1330 Infrastructure in the New Era Executive Summary Alix Newbold May 11 1

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Infrastructure in the New Era Constructing Excellence and Pinsent Masons LLP Acknowledgements

This report has been written by a team and is . David Ferroussat, Programme based upon the views and opinions of a wide Commercial Manager – Terminal 2, range of practitioners within the infrastructure Heathrow Airport Limited sector who attended four roundtable discussions, . Mark Hagger, Programme Manager, chaired by Martin Rowark. Environment Agency . Andy Haynes, Head of Commercial, Author Team: Network Rail . Ken Owen, Commercial Director, . Richard Laudy, Head of Construction Sector, CLM London 2012 Pinsent Masons LLP . Andy Quincey, Director of Group . Andrew Roach‐Bowler, Procurement Procurement, Transport for London Manager – Stations, Crossrail Limited . Steve Rice, Programme Director, . Graham Robinson, Global Business Defence Infrastructure Organisation Consultant, Pinsent Masons LLP . Beth West, Head of Commercial . Martin Rowark, Head of Procurement, Procurement, London Underground Limited Crossrail Limited . Don Ward, Chief Executive, Government and Academic: Constructing Excellence

. Michael Ankers OBE, Chief Executive, Workshop Leaders: Construction Products Association . Dr Nuno Gill, Director, Centre . Alan Couzens, Project Leader, Infrastructure for Infrastructure Development, UK, H M Treasury, UK Government Manchester Business School . Steve Livingstone, Programmes Controls . John Russell, Project Director, Infrastructure Director, BAA PLC UK, HM Treasury, UK Government . Paul Morrell, Chief Construction Advisor, . Simon Lawrence, Project Director, Department for Business Innovation Infrastructure UK, HM Treasury, and Skills, UK Government UK Government . Mark Reynolds, Deputy Chief Executive, . Denis Walker, Head of Construction Sector, Mace Limited Department of Business, Innovation and . Steve Waltho, Global Head of Infrastructure, Skills, UK Government Davis Langdon An AECOM Company . Keith Waller, Project Director, Infrastructure UK, HM Treasury, UK Government Infrastructure Clients:

Infrastructure Consultants: . Martin Buck, Commercial Director, Crossrail Limited . Malcolm Bairstow, Partner, Ernst & Young LLP . Mike Cornelius, Head of Procurement . Madoc Batcup, Managing Director, Synaps & Commercial, Olympic Delivery Authority . Edwin Bergbaum, Director, . Bob Dixon, Quality Control Manager, EDF Waterman Group PLC

1 . David Bucknall, Chairman, . Doug Gillespie, Director, Mace Group Limited Rider Levett Bucknall . Chris House, Major Projects Director, . Jim Cook, Director of Ground Engineering, Aggregate Industries PLC Buro Happold . Chris Hughes, Managing Director, . Paul Dyson, Director – Infrastructure, Morgan Sindall Tunneling Turner & Townsend plc . Peter Mason, Business Development Director, . Sion Edwards, Director, Mott MacDonald Balfour Beatty Civil Engineering Ltd . Chris Ellis, Operations Director ‐ . John Matthews, Managing Director, Infrastructure, Jacobs EMCOR Engineering Services Limited Tom . Asim Gaba, Director, Arup . Terry Nea, Commercial Director, . Shy Jackson, Senior Associate, Mace Plus Limited Pinsent Masons LLP . Steve Nelson, Finance Director, 4Projects . Kevin Joyce, Senior Associate, . Tom Paul, Director, Kingspan Limited Pinsent Masons LLP . Nigel Roberts, Commercial Director, . Neal Morris, Partner, Pinsent Masons LLP Balfour Beatty Civil Engineering Ltd . John Mullee, Partner, Pinsent Masons LLP . Martin Rogers, Executive Board Member, . Rowland Nicholson, Senior Construction Royal BAM Group Manager, Fluor Limited . Declan Sherry, Operations Director, McGee . Kate Rees, Partner, Pinsent Masons LLP . Steve Sparks, Sales director, 4Projects . Murray Rowden, Managing Director – . John Stack, Managing Director, Infrastructure, Turner & Townsend plc J Murphy and Sons Ltd . Steve Rowsell, Director, RowsellWright . Neil Sutehall, Business Strategy Manager, . Jose Sirera, Principal, Gensler J Murphy and Sons Ltd . . Michael Spencer, Partner, EC Harris Stuart Togwell, Commercial Director, Wates Construction Limited . Dan Tain, Partner, Pinsent Masons LLP . Richard Vertigan, Chief Executive, 4Projects . Malcolm Taylor, Programme Director, AECOM . Paul Whitmore, Commercial Director, Morgan Sindall Group PLC Infrastructure Supply Chain: . Andrew Wolstenholme, Director of . Rod Bennion, Chairman, Innovation, Balfour Beatty PLC McNicholas Holdings . Chris Boothroyd, Commercial Director, The team is grateful and acknowledges the Vinci Construction UK Limited support of other organisations and people who have supplied material, contributed to production . Patrick Bruce, Group Commercial Director, and provided expert views. Costain Group PLC . Steve Fox, Chief Executive, BAM Nuttall . Steve Fullen, Commercial Director, Kier Construction

