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14/05/18

Few could have imagined that one of the UK’s largest contractors would fall into financial ruin, leaving a gaping hole in the construction industry in terms of delivery of projects. While it has opened up opportunities for other companies to step in and fill the gap, it has also highlighted the need for a more careful review of contracting suppliers in terms of their financial health. If the Carillion collapse is anything to go by it has proven that one cannot assume that just because a company is large and established that it is in fact operating in the black.

Highways England reviews policies
At the time of Carillion’s liquidation it was undertaking hundreds of millions worth of work for Highways England which included joint ventures with other major industry players such as Kier and Balfour Beatty. Highways England admits that it has not only had to increase the stringency of financial reviews of suppliers but also clarify what steps are to be taken in the event that contractors fail to deliver on their contractual obligations.
The joint ventures in place for Highways England may have been their saving grace as it meant that the other partners who were already familiar with the projects could expand their current operations by increasing their staff to accommodate the increase in output required. After all, there were a whole lot of skilled Carillion employees now looking for jobs.

New opportunities for contractors
With Carillion out of the picture and the introduction of the Highways England new RDP framework later this year, it won’t be surprising if new players enter the game. As this plan seeks to appoint a number of suppliers in eight different lots across different regions it is an opportunity for smaller contractors to get a foot in the door. If smaller contractors can show that they have the skills and capacity to fulfill the contracts and they have sound financials to boot they could find themselves on the preferred suppliers list for Highways England.

Will there be mutual benefit?
One of the reasons cited for the Carillion collapse is the delayed PF1 scheme for the Aberdeen Western Peripheral Route – a deal worth £845m in which Carillion and their joint venture partners suffered massive losses. While suppliers find themselves under obligation to prove financial stability, will the same apply to those making supplier appointments?
14/05/18


2018 has been an interesting year so far with budget cut announcements and some high profile projects being cancelled. On the positive side though, new development and funding programmes are being initiated and projects such as the smart motorways on the M1, M62 and M23 are forging ahead, perhaps highlighting the priorities for the infrastructure sector – increasing capacity and safety on England’s roads.

But it’s not just safety for road users that is in the spotlight. Road worker safety is being influenced and supported by technology and opportunities for greater collaboration across the sector promise to improve delivery and efficiency. But what does this look like in the immediate future of infrastructure?

Keeping up with technology
While there has been talk of switching to electric cars for some time, the adoption has been relatively slow. However, with more vehicle manufacturers offering hybrid models and investing in producing more electric cars, this is set to change. Looking ahead, infrastructure will need to support these and other technological advances, ensuring that road users will have the facilities they need to continue on their journey unencumbered regardless of the type of vehicle they choose to use.
More robust new materials are being manufactured for construction and there is a push for a greater focus on reducing materials wastage and increasing recycling. Both of these can offer advantages to contractors willing to adopt new materials.

Technology is also contributing to worker safety, allowing for remote monitoring through sensors and using drones and machinery to access construction areas that would be considered dangerous for humans. But more importantly for construction management is the implementation of BIM to improve operations, efficiency and project delivery.

Collaboration is critical
With technology factoring into to so many more elements of the industry, greater collaboration with technology partners will be needed to ensure that contractors can remain competitive in their client offering. It won’t be surprising to see more joint ventures on major tenders as contractors choose to focus on their areas of expertise and collaborate with strategic partners to deliver the rest.

Additionally, with the uncertainty of Brexit ahead, it will be important to secure partnerships that will ensure the supply chain for skills and expertise as well as raw materials can be maintained into the future. Indeed, there are exciting times ahead for infrastructure but it will require remaining alert to future opportunities and challenges.
Author
14/05/18


Highways England are in the process of creating more smart motorways to operate using active traffic management techniques. This uses lane management as well as speed control for specific lanes through digital signage to ease congestion.
Smart motorways are viewed as a more efficient way of increasing road capacity and reducing congestion without incurring major road widening costs. But is it really the best option for the infrastructure construction industry and the commuters using the roads?

Is Smart safer?
Highways England reportsi that since the initial smart motorway opened on the M42 in 2006, there has been a 22% increase in journey reliability, a 50% reduction in personal injury accidents and when accidents have occurred, there were no fatalities and fewer serious injuries reported. However, this has not been the case on all smart motorways.
The Nottingham Post reportsii that on the M1 smart motorway section between junction 32 and 35a near Sheffield, accidents with serious injury increased in 2015 and 2016. In 2017, there were fewer fatalities and serious injury accidents than in the previous 2 years, but this was still higher than statistics from 2014 before the smart motorway conversion. This begs the question, are they really safer?

