Crossrail was praised for including procurement in the design process ©Crossrail Ltd
Crossrail was praised for including procurement in the design process ©Crossrail Ltd

NIC calls for new way to measure cost of major projects

A government advisory body has proposed a new analytical framework to measure the cost and performance of major infrastructure projects.

The framework, part of a report by the National Infrastructure Commission (NIC), is designed to provide a “whole life analysis of the cost and benefits of private financing and traditional procurements”.

It builds on past studies looking at the performance and cost of construction projects across thir lifespan.

The long awaited report by NIC said private financing had benefits compared to more traditional procurement approaches because it encourages a “whole life approach” to project design, but acknowledged there had been a slowdown in its use due to “uncertainties about its cost effectiveness and the rationale for its use”.

The report echoed recent reports by separate parliamentary bodies calling for government to develop a better understanding of the costs and benefits of private financing. It said while transferring risk to private partner incentivises efficiency, it could also create challenges if requirements changed during the project lifetime.

Recently both the Public Accounts Committee and the Public Administration and Constitutional Affairs Committee issued separate reports criticising the use of private finance initiatives schemes and the government’s lack of data to support their use.

NIC is an impartial advisory body set up by the Treasury to provide a long-term view on infrastructure spend. Today’s wide-ranging report sets out its recommendations on a host of infrastructure issues over the next 10-30 years. Its key recommendations included calls for government to prioritise:

  • Low carbon energy including renewables and electric vehicles
  • Digital technology including rolling out full fibre broadband
  • Improving road infrastructure
  • The development of cities as opposed to inter-city transport
  • Investment in flood prevention

Among its major recommendations was that government temper its plans to build more new nuclear power plant after Hinkley Point C, suggesting it should build just one more to keep the supply chain running. It said: “The supply chain for nuclear power should be maintained by agreeing a further plant beyond Hinkley Point C, even though renewables look like an increasingly viable alternative, as the costs of re-establishing the nuclear supply chain would be very high.”

The report also called for better data collection on the cost and performance of infrastructure projects, including capturing “system wide effects” and not just the “marginal impact” of projects. “Better data would allow… a better understanding of how different procurement and financing models affect outcomes,” it said.

On Brexit it said the UK should seek to remain part of the European Investment Bank, but called on the government to start consulting on a potential domestic equivalent should this not happen. The report recommended a consultation on this potential body’s functions, including “acting as a centre of excellence on infrastructure, project development, procurement and delivery”.

It added: “The UK’s exit from the EU will impact the UK’s skills base and supply chain; there should be a strategic approach to manage this.”

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