As with many things, the answer is not straightforward. There’s no doubt that over recent decades we’ve implemented new technology and ways of working that have delivered numerous improvements across the lifecycle of a project. But the current rate of improvement isn’t fast enough and is very much focused on projects. To a large extent that is part of the problem – our contracting models are geared to project-by-project innovation and improvement, inherently limiting our ability to drive change at scale. The need for longer-term, systemic change is becoming all the more urgent as demand to really turn the dial on cost efficiency and net-zero intensifies.
Moving beyond project-by-project thinking
When it comes to decarbonisation, we have huge potential for improvement through the likes of hydrogen, electric vehicles, low carbon concretes, modern methods of construction (MMC), design for manufacture and assembly (DfMA), AI – the list could go on.
These innovations typically have large investment needs and take time and effort to scale, often across multiple projects. However, infrastructure projects are not currently designed and procured in such a way that enables their potential to be maximised. We need a multi-year, multi-project approach, but that’s hindered by some common challenges:
- The cost of investment can often be more than the capex a single project can bear, due to public budgeting pressures or company in-year capex restrictions;
- The return on investment (ROI) is often too long for commercial models to account for the pay-back i.e. beyond the life of any one construction project;
- Technical challenges and the construction skill gap hinders progress to delivery;
- Specification and liability issues can slow or prevent adoption, for example low carbon concrete being hard to insure for structural use;
- There can be unintended consequences through the value chain of decisions made and how something is procured from the top.
A complex system of actors
The importance of the role that everyone in the value chain has to play was emphasised as part of a panel discussion at the Interchange event, Manchester. I was a member of the panel and one of our key reflections was that infrastructure is delivered in and by a complex system of actors (in particular this was highlighted by Stephen Elderkin, Director of Environmental Sustainability, National Highways).
While some actors have more influence than others, no-one has a full view or understanding of the different perspectives of those in the whole value chain. It’s very hard for someone at the top, such as government or the customer, to really understand the impact a decision they make can have on a supplier lower down the value chain.
For example, National Highways have taken an excellent leadership position for their Lower Thames Crossing (LTC) project. It’s the first major project in the UK to put carbon reduction at the heart of its procurement process, which includes forward procuring hydrogen and exploring multiple low carbon productivity avenues for the use of hydrogen. That’s fantastic client-level leadership and we need to see more of it. And, of course, there have been many consequences down the value chain which LTC have worked out, such as who will cover the additional costs of higher hydrogen-ready plant hire and less favourable depreciation rates. We need to see more client leadership like we see on LTC, but it’s an example of how big decisions at the top reverberate down the value chain, not all of which are considered by the asset owner or procuring client.
The need for collaboration couldn’t be clearer. We need to work better together on these large innovation challenges, and we need commercial and practical tools to do so, because these kind of large challenges won’t be solved by positive intent and collaborative behaviours alone.
Next steps
What can we do collectively that will make a difference?
- Set the ambition: although each actor up and down the value chain has a role to play, the key role is that of the customer, who sets the aspirations and tone. These aspirations need to be matched by what the value chain sees in subsequent contracts;
- Create the right commercial model: we urgently need innovation in our commercial frameworks and contractual models. Typically, these contracts incentivise short-term delivery or cost management over long-term innovation. That will clearly define behaviours. This issue is improving across industry, but we need a step change. Commercial/contractual innovation is the crucial step that can unlock all the other innovations;
- Deliver on accreditations: it’s not just about achieving accreditation, it’s about delivery. For example, there is already a specification that drives system-level carbon reduction in infrastructure, and that’s PAS2080:2023. Every organisation in the infrastructure sector should become PAS certified, and then also run a real review and improvement programme for their business, not just do the minimum to pass the certification.
- Establish a cross-industry innovation steering group: we need to find better ways, including contractually, that will facilitate innovations to be scaled across the industry much faster. We need even better cross-industry collaboration that can take an innovation that’s been successfully piloted and proactively scale it on other projects, in other companies. For example, just because we at Skanska pilot an innovation, it could be certified and scaled much more quickly if other companies got involved too;
It’s been great to see how the importance of getting these things right is rising up the industry’s agenda, including in the five client carbon commitments recently announced by CO2nstrustZero. These include a focus on incentives in contracts that help the push for low carbon construction and adopting PAS 2080 as a common standard.
It’s always important to look at situations like this with perspective. Significant change and improvement has already been achieved, with innovations being developed, tested and implemented on projects today. That’s great to see and be a part of. Now is the time for all actors in the value chain to work collaboratively, to move from a project-by-project approach to systemic thinking – truly unleashing the full potential of the innovations being developed by amazing people across the industry.
Like to find out more? Read an interview with Adam in leading industry publication New Civil Engineer. Skanska's Adam Crossley on how the industry can remove obstacles to innovation | New Civil Engineer