic programme to the less well known support to planning teams and developers up and down the country as they try to create places that look good and work well for everyone. I know there are literally thousands of new buildings, parks and streets which are better because of CABE’s support. I believe the reasons for that work remain and will become ever more relevant to the future of this country.”
“CABE is now taking stock of the decision and looking at options to create new ways to support and champion good design.”
Arabtec Holding Co., the biggest builder in the United Arab Emirates by market value, expects sales to drop by at least 12.5 percent in 2010 as the country’s construction industry struggles to recover from the recession.
Revenue may range between $1.5 billion and $1.75 billion this year, Chief Executive Officer Riad Kamal told reporters today in Cairo, where the company signed an agreement to set up a unit in Egypt. Revenue in 2009 was about $2 billion, he said.
“The bulk of our presence is in the U.A.E. and the U.A.E. market has been on a decline,” he said. “This is the reason why we are spreading very fast outside.”
Half of all planned real estate projects in the emirate of Dubai were canceled after the global financial crisis caused demand to collapse and a housing glut drove property prices down. The slump has forced construction and real estate companies to look for projects overseas.
The company today set up Arabtec Egypt for Construction SAE with Amer Group Holding and won a contract valued at more than 195 million dirhams ($53 million) to develop Amer’s Hanging Gardens on the Red Sea. Amer Group develops luxury resorts in Egypt, including Porto Marina on the Mediterranean and Porto Sokhna on the Red Sea. The Hanging Gardens project includes six residential buildings with 726 apartments at Golf Porto Sokhna, Arabtec said in a statement today.
Construction in Egypt expanded 12.5 percent in the third quarter, helping the economy of the most populous Arab country grow 5.6 percent, the government said last week.
Arabtec plans to compete for more infrastructure projects in Egypt through the unit, Kamal said. It also plans to bid for a contract from Islamabad’s airport in Pakistan, he said.
The shares fell 1.75 percent to 2.24 dirhams at the 2:00 p.m. close today in Dubai, extending this year’s decline to 16.4 percent according to data compiled by Bloomberg.
The research also found that the housebuilding industry was critical of the previous government’s lack of policy direction in its ambitions for all new homes to be constructed to zero-carbon standard – which still has not been given a formal definition – by 2016.
More than 60% of senior specialists said there would be a shift towards factory-built housing, and 40% believed the lack of a firm definition had led to reduced development volumes.
Liam Bailey, head of residential research at Knight Frank, said: “With zero carbon there is this degree of uncertainty and that makes it difficult for developers to meet this target.”
He added that similar problems were noted with the introduction of the first affordable housing targets, but that as “the rules became tighter and more clear-cut and because developers knew where they were, most just got on with it”.
Meanwhile, architect Peter Marshall has secured an £8 million investment deal for a sustainable housebuilding factory for his firm Pretek in Blackburn, Lancashire.
Marshall, who previously worked with Terence Conran, said: “The houses vary in size from two to five bedrooms and we can build to any sustainability code.
If someone asked us to design homes to Passivhaus standard we would be able to do that too.”
Pretek is working with A2Dominion on its first project and said it has the capacity to build 3,000 homes annually.
Ruth Reed met minister to argue for registration board’s abolition
The RIBA has been actively lobbying the government to scrap Arb since the formation of the Tory and Lib Dem coalition government on May 12, BD has learned.
A Freedom of Information request showed that unnamed RIBA bosses wrote to and met with government officials on numerous occasions over the summer, pushing for confirmation that the registration board would be axed and that RIBA would take over its main functions.
Before the election, Conservative MP and shadow architecture minister Ed Vaizey, who was last week made an RIBA honorary fellow, repeatedly promised to abolish Arb.
In the first letter obtained by BD, dated May 24, RIBA approached the Office of Parliamentary Counsel to advise on the procedure necessary to abolish Arb and transfer its powers to RIBA.
The letter was forwarded to the Communities & Local Government department’s principal architect Richard Harral, who wrote back to say that legislation would be necessary to amend the 1997 Architects Act.
“Parliamentary Counsel’s role is to advise government and it does not in general deal with correspondence relating to matters of policy,” Harral added. “As the official within CLG responsible for the Architects Act, your letter has been passed to me.”
RIBA president Ruth Reed later met with decentralisation minister Greg Clark and, in late July, wrote to his departmental colleague MP Andrew Stunell , who has overall responsibility for Arb.
“We believe in the interests of the consumer and to reduce the regulatory burden, the functions of the Arb could be delivered by the RIBA,” Reed wrote. “This would avoid the duplication that occurs currently and fits with models used in other countries and other professions in the UK.”
In a statement issued this week Reed added: “The RIBA’s proposal is to act as registration and charter body, with register and membership lists maintained entirely separately. We believe that through this efficiency, we can deliver the Arb’s duties at a lower cost (than the current ARB registration fee) to the registrant.”
Last year a report into the functions of the two bodies, undertaken by academic Christopher Ball, suggested that the RIBA waited until after the election to approach the government over the possible scrapping of Arb.
The Arb declined to comment.