Infrastructure procurement models need new framework for effective future investment
Infrastructure procurement of UK projects risks being constrained by lack of evidence on long-term investment outcomes and could have strategic implications for the UK’s ability to meet growing demand for infrastructure services and its Net Zero emissions targets.
The lack of a strong evidence base on infrastructure procurements has led to the focus on a single measure of performance, usually short-run cost. As a result, future procurement decisions risk being made on the basis of opinion and judgement, limiting the scope for lessons to be learned to improve future practice.
Launching a framework to assess private financing and traditional procurement, the National Infrastructure Commission today said results from the pilot showed the public sector must do more to understand the benefits and downsides of different procurement options and improve its project data management. Doing so will also address existing concerns about transparency and public accountability and improve the public sector’s chances of securing the private financing UK infrastructure will need up to 2050.
This analytical framework – tested in partnership with Highways England – provides a comprehensive tool for analysing the whole-life performance of different procurement models. It aims to ensure that government selection of infrastructure procurement models is made with a robust consideration of broader factors beyond cost.
Chair of the National Infrastructure Commission Sir John Armitt said: “Thirty years ago, the UK led the way in infrastructure financing and with PFI and PF2 off the table, recapturing that innovative spirit is vital. But without an objective way to determine value, officials risk making decisions with one hand tied behind their back.
“Transforming the nation’s infrastructure means mobilising private sector investment alongside that of government. It’s imperative we develop the tools to make better decisions about what works and what doesn’t and address existing concerns about the use of private finance.
“That requires an honest conversation about the role it plays in supporting our infrastructure investment and the partnership models we need. This framework encourages the public sector to view data differently and ask the right questions to get the best taxpayer deal, whatever the procurement model.”
A robust evidence base supports long-term value for money
The framework sets out best practice principles to assess any procurement model. By focusing on a broader assessment of outcomes in addition to cost and taking a whole life view, it aligns closely with the emphasis on quality infrastructure investment principles promoted by the Japanese 2019 presidency of the G20.
The framework proposes a more balanced understanding of the performance of private financing and traditional procurement. It builds upon past research that has focused solely on analysing performance in the construction phase of projects, and fills an existing gap in analytical tools.
The framework encompasses a wide range of criteria for success and is designed to better reflect the long-term nature of infrastructure assets. By using it, public procurers, private sector infrastructure operators, and scrutiny bodies will be able to develop a more comprehensive understanding of performance over the lifetime of infrastructure assets, that takes into account factors including:
- Asset build quality and condition
- Quality of service
- Wider outcomes, including social and environmental factors.
The Commission piloted the framework in collaboration with Highways England, applying it to five road projects, three completed under private financing and two by traditional procurement. Feedback from the independent advisory group set up to provide challenge to the Commission’s work identified no significant gaps in the framework’s design, and proposed a number of areas for further refinement.
Removing doubts about the right procurement model
The pilot found limited data on public financed projects, which is in part due to the age of some of projects used. This means developing a robust evidence base of costs and benefits of private finance and traditional procurement using roads projects alone is not achievable in short term. In addition, data aggregation at a regional makes it difficult to identify project specific data.
These findings support the Commission’s National Infrastructure Assessment recommendation that data on major infrastructure project costs and performance at each appraisal stage and upon completion should be collected as a matter of course. Adoption of the framework would give the UK a global lead in the analysis and benchmarking of infrastructure procurement.
The Commission will now explore the opportunity to apply the framework in other infrastructure sectors, generating further insights on data availability on public financed projects and to enhance the effectiveness of the analytical framework as an evaluation tool. It is encouraging a wide range of government departments, scrutiny bodies, operators and investors to adopt and apply the framework to generate more balanced evaluation of investment outputs and wider outcomes, and as a tool to supplement project appraisal consideration.