Systemic reform needed for ‘fragmented’ road and rail infrastructure approach, warns CMA

The Competition and Markets Authority (CMA) found that a “short term and fragmented” approach to procurement in public road and rail projects left them taking longer than necessary.

Possible efficiency savings of up to £5 billion per year could be achieved from a current level of more than £19bn of public cash spent on road and rail infrastructure in 2023-23, the regulator said.

Among the recommendations for improvements (17-page / 411KB PDF) by the CMA are a call for a strategic plan for the whole UK for civil engineering in the road and rail sector; clear long-term funding and project pipelines to encourage investment and innovation; and longer-term contracts that extend beyond procuring authorities’ budget settlement periods.

It also recommends that the Treasury takes ownership for driving the systemic changes to help shape the infrastructure strategy going forward.

However Totis Kotsonis, a competition and procurement expert with Pinsent Masons, warned the proposals would create challenges for local authorities.

“Ordinarily you would look to the market, as the experts in delivery of road and rail, to tell the public sector the areas where innovation can drive better outcomes,” he said.

“Asking authorities to identify their preferred areas for innovation instead would seem less optimal as an approach. Furthermore, rewarding innovation in a procurement in a fair and consistent manner is notoriously tricky, and this can increase the risk of litigation significantly.

“The government should at least ensure that it provides detailed and practical guidance to assist any procuring authorities looking to do this.”

The findings come after 11 months of analysis of public road and rail infrastructure across the country, which covered procurement authorities, central government and businesses working in the sector.

Sarah Cardell, Chief Executive of the CMA, said the historic approach to public road and rail needed significant reform to end its inefficiency.

“Our work on civil engineering shows that a short term and fragmented approach to procurement in road and rail is driving up costs, slowing delivery and holding back innovation,” she said.

“This is an opportunity for systemic change – but it requires strong central coordination, and a reframing of road and rail procurement as a lever for growth and innovation. The CMA will continue to play its part, bringing independent advice, analysis and practical solutions to drive economic growth.”

While the study focused on public road and rail infrastructure, the CMA said it expected its findings to have broader application across other civil engineering markets and public procurement opportunities.

The competition watchdog had previously warned that volatile funding, failing procurement policies, capacity constraints and unnecessary regulation barriers kept procurement around road and rail infrastructure in a negative cycle as part of its interim findings in January.

The finalised report calls for the Treasury to oversee implementation of change in the sector in its role of responsibility for infrastructure strategy, with the National Infrastructure and Service Transformation Authority playing a key role in driving the process alongside the Scottish and Welsh governments and the Northern Ireland Executive.

It also calls for a sector plan – along with annual update reports – to set out a system-wide set of objectives to proactively shape the market through public procurement and regulation of civil engineering in the road and rail sector, including reducing barriers hampering investment and innovation, along with regular reporting from each of the authorities on supply chain innovation targets.

Capital budgets of at least three years should be set aside by the central and devolved governments for procurement in the sector, in order to guarantee more stable funding, with the CMA recommending greater flexibility for the procuring authorities to commit to contracts beyond the budget periods, providing suppliers with increased certainty of work, and reducing bid costs and reduce bid costs for all parties.

Among the other recommendations are streamlining the regulatory process for approving new engineering processes, standardising accreditation requirements and monitoring response times.

It also recommends mandated compliance with the Cabinet Office’s Construction Playbook, which Kotsonis explained could create issues for projects going forward.

“The recommendation to mandate compliance with the Construction Playbook and its accompanying guidance notes - and in doing so ending the current ‘comply or explain’ approach - could be a double-edged sword,” he said.

“On the one hand, the Playbook contains many excellent recommendations and best practice processes which could drive more successful procurements. On the other, not every recommendation is appropriate for every project.

“If contracting authorities are forced to comply with the Playbook in its entirety, they may find themselves adopting processes that are not necessary or proportionate to the particular project at hand.

“In addition, the additional complexity of complying with the Playbook and its guidance notes may in itself elongate procurement timescales, and create additional non-compliance risks in the conduct of a procurement process.”