Infrastructure in 2014: The push for real value is worth it
Lowest cost is something we simply can’t afford.
The Jubilee Line Extension (JLE) was built on a business case of 1:1, in other words the view was that we would merely recover what we put in. As we focused on cost, were we really so pessimistic about value?
To cast one’s eyes east from anywhere in central London is to see a new city at Canary Wharf and to know what it has meant to our country, and to finally appreciate that the original benefits of JLE were woefully understated.
Maybe we didn’t understand the potential extent of these benefits, and then, maybe we still don’t. Back then, JLE ran a poor third priority to Crossrail and Chelsea Hackney, or Crossrail 2 as we now anticipate it.
We finish 2013 with mixed blessings. Certainly, infrastructure’s profile has continued to grow, and that must be good; these are busy years for the development of our capital’s infrastructure. The public is persuaded on a point of necessity, and so for the moment this investment looks politically sustainable.
And yet, we just can’t seem to convince ourselves that infrastructure is more about revenue, benefit and growth than it is about cost.
So what? Well, I rather think that there is a growing appreciation that aiming for low cost, above all else, may not get us great outcomes.
This year saw London Underground (LU) complete a trial of its Innovative Contractor Engagement (ICE), a procurement initiative to analyse bids on value, not lowest cost. It was a risk; a new process which challenged the client to state its operational requirements for Bank station, and to ask the market how such outcomes could be delivered; in other words, to market test the solution.
Theoretically the latitude existed for the answer to have been pure technology, an app say, rather than construction; room then for that elusive innovation to breath.
The success of this approach has been well documented in this magazine, 20% better product performance and 45% better value; and less cost, a common product of a well thought through solution.
London Underground’s passengers broadly double every 35 years, growth is a constant and our upgrade will never finish
Should we be surprised that great engineering teams, once given the opportunity, will get to a better answer? I think we should expect it.
LU is in good company. Many major clients “get it”, and progressively, Highways Agency, Anglian Water, Thames Water, Environment Agency, Crossrail, Network Rail, Heathrow and HS2 Ltd amongst others, now stand prepared to challenge two decades of orthodox governance and to convince those that need to be convinced that pursuing their version of value, not simply lower cost, will allow them to get the best from their supply chains, and to deliver great outcomes.
In the unfortunate event that clients continue to dictate lowest cost for fixed solutions, it seems inevitable that innovation will elude us and strategic pricing (with all that follows) will persist.
Better value is a simple concept: more revenue, benefit and growth per pound. It’s time for clients to lead by properly defining and evaluating operational benefits, and in turn to provide industry with the latitude to exercise its intellect and its brilliance to get more benefit for that pound. Collaboration perhaps.
London Underground’s passengers broadly double every 35 years, growth is a constant and our upgrade will never finish.
We are not going back to lowest cost because we simply can’t afford to. LU will seek ways to use the principles of ICE on future stations schemes and even the development of its New Train for London.
Once you believe in high value outcomes, once you’ve seen what an empowered industry can really do for you, why on earth would you want anything less for 2014, and beyond?
- Miles Asley is London underground programme director of crossrail and stations