Press release

Reforming the construction sector to encourage growth

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Government Construction Summit hears how public sector construction supports economic growth.

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CAB 071-13

Reforms to strip out inefficiencies in public sector construction have already generated £447 million in savings for the taxpayer last year and will deliver up to 20% savings in project costs by 2015, Cabinet Office Minister Chloe Smith said today.

Making links across departments has meant government is able to act as a single customer to the construction industry and provide clear benchmarks for budgets by setting out the average price it expects to pay for projects. The new set of benchmarks published today aims to drive down project costs even further and encourage the industry to offer more competitive and innovative solutions.

Speaking at the annual Government Construction Summit attended by suppliers, contractors and those responsible for public sector construction projects, Chloe Smith said:

Government is a good client who pays on time and invests in projects that make an important economic impact to help the UK compete in the global race. We’ve always been ambitious in our plans to reform public sector construction, and the £447 million in savings generated by acting as a single customer shows just how we are spending public money more intelligently.

Working more collaboratively has identified where we can strip out unnecessary waste in construction projects and test out innovative models to help businesses of all sizes win government contracts. Our reforms aim to deliver projects up to 20% cheaper by 2015 – making at least £1.2 billion available to reinvest. That means 60 new secondary schools, or 60 new community hospitals.

Working with both small and large suppliers has enabled government to test new ways to be more efficient, strip out waste and pay on time:

  • Ministry of Justice is building a new youth justice institution at Cookham Wood at 20% less than the expected cost by focusing on early collaboration between contractors, utilising innovative building information modelling (BIM) technology to identify problems early and using a range of other efficiency measures.

  • Surrey County Council/May Gurney’s Five Year Highway Programme has focused on sustainability to create a wider integrated supply chain, sharing their success with other authorities and their suppliers to significantly increase the amount of recycling of construction material in the South East.

  • Highways Agency has been using Project Bank Accounts on all contracts awarded post October 2011, and nearly £2.2 billion of spend on government construction projects has already been paid via Project Bank Accounts since their introduction. This improves the speed and security of payment to members of construction supply chains down to tier 3 within a matter of days.

Civil Engineering Contactors Association (CECA) director of external affairs Alasdair Reisner said:

Two years ago industry and government agreed to work together to drive the cost of construction down by 20%. We have welcomed the chance to be involved with this work, and are pleased to see that the results are starting to emerge, producing sustainable savings that reduce the cost of construction for the taxpayer. We hope that the new approaches will be adopted widely, creating a leaner and more competitive industry that delivers exemplary results for its customers.

CEO of Constructing Excellence Don Ward said:

The early findings of the trial projects monitored by Constructing Excellence already point to smarter procurement delivering significant improvements in value for money for the public purse. Of course it is key to ensure savings do not impact on safety, quality or whole life performance, and our monitoring will focus on this as well as capital cost savings.

Notes to editors

  1. The annual update of benchmarking costs for construction projects for 2012/13 was published today.

  2. More information on the new models being trialled by ongoing trial projects and their outcomes is available here.

  3. The Cabinet Office’s Efficiency and Reform Group announced on 3 June 2013 that government had saved £10 billion for the taxpayer through fundamental reforms to how it operates. Of this, £447 million of savings were made by stripping out inefficiencies in public sector construction projects.

  4. Reforms to public sector construction aims to deliver projects 15-20% more cheaply by 2015.

  5. There is a contractual obligation for all central government contracts to pay down to tier three within 30 days.

Published 2 July 2013