Energy and Infrastructure Report 2022
Fostering better outcomes/Key trends
Holding nerve on investment and pipeline certainty
Data from the ONS demonstrates the significant impact of the COVID-19 pandemic on public finances. UK public sector net borrowing for the financial year ending 2021 is estimated to have reached 15 percent, the highest ratio since the end of World War Two when it was 15.2 percent.
According to the latest release from ONS (22 February 2022), public sector net borrowing excluding public sector banks was a surplus of £2.9 billion in January 2022 — equivalent to £5.4 billion less borrowing than in January 2021, but a £7 billion smaller surplus than in January 2020 before the COVID-19 pandemic.
While economic recovery from the pandemic is underway, there are other pressures on public spending. The UK has an ageing population requiring increasing amounts of care. The cost of living is soaring, leaving people requiring heightened levels of support. The UK also needs to provide aid to Ukraine. Some think that the government may reduce spending on energy and infrastructure projects as a result. However, it is hoped that the government will recognise the importance of those projects needed to futureproof the UK. Investment is required to balance inequalities arising from the pandemic and stimulate social and economic recovery. It is also critical that steps are taken to transition to net zero carbon and build resilience to the effects of climate change.
Sir John Armitt, Chair of the National Infrastructure Commission, recently addressed the All-Party Parliamentary Group on Infrastructure. He noted the importance of sticking to long-term plans to give certainty to supply chains and investors. He expressed the need for a strategic approach to ensure that infrastructure will be fit for the future.
While highlighting concerns over the impact of the cost of living, Sir John pointed out the necessity to keep pace with investing for the future. Specifically, that if investments are not made now, wanted and needed outcomes will be delayed and it is likely that overall costs would increase. He urged for the National Infrastructure Strategy, published by the government in 2020, to be followed and committed to on a long-term basis.
The development of policy pathways to enable implementation is key. And whilst the strategy should be updated for significant changes, resisting many alterations and giving certainty of the pipeline will aid delivery and support private investment.
Collaboration and new ways of working
The COVID-19 pandemic has fostered new ways of working and delivering projects.
Flexible working
The construction industry has long had an image problem, with potential workers put off by a lack of diversity, long hours, low pay and little job security. Many in the industry have been working to change these perceptions to try and attract more workers.
Adoption of flexible working is increasing: giving more choice over where people are based and their working hours. Build UK and Timewise undertook a study concluding that flexible working on construction sites could be successful.
The four firms that took part, BAM Construct, BAM Nuttall, Skanska UK and Willmott Dixon, reported massive wellbeing improvements with no effects on project budgets or deadlines.
It is hoped that greater flexibility and agility will help attract and retain talent, making construction a viable career choice for as many people as possible.
Digitisation and use of modern methods of construction (MMC)
The increased use of technology, digital tools and data is helping the industry overcome challenges. For example, 3D printing can reduce waste, robotics can help reduce on-site labour requirements and data analytics can improve planning and decision-making on projects. There is an enormous opportunity for artificial intelligence (AI) and machine learning in construction, including supporting risk management, identifying opportunities in delivery and helping explore solutions.
MMC, mainly offsite or modular techniques, are increasingly used on energy and infrastructure projects to improve quality and efficiency. A 100m-long temporary factory has recently opened to manufacture 1,000 concrete deck segments to form the Colne Valley Viaduct. The viaduct will stretch for 2.1 miles across lakes and waterways, carrying high-speed trains as part of the HS2 project.
The modular approach means a 'match-casting' technique, with the pouring of each segment against the previous one, can be used to ensure the perfect fit when reassembled on site. It also ensures quality, safety, efficiency in production and road transport avoidance. Once the viaduct is complete, the factory will be removed and the area will form part of the 'green corridor' with chalk grassland and woodland.
Rolls-Royce has recently launched a competition to find the primary location of a factory to build heavy reactor pressure vessels (RPVs) that are part of 477 MWe reactors for small nuclear reactors. The engineering company is considering sites in England and Wales.
Components would be made in factories then assembled on-site, reducing risks and construction costs compared to larger nuclear power plants. The offsite approach is considered particularly beneficial for remote locations. There is also a significant opportunity to export to countries such as Poland and Saudi Arabia.
Collaboration and longer-term partnerships
Increased collaboration has been seen across the industry to overcome the issues faced with materials and delivery issues. Longer-term partnerships, underpinned by a collaboration ethos, will allow for continuous improvement and innovation, creating better project outcomes and a more sustainable construction industry.
Mark Thurston, HS2 chief executive, recently told Construction News that HS2 might use alliancing style contracts in the future to drive best value. Currently, HS2 runs a collaboration board between civils contractors to enable sharing on resourcing, technology, logistics and health and safety issues. The collaborative environment on HS2 has benefits such as the collective sourcing of materials from the market to ensure sufficient supply and avoid pushing up prices.
Alliancing models have worked successfully in the utilities sector, including on British Gas and Anglian Water investment programmes. Network Rail has also recently announced that it is planning to adopt an alliancing model for procurement. The procurement model was also endorsed by the recent review undertaken by Professor David Mosey: Constructing the Gold Standard – An Independent Review of Public Sector Construction Frameworks.
More frequently, energy and infrastructure clients choose the NEC4 suite of contracts for their projects — benefitting from greater surety of delivery while ensuring better protection to all stakeholders associated with the project. NEC4: Alliance Contract (ALC) is a multi-party contract with an integrated risk and reward model, allowing for deep collaboration between project partners bound by common interests, therefore reducing the potential for dispute.