Which Smart Motorway scheme is best?
Much of the safety debate doesn’t relate to speed control as used in the Controlled Motorways scheme, but rather whether the hard shoulder of the motorway is used.
The M42 operates on a Dynamic Hard Shoulder Running Motorway scheme which uses the hard shoulder as an additional lane during periods of peak congestion. Due to the success of this scheme it is being implemented on additional sections of the M42, M1, M4, M5 and M6.
The M1 section is an All Lane Running scheme in which the hard shoulder has been permanently converted to a running lane. It’s seen as being more cost effective, but the downside is that eliminates the emergency lane which makes it difficult to access an accident scene.

What’s the priority?
Industry concerns are that if smart motorways are implemented with cost cutting as the priority, it may have a negative impact, not only for road users in terms of safety but also for contractors. With no road widening to create additional lanes it reduces contract opportunities for roadworks contractors and this could have a negative knock-on effect on the infrastructure construction industry as a whole.


i http://roads.highways.gov.uk/programmes/smart-motorways/
ii https://www.nottinghampost.com/news/local-news/smart-motorways-really-better-option-1332509
14/05/18


It was as early as 2000 that the UK started to implement Early Contractor Involvement, although back then it was coined ‘early design and build’. From there it has grown into a collaboration effort that is widely used by Highways England, HS2 and Crossrail amongst others and is meeting with widespread success in terms of improved delivery on project outcomes.

Advantages of ECI
Early Contractor Involvement sees contractors getting involved in the early planning stages of a project – sometimes 2-3 years before the build is due to start. This has several benefits. Aside from building good working relationships early on, contractor’s input is valuable in terms of forward planning and mitigating risks, especially when it comes to Health and Safety issues.

With ECI, this is made more effective through the construction and maintenance phases and incorporates the whole-of-life operations. From an investment perspective, having contractors on board when the investment decision is made helps expedite the project start date and reduces the time needed to develop 30-40% of the project.

A new kind of collaboration
ECI is based on a long-term collaboration where all parties involved are invested in complying with the contractual obligations and operate on the understanding that the commercial principles of any contract agreement will be strictly adhered to. This has the knock-on effect of ensuring that everyone in the supply chain operates on the same understanding.

It’s different from the partnerships of yesterday that got a bad name for themselves because one party’s interests where being pushed more than another. ECI is based on developing mutual benefit and efficient project outcomes where the client is protected because there are effective checks and balances set in place within the contracts.

Long term benefits
While at first it may appear to be a big commitment for contractors to make so far in advance, it has the benefit of allowing them the time to properly resource themselves for a specific project. And while the one downside is that the price is often not finalized when contracts are awarded, many clients recognize that the benefits of the long term working relationship far outweighs this risk. By working towards a target price when the ECI contracts are initiated this risk can be reduced. But most of all organisations that have long-term programmes of work are better positioned to take advantage of future build opportunities.
14/05/18

It’s been more than a year since the Cities and Local Government Devolution Act 2016 was passed, giving local authorities control over specific public services. The act was aimed at empowering local cities to be able to better manage local transportation including rail, roads and highways and provide an opportunity for collaboration between local authorities so that resources could be pooled where shared benefits were possible.

Benefits of Devolution
It was envisaged that by linking communities through a wider public transport network, it would provide greater access to jobs specifically for lower income earners. This would serve to reduce the unemployment rates in smaller cities and balance the productivity rates in more rural areas such as the Northwest, with the aim of bringing it more in line with London the rest of the UK. However, while this paints a positive picture, progress has been hindered by a number of stumbling blocks.

Struggling to come to an agreement
To achieve this bigger picture benefit, local city councils will be required to collaborate on rail and highway projects, and counties will need to relinquish control. To date Cornwall is the only rural area and county that has managed to achieve this. And while others struggle to reach agreements, progress crawls along at a snail’s pace. There is also the question of how the Department of Transport will support this devolution of power into the future and what their role will be.

Collaboration is key
It is obvious that success can only be achieved through collaboration, between local authorities, contractors and private and public organizations such as Highways England and Network Rail. There are exciting opportunities to create a new benchmark for delivery, incorporate best practices and share knowledge and expertise so that project outcomes can be realised. If this can be achieved, it may also help find solutions for the challenges that some local authorities are experiencing through budget cuts.

