Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by the Civil Engineering Contractors Association (TYP 33)


  The Civil Engineering Contractors Association (CECA) is the representative trade association of civil engineering contractors operating in England, Scotland and Wales. It has around 250 member firms, of all sizes, that are responsible for at least three quarters of all the civil engineering work carried out in those three countries. Total civil engineering workload is currently worth around £13 billion a year.

  New construction, improvement and maintenance of infrastructure networks for all forms of transport account for around 45 per cent of total civil engineering workload. CECA and its members therefore have a very considerable stakeholder interest in any Government statement on transport policy or expenditure plans for investment in or maintenance of transport infrastructure.

  In the past there have been many changes in transport policy, and in expenditure plans for transport, which have led to large fluctuations in civil engineering contractors' workload. The clearest example involves investment in motorways and trunk roads in England during the 1990s.

  The 1989 White Paper Roads for Prosperity doubled the number of major projects in the English strategic roads programme, to around 330, worth an estimated £5 billion. Annual public capital expenditure on the programme, and on capital maintenance of existing roads, then rose to over £2.1 billion in 1994-95.

  By the end of the decade, however, following a succession of cuts beginning in 1994, the 1998 White Paper A New Deal for Roads in England set out a "Targeted Programme of Inprovements" (TPI) with just 37 major schemes worth £1.4 billion to be started in the next seven years. The annual level of public investment was more than halved to only a little over £0.9 billion in 1999-2000.

  Fluctuations like these militate against improving the efficiency of the civil engineering industry, and raising the value it delivers for its clients' money. They also make it more difficult to attract young people into careers in the industry, and to retain experienced engineers, other construction professionals, and skilled operatives.

  By comparison, the Government's 10 Year Plan for transport, launched in July 2000, appears to offer the civil engineering industry a reasonable assurance of first an increased then a sustained high level of work on the nation's roads and railways. CECA accepts that it was never an absolute assurance, and that there would be adjustments from time to time, arising from biennial reviews carried out in parallel with successive Comprehensive Spending Reviews. It has been led to believe, however, that these would be relatively minor, and the broad shape of the Plan would not be changed. From the civil engineering industry's perspective, therefore, the 10 Year Plan represents a most welcome development, helping it to plan its investment in human resources, equipment and technology.


  The Sub-Committee has indicated that it wishes to examine the assumptions on which the 10 Year Plan is based.

  CECA would not claim to possess all the competences necessary to judge all the assumptions underlying the Plan. However, when it was first issued in July 2000 the Association studied not only the main text, but also the Background Analysis which provides more detailed information, and it concluded that the key assumptions were reasonable on the basis of the information on transport, environmental conditions etc, and the economic forecasts, then available.

  There will always be scope for improving forecasting techniques, and in this connection CECA has been pleased to learn that various previously separate forecasting models for the demand for different modes of transport have now been integrated by the relevant staff of the Department of Transport, Local Government and the Regions (DTLR).

  CECA would point out that very many of the Plan's more detailed assumptions depend on an underlying forecast of the rate of growth of the economy, which is the principal driver of demand for both passenger and freight transport. It may appear now, as a result of world economic slowdown, that the assumed average annual rate of growth of UK Gross Domestic Product in the first five years of the Plan, 2.5 per cent, could be revised slightly down, but not by as much as would have any significant implications for the Plan.

  Also under the "Assumptions" heading, it is indicated that the Sub-Committee is interested to receive opinions as to whether the expected number of congestion charging and workplace parking levy schemes will be implemented, and when. CECA considers that it is premature to challenge the targets set in the Plan at this stage, given that it does not assume any such scheme would be implemented before 2004-05.

  The Sub-Committee is also asking whether the skills and capacity are available to deliver the improvements suggested in the Plan. This is a question of considerable importance to the civil engineering industry, which needs to consider not only its own capabilities to undertake the volume of work implied by the Plan, but also those of its major transport infrastructure clients, including the Highways Agency, local authorities, and Railtrack, to identify future work programmes, particularly for major projects, and develop them to the point at which they are ready to procure the services of contractors to carry out the work (and, for an increasing proportion of all jobs, to undertake the detailed design).

  CECA remains confident that, provided the initial increase in demand for its services is gradual, and the on-going level of demand in the medium term is consistent, and provided also that the industry works closely with its major clients to avoid waste of scare resources, particularly in the use of engineers (as is clearly envisaged in the recent Procurement Strategy documents from the Highways Agency), the civil engineering industry will be capable of playing its part in delivering the Plan.

  In the short term, it has been more concerned about the capacity of clients, following the reductions in their staffs accompanying the cuts in expenditure on both investment and maintenance of transport infrastructure in the late 1990s, to bring forward additional projects at a rate sufficient to require the higher levels of expenditure, particularly on major network enhancements projects, envisaged in the Plan.


  The questions that the Sub-Committee is asking in relation to implementation of the 10 Year Plan are mostly concerned with the future funding of investment in transport infrastructure and equipment.

  CECA has observed, and indeed has been given direct assurances, that the Government's commitment to the 10 Year Plan remains as strong as when it was first launched. There seems to be no reason why, despite economic growth being slightly slower than anticipated, and also despite claims on the public purse that could not have been foreseen when the Plan was launched (eg foot and mouth disease, and the war on terrorism), the Government should have any difficulty in financing its originally envisaged share of the £180 billion of expenditure.