2 Executive Summary

The current economic crisis has changed the landscape for all involved in the UK construction industry.

No longer able to rely on a healthy economy for continuing prosperity companies have to rethink their approach to business and consider how they will survive the recession and maximise the opportunities as we emerge into a new economic and political era.

In October 2009, the Constructing Excellence Vision report ‘Never Waste a Good Crisis’, identified that the infrastructure sector had made considerably A vision for ‘Infrastructure in the New Era’ better progress than many other sectors of the emerged from a series of key roundtable construction industry in its attempts to reform discussions. Significant common ground also and improve since the publication of the Egan emerged on an action plan for change and Report over a decade ago. improvement to the way in which infrastructure assets are procured, delivered and managed. This report seeks to understand the key drivers for this change and presents a manifesto for The vision is an infrastructure sector where clients further improvement in the infrastructure sector clearly understand their needs, build on those – a key part of the construction industry. needs to define their requirement in terms of business outcomes and select and work closely Constructing Excellence and Pinsent Masons set with integrated supply-chain teams that develop out to engage with the clients, consultants and and manage infrastructure assets over their supply chain contractors, specialists, product lifetime, to deliver that requirement, supported by manufacturers, suppliers within the infrastructure clear commercial and governance structures. sector to examine the approach being taken towards collaborative working and to understand ‘Intelligent clients’ have a holistic view on the their views to implementing change to the way in core needs of their own business and long-term which infrastructure assets are procured, development programmes that achieve those delivered and managed, particularly in the needs. They have a focus on the performance current economic climate. of infrastructure assets over their lifetime, rather than a narrow focus on projects and capital cost. In undertaking this work, we defined the Intelligent clients are also lean, but bring together infrastructure sector to encompass both in-house inter-related capabilities, including economic and social infrastructure. expertise in procurement and contracting strategy, design and technological know-how, There was a mutual exchange of ideas with capital project and programme management Infrastructure UK throughout the process of our as well as facility management and asset dialogue with all parts of the infrastructure sector management capabilities, knowledge of that informed the development of the project finance, understanding of alternative Infrastructure UK Implementation Plan. models of programme governance, leadership and stakeholder management skills.

3 It is recognised that not all infrastructure Constructing Excellence will work with clients have yet fully developed their in-house Manchester Business School and others to capabilities and developed the inter-related promote collaborative working in the capability as intelligent clients of the future. Many infrastructure sector and to encourage clients have already embarked on change commercial alignment, particularly through programmes that will develop their capability for innovation in funding, contracting and the future, including BAA and the newly formed procurement models. Defence Infrastructure Organisation, which provide models for other clients. The water Compete for Value infrastructure sector and some transport infrastructure clients also provide such models Competition between suppliers is healthy, and that will assist other clients develop their the right basis for this competition is required to capabilities. help deliver value.

Constructing Excellence will continue to work Client teams need to base competition between closely with its members, Manchester Business suppliers upon the whole life performance of School and others to provide support for client infrastructure assets, including outturn delivery and supply-chain organisations in the and operational costs supported by a deep infrastructure sector to define and develop understanding of business needs and the need client and supplier leadership capabilities for long term collaboration, rather than simply and to guide the development of advanced initial tender prices. executive education. Constructing Excellence will continue to develop, Commercial Alignment validate and support new methods for achieving value through competition, in partnership with New business models are required which align government, clients and others. and reward the supply side for delivering better value with regard to achieving delivery goals as ‘Should’ Costs well as goals for the performance of infrastructure assets over their lifetime. Investment is needed in research, at different levels, to ensure that government and other Collaborative working is a critical factor for the infrastructure clients develop a clear successful delivery and management of high-risk, understanding of the actual cost of their assets high-value infrastructure assets. over their lifetime, including both capital and operational costs. The alignment and integration of capital project delivery and operational requirements should be Constructing Excellence will engage with clients, investigated as well as the opportunity for the suppliers, Infrastructure UK and infrastructure supply-side to take a stake in the performance of asset regulators to ensure that good infrastructure assets over their lifetime, and benchmarking takes place across different thereby help to unlock value. infrastructure sectors such as rail, air, road, water