Opportunities for Contractors
It is imperative that all parties involved keep the focus on bringing benefits to local commuters who will be making use of the services and deciding if in fact devolution has been the right strategy for success. To this end, contractors have an opportunity to partner with local city councils, providing expertise that can help create the right transport framework for the regions specific needs. Additionally, successful implementation in one region may open up opportunities for future contracts in other cities.
14/05/18


Following a recommendation from KPMG, local authorities such as Northamptonshire have recently announced significant budget cuts. The reduction of £10 million in capital receipts expenditure affects several key sectors, one of which is highways maintenance. At the same time the Highways England CDF framework which oversaw maintenance since 2014, is set to conclude by the end of 2018 – 2 years earlier than planned, precisely because by then they too will have run out of funding.

While the national authorities can now breathe a sigh of relief, thanks to the revised budget announcements, this provides little consolation for the local authorities who find themselves without the funds needed to fulfill their mandate to deliver on much needed services such as social care, housing development and highways maintenance.

Maintenance spending already low
Government figures show that roads maintenance spending by local authorities is at the lowest level in over a decade. Spend on maintaining B, C and unclassified routes in 2016-2017 was only £1,87bn compared to £2,46bn in 2004-2005. So in the interests of safety, can they afford more cuts?
In 2013, when some local authorities switched off street lights as a cost cutting measure, there were reportedly 11 deaths linked to this. If roads are not properly maintained, what will the impact be on the safety of road users, especially when the weather turns foul in the winter months?

New plan for highways maintenance
While local authorities may be tightening their belts in an effort to remain sustainable, Highways England is in the process of implementing its Regional Investment Programme to replace the CDF. This will see new opportunities for twelve selected contractors to carry out roads and maintenance work across six key regions in England.
The new contracts offered by Highways England will be for four years with the possibility of extending for a further four years based on performance. However, the RIP is still in the very early stages of implementation and contractors are yet to go through the selection and appointment process. While the new RIP promises benefits into the future for communities and contractors alike, will it be too little too late?

With local authorities already behind in maintenance and coming up empty on funding to conduct even basic repairs, will it fall to Highways England to ensure that local roads are kept safe this summer?
14/05/18


The collapse of Carillion has hit the construction industry hard on all fronts. There are many projects that may remain incomplete in the short term, including the construction of hospitals. Not only have employees found themselves out in the cold, but many businesses up the supply chain are feeling the knock on effect.
The question that many are asking is: Could the collapse have been prevented? Now that it has come to light that Carillion was hiding more than £500bn in debt it seems unlikely. However, there are some serious lessons to be learned if the construction industry wants to remain robust in the future. Particularly when it comes to tendering and managing risks and rewards.

Big player tactics don’t work in reality
The practice of tendering low to win the bids, have fixed price contracting in place, and then outsource a large portion of the work results in low margins and unmanaged risk. Specialist aspects of projects are often overlooked in tender phases adding to the risk. It may be true that this is simply how the industry has always operated, but it’s unsustainable. So will the industry learn from this and start to change their perspectives?
There is a call to start thinking and working differently, not just from a contract point of view, but also taking into consideration technology and other practices that can result in greater efficiencies. With the construction industry now under strain following Carillion’s collapse, it will be more important than ever to make sure better business practices are put in place.

Collaboration is key
It may be possible to mitigate risks by involving supply chain contractors early on in the tendering process. The use of BIM is already being encouraged in the industry and becoming a requirement for major project tenders. This can help ensure that the technical aspects of a project are adequately covered in the early phases of a tender submission.

When project stakeholders work closely together and accept responsibility for their part, risk becomes easier to manage as each party becomes accountable for what they need to deliver. If this is incentivized, either through the prospect of long term collaboration or contract mechanisms it becomes even more effective.
Rather than just being about contractors winning contracts, will this kind of approach help shift the emphasis to delivering measurable business value for all stakeholders?
09/05/18


It’s been a bit of a rollercoaster ride for the infrastructure construction sector in recent years largely due to funding issues. With the majority of funding coming from public sources, changes in budget allocations and budget cuts have put a stranglehold on many project developments. However, if the latest AMA Research report is anything to go by, things are looking up for the future.

Will 2018 be the turning point?
The research report highlights a number of areas where funding has been specifically earmarked for infrastructure projects. Under the National Infrastructure Plan £15bn was allocated for capital enhancements and renewals for the period 2015/16 to 2020/21. This combined with a push to develop infrastructure in the North as well as Highways England’s Collaborative Delivery Framework, all point to 2018 as the year when the tide starts to turn. The construction projects that have been in the pipeline for some time may well come to fruition and start to see development happening on the ground.