  However, it presumed that almost half of all the fixed investment, or around a third of the total of spending including resource expenditure on maintenance, administration and subsidies, would be carried out by the private sector. At the time the Plan was first published, this appeared to be feasible. Now, however, prospects appear somewhat different, particularly for investment in the national rail network, but also where strategic roads and local transport are concerned.

  Events surrounding the collapse of Railtrack have clearly had a significant adverse effect on the attitude of potential private investors out with the railway industry Where those that are already stakeholders in that industry are concerned, however, including principally the Train Operating Companies (TOCs), there are other important matters to be resolved, including in particular the award of new franchises to operate services on those main lines most in need of modernisation. It is not to be expected that TOCs will be willing to invest substantially, either in new rolling stock or infrastructure, without the assurance of long franchises.

  CECA is reluctant to say more than this about railway industry investment projects ahead of publication by the Strategic Rail Authority (SRA) of its Strategic Plan, due on 14 January 2002. It is hoped that this will clarify the situation in respect of both the ordering of major network enhancement projects, and financing vehicles.

  Where private investment in roads is concerned, including both strategic and local roads, there is no shortage of potential private sector partners within the civil engineering industry, including existing Design, Build, Finance and Operate (DBFO) concessionaires, and smaller-scale firms or consortia willing to undertake smaller projects. If their interest is to be maintained, however, it is essential that there should be an early indication of additional projects that clients, including both the Highways Agency (HA) and local authorities, regard as suitable candidates for private financing.

  In the English strategic roads sector, CECA understands that the HA will very shortly initiate the process for selecting a concessionaire for the North Kent DBFO package. After that, however, there are no more major strategic road schemes in the Agency's TPI that have been marked as prospective DBFO schemes. At local authority level, where the Government is looking to encourage more private financing solutions, the attitude of most authorities is at best ambivalent.

  Against this background of uncertainty, CECA would suggest that it is not possible for anyone to answer the Sub-Committee question has asked whether "the balance and phasing of investment across funding areas (is) correct". Clearly there are some considerable doubts, which the Government, with the assistance of bodies including the SRA and HA, must seek to resolve as soon as possible.

  The Sub-Committee asks specifically for views on the impact on the 10 Year Plan of the programme of multi-modal studies of some of England's most serious transport problems that was launched following the 1998 integrated transport and roads White Papers.

  It is clear that the HA—and the DTLR also, which is ultimately responsible for approving major road schemes—has up to now been looking principally towards the conclusion of these studies for the next tranche of major schemes to be added to the Agency's TPI, which the 10 Year Plan sees as containing 30 trunk road bypasses and 80 other improvements at junctions where there is growing congestion.

  In all, around 40 schemes that were included in the Agency's strategic roads programme prior to 1998 were referred for re-consideration in the context of multi-modal studies. Up to now, however, decisions have been reached on only five of them, as several of the studies have slipped behind the timetable envisaged in the Plan, which looked for all 11 "Tranche 1" studies to have reported by the end of 2001.

  Particularly following the acceleration of starts of a number of the major road schemes in the 1998 TPI, CECA has been concerned that slow progress with the multi-modal studies threatens a hiatus in the award of contracts for major road schemes that would lead to a downturn in work in this sector in around two years time. For some reason that has never been fully explained, the Plan has a slight dip in public investment in strategic roads in 2005-06. CECA fears that, unless more schemes are approved very soon, there will be a larger dip before that.

  It has been suggested in a number of quarters that, if there are delays in identifying additional major schemes, there might be a reallocation of resources towards smaller schemes, perhaps at local level, which could be brought forward more quickly. CECA views this possibility with some concern, because of the possible implications for the balance of demand for and supply of engineers. As a general rule, a number of smaller schemes costing a given amount will require the services of more engineers than a single major scheme costing the same amount.


  As with the key assumptions, so also with the main targets set in the 10 Year Plan, CECA considered that they appeared reasonable at the time they were announced, but they may be improved over time given better information and forecasting techniques.

  What is also very relevant in this connection is the evolution of regional transport strategies and local transport plans, which may make it possible, over time, to sub-divide by region at least some of the national targets set in the Plan. In CECA's view, however, the new transport planning régime is not yet sufficiently well established, particularly at regional level, to consider setting regional targets for several years.


  As is recalled in the Notice announcing the Sub-Committee's inquiry into the 10 Year Plan, it is designed to deliver a series of improvements to transport services that will deliver the Government's integrated transport policy as set out in its July 1998 White Paper A New Deal for Transport.

  When the Plan was launched in July 2000, there were a number of ways in which it clearly did not conform to the integrated transport policy, not least by its exclusion of air and waterborne transport, pending publication of "daughter" documents to the 1998 White Paper setting out policies for those two modes of transport.

  As far as other matters identified by the Sub-Committee are concerned, however, such as the balancing of transport investment policy with social and environmental policies, and of policies for those different modes of transport including cycling and walking that are covered by the Plan, CECA's view is similar to those which it has expressed earlier in respect of both key assumptions and main targets set out in the Plan. It appeared that the 10 Year Plan, as published in July 2000, was broadly consistent with the integrated transport policy launched two years earlier, but there will always be scope for refinement as knowledge and forecasting techniques are improved.

  As for the European dimension, CECA has not yet studied the European White Paper, but is considering it currently with a view to submitting a response by the end of January. However, in its own Transport Policy 2000 the Association urged strongly that transport policy in the whole of the UK must take into account the broader European framework

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