The National Infrastructure Commission says that better cost management could cut costs by between 10% to 25% on major UK infrastructure projects.

The NIC reaches out this conclusion in a new report has published today - Cost drivers of major infrastructure projects in the UK - which analyses the factors that can contribute to increased costs on major infrastructure projects, together with an analysis of how the UK's performance compares with other peer economies.

With significant new infrastructure needed over coming decades to deliver net zero, support economic growth across the UK and improve our resilience to the impacts of climate change, improved cost management will better enable delivery of the Commission’s recommended programme of investment, the NIC says.

Through new analysis of project data and engagement with key stakeholders, the report identifies actions to improve the budgeting, specification, design and delivery of future UK infrastructure, which if actioned could translate into reductions of between ten and 25 per cent in outturn costs across a portfolio of enhancement projects.

Cost drivers of major infrastructure projects in the UK has identified four interrelated factors which act together as a major barrier to the consistent delivery of projects on time and on budget. By clearly identifying these causes, government and industry can develop solutions to address them, the Commission says.

Image courtesy NIC Cost drivers of major infrastructure projects in the UK

The report identifies four root causes that can contribute to systemic failures of cost management on major infrastructure projects:

• lack of clear strategic direction
• client and sponsorship challenges
• inefficient consenting and compliance
• a constrained supply chain.

The report draws upon a number of existing studies to help understand the factors which impact on the cost of major projects, along with evidence from discussions with organisations responsible for a range of schemes in different infrastructure sectors.

Improving the budgeting, specification, design and delivery of the UK’s infrastructure projects could deliver significant benefits, the report says. Industry has suggested that changes ranging from optimising design through to using more efficient construction methods could reduce the outturn costs of some projects by as much as 20 to 40 per cent.

The Commission concludes that harnessing these opportunities system wide could translate to reductions of between ten and 25 per cent of outturn costs across a portfolio of enhancement projects.

Accompanying the report is a separate technical annex explaining the methodology used in the report, and a summary of a stakeholder roundtable held jointly with BCG.

Regulated utilities - failure to provide long term trajectory for network enhancements has held back investment in much needed and large scale infrastructure like new reservoirs

Commenting on regulated utilities, the Commission says that a failure to provide a long term trajectory for network enhancements beyond five year price review cycles has held back investment in much needed and large scale infrastructure like new reservoirs. In energy transmission and water resources longer term pipelines are now being set out. However, past failure to do so means the supply chain is having to adjust to a burst in demand which will exacerbate costs.

Referring to the Commission’s 2023 study of the Nationally Significant Infrastructure Project planning system, the report points out that the consenting and compliance of projects is overly complex, and adds unnecessary costs and uncertainty. However, while acknowldeging that lanning and compliance frameworks are essential for providing democratic consent for infrastructure, the report says:

“But there is evidence that the complexity of the system is causing delays which add cost without improving outcomes.

“The Hinkley Point C nuclear project spent three years on consultation with the public and government bodies before submitting a planning application. Despite using the same model of reactor, the Sizewell C project spent seven and a half years on the same phase. The average consenting time for major infrastructure projects in the decade from 2010 increased from around two to around four years.”

It also suggests that at a system level, government agencies issuing permits or requiring measures to mitigate the impact of infrastructure projects have little incentive to consider the impact of their proposals on project costs.

Overall, the Commission’s analysis found that while all actors have a role in the challenges driving up infrastructure project costs, government acting as a strategic enabler is foundational. The NIC concludes:

“Without a clear, long term strategy and pipeline from government providing confidence, other necessary changes will not reliably drive down cost for many schemes.

“There is an opportunity for government to address these systemic weaknesses. However, only a system wide effort targeting the root causes – rather than piecemeal interventions – will enable the UK to reap the rewards of lower cost and more efficiently delivered infrastructure.”

Click here to download the report in full

Click here to download the technical annex 

Click here to download the Roundtable summary