The UK’s Competition and Markets Authority proposes significant changes in the civil engineering sector.
Boosting the UK’s civil engineering sector could lead to efficiency savings of up to £5 billion per year.
This is the verdict of the Competition and Markets Authority, which has released its final report as part of its civil engineering market study.
The UK’s £725 billion infrastructure strategy represents a huge investment in its social and economic infrastructure over the next 10 years.
In its interim report, the Competition and Markets Authority (CMA) made it clear that the UK doesn’t have what it takes to deliver it.
Now, it has proposed bold recommendations to address market challenges, reduce delivery times, and increase innovation and investment.
The CMA’s role is to ensure markets work well for people, businesses, and the UK economy. Market studies and investigations are important parts of that.
These studies look generally at why particular markets may not be working well, taking an overview of regulatory and other economic drivers and patterns of consumer and business behaviour.
While a market investigation may be a possible outcome of a market study, it isn’t the same.
This study looks at the civil engineering market for public road and railway infrastructure. Its recommendations apply to the UK and devolved governments in Scotland, Wales and Northern Ireland.
The CMA says that the sector is under-equipped to meet coming demand. The ICE agrees.
It highlights five root causes that are holding back the civil engineering sector:
These challenges contribute to a negative cycle of projects going over time and budget, as well as less investment and innovation in the sector.
The CMA has made several “critical” recommendations to reform how the sector operates. Many of these align with those the ICE has long championed.
Government bodies have an important role to play in shaping the civil engineering market. This should happen more strategically.
Currently, accountability for the whole infrastructure system sits across a range of government departments and bodies.
HM Treasury (HMT) should take ownership of the necessary system-wide changes required to actively shape the civil engineering market.
In practice, the National Infrastructure and Services Transformation Authority (NISTA), as an agency within HMT, would provide the necessary coordination, advice, and oversight to support this.
The ICE has previously outlined the need for strong system leadership from NISTA and the Chief Secretary to the Treasury.
The CMA recommends a plan that sets out a coherent, system-wide set of objectives and actions for civil engineering in the road and rail sectors.
It would include a framework for proactively shaping the market through public procurement and regulation, altering incentives for public authorities, and breaking down barriers to investment and innovation.
This would be reported on annually.
Delivery of the sector plan would include a focus on skills and capacity across the public sector.
A strategic workforce plan would set out how governments intend to strengthen the commercial and technical capability of all public procuring authorities.
This longer-term focus is met with longer-term funding and contracting.
Public bodies that award contracts would have more flexibility to extend these beyond budget periods.
And funding periods themselves would be longer.
The report recommends a minimum of three-year funding settlements and clearer forward project pipelines to give businesses the confidence to invest in skills, capacity, and innovation.
The ICE supports this recommendation. From a maintenance perspective, year-ahead budgets for public authorities fail to recognise the importance of proactive investment.
As pressure from climate change, public demand, and other factors grows, so does the urgency to ensure ageing assets can continue to serve society and economic growth. Longer-term budgeting would be a useful step forward.
The ICE has long called for the use of the Construction Playbook – the government’s guidance for assessing, procuring, and delivering public works – to be mandatory for all national procuring bodies.
The CMA agrees. Mandating compliance with the playbook would mean improved infrastructure delivery, wider adoption of industry best practice, and better project outturns.
Governments should publish a comprehensive implementation plan for how they will support and ensure compliance and monitor and report on it in the future.
The CMA has highlighted that poor productivity and a reluctance to innovate can affect delivery.
The ICE and the Department for Transport are sponsoring the British Standards Institute to produce a publicly available specification on improving productivity in infrastructure development and delivery (PAS 4010).
This PAS will be out for public consultation soon.
Standardised and streamlined procurement, regulation and regulatory approvals, and contracting are key themes in the final recommendations.
Governments should determine and mandate a limited set of standard designs for certain common elements of road and rail infrastructure, like bridges or gantries.
This would help to build assets cost-efficiently and reduce scope for over-specification.
For the industry, the report’s recommendations also include an improved approach to risk allocation.
The CMA says that procuring authorities should review the overuse of Z clauses in NEC contracts, which can lead to inefficient risk allocation across the supply chain. Standardising their use would be a step forward for the industry.
The ICE welcomes the CMA’s market study. Serving society means being honest about where the industry could improve.
While the market study only applies to road and rail, there is plenty in it that could be applied across other types of public infrastructure.
As the professional body for civil and infrastructure engineers, the ICE has been feeding its members’ insight into the CMA study.
This has included appointing an ICE Policy Fellow to the CMA’s sector advisory panel, a formal response following the release of the interim report, and a roundtable with senior infrastructure leaders.
It’s now up to the government to respond to the CMA’s comprehensive recommendations and enact these changes. The ICE will continue to engage with decision makers throughout this process.
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