Industry

03 APR 2019

GREATER ACCOUNTABILITY IS NEEDED TO IMPROVE SUPPLY CHAIN BEHAVIOURS

Infrastructure needs a more robust pipeline which can provide the industry with more accurate and reliable information, says Neil Dunkerley.

Recent research by the National Infrastructure Forum (NIF) has found that a lack of certainty surrounding the public sector infrastructure projects pipeline is “driving unsustainable behaviours”. But, could a lack of accountability be to blame?

With 276 projects currently listed in the government’s national infrastructure and construction pipeline, industry concerns are growing that the pipeline has become unwieldy and lacks visibility, and there are calls for a complete overhaul. 

Close analysis of the pipeline by the NIF has revealed that just £30.24bn of the £413bn of infrastructure projects, announced by the government at the end of 2018, are likely to go ahead in the medium to long term, with the majority unlikely to go ahead at all. This is presenting a rose-tinted view of the opportunities that might exist for contractors in the future, which is adding to their risk exposure and making it difficult to plan ahead.

The complex nature of many infrastructure programmes, in terms of the number of partners involved and the time it takes to secure the package of funding needed to get them underway, can mean contractors and sub-contractors are often the last to know if progress stalls. This can lead to problems further down the line if businesses in the supply chain have based their strategic plans on potential future contract opportunities.

This situation breeds uncertainty and unpredictability, forcing contractors to rely more on subcontractors to fill any gaps in resource. From a risk perspective, this way of working can also encourage an unfair distribution of risk across the supply chain. 

For example, under pressure to secure contracts, tier one contractors are being forced to take on more risk in contractual terms and conditions, whereas further down the chain, the risk exposure of subcontractors and other suppliers is more diluted. This higher risk exposure also contributes to a culture of under investment in training and skills development, efficiency-driving technologies and off-site construction methods.

To address these problems, the NIF has put forward a number of recommendations to modify the pipeline in order to improve visibility and certainty. For example, it is recommending the creation of a new Pledged Project List, featuring fewer projects on the basis that they are likely to be procured in the short to medium term. It also recommends that a separate list is produced by the Infrastructure and Project Authority to indicate projects valued at more than £30m, which are already underway. 

Other recommendations put forward by the NIF include changing the definition of ‘value for money’ to capture factors capable of delivering social value, reducing the cost of bidding for work and encouraging wider use of two-stage procurement frameworks. In addition, it is recommended that proposals are accepted from the private sector and that a mobile procurement team is established to support public sector procurement and share expertise across government departments.

Whether government will be willing to act on these recommendations, and risk negative headlines about scaling back infrastructure investment, remains to be seen. 

By acting now however, there is an opportunity to create a more robust pipeline, which is capable of providing the industry with more accurate and reliable information. In the meantime, industry pressure must be sustained to encourage those involved in compiling the pipeline to take greater responsibility for its deficiencies.

Neil Dunkerley is a director at risk management consultancy, Equib. He specialises in advising organisations on how to manage risk when financing or delivering large-scale infrastructure programmes.

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