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Infrastructure blog

Why there has never been a bigger need for a new infrastructure delivery model

25 January 2018

Greater organisational collaboration and less dependence on traditional contracting models will enable the more effective delivery of major infrastructure projects and programmes in the built environment sector.

Why there has never been a bigger need for a new infrastructure delivery model

ICE is developing this new approach through its Project 13 programme, which is intended to boost productivity levels across industry and bring about a series of improvements to the quality and reliability of the UK’s infrastructure networks.

The collapse of Carillion has put at risk thousands of jobs, a number of major infrastructure projects and the delivery of key public sector contracts.

This includes a £1.4bn HS2 contract, the £335m Royal Liverpool Hospital and the £350m Midland Metropolitan Hospital, alongside all of the maintenance services that the contractor currently provides at hospitals and prisons across the UK.

The gravity of the situation is significant and a long-term solution that safeguards the futures of Carillion employees and its service users is urgently required.

Within the context of the overall health of contracting it is also an important moment to take stock and ask ourselves some pretty fundamental questions:

  • Are current delivery models fit for purpose?
  • What steps are necessary to improve the delivery of major infrastructure programmes and projects?

Low profit margins in any industry are not desirable and the built environment sector is no different. Recent figures highlight that the average pre-tax profit margins for the 10 largest tier 1 contractors sits at a worrying -0.5%. Clearly this is not sustainable in the long-term and the troubles at Carillion should act as a wakeup call for the rest of the sector.

While a new delivery model is almost certainly an answer, it is important to understand the factors that can impinge on a contractor’s ability to make a fair, sustainable margin before embarking on a path of wholesale change.

These can range from not having the most suitable team in place to deliver a specific project, accepting a fixed price too early in the design process (without allowing for design creep or other technical challenges further down the line), through to agreeing speculative or onerous terms with a new client.

These are among a number of factors discussed in a new ICE information sheet that explains how tier 1 contracting models work.

That’s not to say there aren’t any effective approaches already being taken. Collaborative projects that allow detailed design, risk mitigation and price to be developed at an early stage can help generate more sustainable levels of profit. This is also true of framework approaches where there is an opportunity to win separate contracts with a trusted customer over a period of time.

But in order to improve delivery on a more consistent basis and bring about a real uplift in productivity levels and the overall performance of infrastructure networks – from roads and railways to our energy supply and flood defences – requires a new approach. ICE believes that is the promise of Project 13.

Project 13 sets out a delivery model based on effective collaboration between client organisations, contractors and other delivery partners. It defines value within the context of overall outcomes per whole life £ rather than lowest capital cost. The objective is to deliver high performing and resilient infrastructure networks.

ICE is working with leading industry partners to produce a suite of tools to support organisations in adopting Project 13 principles, which we are launching at ICE on Tuesday, 1 May.

These tools are being developed through community workshops and consultations, with a number of key government departments also engaged. If you would like to join our 300 strong Project 13 community please get in touch at [email protected].

  • Ben Goodwin, lead policy manager at ICE