New works and upgrades
As traffic congestion becomes more of a problem there seems to be a push to develop alternate routes which include new crossings and tunnels in the London area. There is also a major drive to upgrade highways on major routes, turning many of them into smart motorways. These upgrades require not only traditional roadworks but will also incorporate digital technologies which will require specialist skills and knowledge.
In addition to new works Highways England has a maintenance budget of £1,3bn for the period 2019 to 2020. If traffic congestion continues to increase as predicted it will result in higher than normal wear and tear. There are questions if even this maintenance budget will be enough to keep roads pothole free and prevent traffic disruptions.

Major rail developments on the cards
While in recent years there has been a steady decline in new rail developments, there is £38bn earmarked for rail construction up until 2019. This will support a number of major projects that are due to come online in the near future, including: main tunneling works on the Northern Line to Battersea; the Bank Station redevelopment project; the Metropolitan Line extension project; and electrification of several cross country routes.

Government has promised to continue to invest more in infrastructure and if this happens then the infrastructure constructions sector is going to be kept very busy in the coming years.
09/05/18



In this modern era there is a lot of debate about what will entice people to make a move from their current position. Some move for learning opportunities or to gain better experience, some want better benefits, others are looking for convenience, with the options to work remotely or from home rather than commute into an office every day. But at a senior level, do those things really make a difference or is it still money that talks the loudest?

Getting the offer right
In senior roles where finding the right level of expertise is critical for the success of a project or company division, and the right talent may be hard to come by, the question to be raised is; can companies afford to not be competitive in their salary offerings? Senior employees need to be enticed to move and making a mediocre offer isn’t likely to make this happen. On the other hand there is the argument that companies have budgets to adhere to, so where is the balance?
A critical starting point is knowing what the industry benchmark is and having a clear budget, while at the same time having a good understanding regarding what aspects of the offer are immovable and which are flexible. While it’s incredibly difficult to define the value a person can bring to a business in advance, at a senior level they should have a track record that demonstrates this. Having this information provides leverage for both sides when it comes to negotiating a salary.

What’s most important?
What will make the most difference to the business bottom line? With this in mind, what are the critical hiring elements? Even with a well-defined candidate brief it’s unlikely that you’ll be able to tick all the boxes. Know which are negotiable and find out what other benefits may be important to the ideal candidate. For some people time is money, so while they may first look at the take home pay, they’ll also consider the value of not having a 1 ½ hour commute into work every day.
From a hiring perspective the value of having someone that can manage a project to deliver on budget and on time could well add to the business bottom line. Not only delivering cost efficiencies on existing projects but also helping to secure future work because of being strong in terms of deliverables.
02/05/18


As much as there is a need to develop a better transport infrastructure for the North, the funding to make this happen seems to consistently fail to materialise. For the past decade London has received double the funding per capita for transport compared to the North and this seems unlikely to change in the near future. An analysis of planned projects revealed that London is set to receive 2.6 times more transport infrastructure than the North.

It is believed that one of the primary reasons for this is that Transport for London has developed the right expertise in planning developments and selling the concepts to ministers by being able to demonstrate that they are good value for money. But more significantly TfL is able to finance its own spending and actively lobbies for political support. TfL is well established and well organized which has given the South a distinct advantage to securing funding and getting developments rolling.

Changes afoot in the North

The good news is that the North are now following in their footsteps. The last week in April saw the inaugural meeting of the Transport for the North take place in Liverpool, officially making it a statutory body. While it may take some time for TfN to be as effective as TfL, it is certainly a step in the right direction.

One of the biggest challenges ahead will be getting to a level where TfN are self-funded and can operate independently. To achieve this they will need to generate revenue streams, successfully win government grants and be able to present a strong case for potential investors. Indeed, for TfN to be have the clout it needs to get transport projects off the ground, it will need to have a strong network and support base in other sectors. An overall review of economic policy is needed and TfN will need to present the right kind of expertise if they want the powers-that-be to listen and give them their support.

A critical element of this is to have a clear mandate of what TfN as a governing body would do. On this they are already moving in the right direction. Tfn’s aim is to focus on issues relating to transport, trade and investment and Brexit. And to do this is a context of aligning local industrial strategies with broader regional ones to achieve success.