4 and other utilities, and that accurate data on the Constructing Excellence will work with cost of good quality is available to procurers. Manchester Business School to understand the needs of infrastructure clients and to determine Early Involvement approaches that are best suited to meeting those needs. Operational managers, specialist contractors, product manufacturers and suppliers are too New Processes and Tools often excluded from early decisions which have the greatest direct influence over asset delivery Success for intelligent clients and their supply and performance, yet it is their operational chain partners needs the adoption of better strategies, products’ installation and performance processes, and tools help to facilitate these. which determine long-term success. We welcome the Government’s acceptance that Building Information Modelling (BIM) The optimal early involvement of asset and Management will facilitate collaborative maintainers and supply-side partners in the working and deliver better integration of the planning, and design stages of new infrastructure design process to improve the quality and assets is therefore critical to improving efficiency efficiency of delivery, operation and maintenance. and productivity of delivery, increasing flexibility and adaptability to accommodate ongoing Constructing Excellence will work with the change in requirements, and reducing waste in government and other industry bodies to ensure all its forms. that BIM is established as a standard industry tool.

Constructing Excellence will continue to seek Greater standardisation of delivery and demonstrations of alternative approaches to early operational processes, investment in modular involvement and the identification and products through standardisation of interfaces, dissemination of the benefits that flow. clear mapping of functions to building components and development of tests to Integrated Supply Chains validate the functioning of the overall system once the components are put together are other Integrated delivery teams and supply chains tools and methods critical to achieving better need to evolve to deliver better value. These may value solutions and high performance in delivery take the form of one-stop shop organisations, and operations. alliances, joint ventures or special purpose vehicles. The key is to offer clients seamless and Constructing Excellence will continue to prompt integrated whole-life solutions – a complete new innovations and to measure and review infrastructure asset from planning design to their success to demonstrate their impact. delivery and asset life management service to support business outcomes.

5 Use the Contract worldwide. Its introduction into the design and construction industry has been slow due to a Modern collaborative forms of contract, such as conflation of reasons including organisations’ the Engineering and Construction Contract reluctance to make the necessary capital (NEC), have been successfully adopted in the investments in an industry that is predominantly infrastructure sector. These seek to align risk and project-based, a lack of collaborative working on reward with the collaborative working behaviours projects, inadequate commercial and essential to success and provide the tools for procurement practices, and high levels of effective project management. It is important that fragmentation within the industry. those involved understand how to use standard and innovative contract mechanisms to align the Constructing Excellence will facilitate sector- interests of clients and suppliers. It continues to specific activity, where it does not already exist, to be demonstrated that far too few understand the search for the most effective ways in which lean management, organisational, and commercial principles and practices can best be translated principles on which the NEC is built to deliver the and applied to deliver value in sectors as diverse benefits of such forms of contract. as transport, water and power.

Constructing Excellence will work with Pinsent Government Long-Term Plan Masons to develop and deliver project-based workshops on the NEC in practice and provide The Government’s National Infrastructure Plan training in modern procurement techniques for the provides a long-term view of the UK’s implementation of collaboration based contracts. infrastructure needs. It is vague on who might fund this investment and how it might be Lean Processes delivered, let alone on how capital and operational budgets might become single Asset Lean management, derived from the Toyota Life Budgets. Production System, is a proven approach to manage and organise work, and identify and Constructing Excellence will maintain its dialogue remove waste in production processes with Government, private sector funding implemented across a wide range of advanced organisations and clients to improve the quality manufacturing and capital goods industries of the National Infrastructure Plan.

Requests to reproduce any part of this document should be sent to Constructing Excellence Constructing Excellence, Warwick House, 25 Buckingham Palace Road, London SW1W 0PP Tel: 0207 592 1100 | E: [email protected] | www.constructingexcellence.org.uk

Front Cover Image Copyright Crossrail Ltd and Canary Wharf Group – Cross-section of the Crossrail Canary Wharf Station which shows the six- storey structure from track-level to the roof-top garden. The station's retail scheme is designed by Foster + Partners. The station itself is designed by Tony Meadows and Associates. The park scheme is designed by Gillespies. The structural engineering and building services is undertaken by Arup.

Disclaimer All information provided in this report is for information purposes only. Although every reasonable effort is made to ensure the accuracy of the report Constructing Excellence and Pinsent Masons LLP provide no guarantees of any kind.