The competition regulator, the Competition and Markets Authority, has laid into the road and rail civil engineering markets, highlighting the need for reform in how the UK procures these vital elements of infrastructure. No argument there. After an 11 month market study, the CMA sees huge scope for driving down costs while increasing innovation and productivity.
Given the procurement disaster that has been HS2 which sucked in and wasted public money on an unprecedented scale – according to its critics anyway – the scope for improvement is obvious. How to do that is the $64,000 – or £100 billion in HS2’s case – question to be answered. Even excluding HS2 spending, the road and rail market is huge, some £19 billion in 2023/24, so improvement is worth pursuing.
The CMA recommends that government “embraces a more strategic and coordinated approach to delivering road and rail infrastructure with a clear plan for the sector”. The CMA also says that the lessons learned have broader applicability across public infrastructure procurement.
CMA Chief Executive Sarah Cardell said a short term and fragmented approach to procurement in road and rail is driving up costs, slowing delivery and holding back innovation. Systemic change is needed, but that demands strong central coordination, and a “reframing of road and rail procurement as a lever for growth and innovation”.
Just like areas of public sector procurement, the road and rail markets have for long been criticised for underdelivering on productivity, innovation and speed of delivery. The CMA’s market study says the key drivers of this have been funding uncertainty, short-term decision making, complex regulation and capability gaps. Savings of up to £5 billion a year could be achieved across the UK by addressing the challenges in the market their report identifies, CMA says.
Key recommendations from the CMA include having the Treasury take strategic ownership for driving change. A strategic sector plan should be published along with annual reports on progress. Credible long-term pipelines backed by multi-year funding would give the industry confidence to invest in skills, capacity and innovation.
Procurement should be designed for long-term value, with improvements to how projects are scoped, procured and delivered to promote competition, lower costs, support investment and incentivise innovation. Public sector capacity needs to be improved, by tackling capacity and skills shortages in procuring authorities through strengthening capability, shared expertise and smarter joint procurement.
The recommendations if implemented successfully would undoubtedly improve things. The industry broadly agrees. The Institution of Civil Engineers said the recommendations align with many that the ICE has championed. ICE is “particularly happy” to see the recommendation for mandatory use of the Construction Playbook. ICE makes the point that embedding the recommendations could provide useful insight and lessons for other sectors, and the government should consider applying them more broadly.
The Civil Engineering Contractors Association welcomed the CMA’s call for a strategic direction to be set for infrastructure. All hope that the report acts as a catalyst for reform across infrastructure procurement and delivery. Similar hopes were of course expressed on the occasion of publication of a multitude of reports on infrastructure procurement and industry performance over the years – which have only led to the debacle that has been HS2. Will this one make a difference? Hold your breath if you dare.
Nick Barrett
Editor