Derek Griffiths reflects on international approaches to infrastructure projects to offer some lessons for Wales
This article follows the IWA’s conference on Infrastructure in Wales, the need for which is testament to the UK’s continuing abysmal record on developing solutions that deliver projects economically, engage local businesses in the supply chain and provide training and employment opportunities to the affected communities. It draws on two of the many mega-infrastructure projects I have experienced. Their commonality begins and ends with being bi-national : they are the British / French Channel Tunnel (“the Chunnel”) and Phase 1 of the Lesotho /South African project ,the Lesotho Highlands Water Project (“LHWP”). The execution of the former exuded an air of chaos that was absent from the latter, even when a coup d’etat occurred in Lesotho.
After briefly looking at the Chunnel, and the litigious British record of delivering infrastructure projects, I shall identify the factors which in 2006 resulted in Phase 1 being acclaimed as “The Project of the Century” by the South African Institution of Civil Engineering. In doing so share some lessons of relevance to Wales and the Welsh Government. Hopefully, they will show the same willingness to learn as their Basotho / South African counterparts were before issuing the tender documents for Phase 1B, who included elements of the socio-economic provisions included in the Cardiff Bay Barrage documents in their own.
I write just after the construction of LHWP Phase 2 has been given the green light, and, if they have any sense, the Lesotho and South African Governments will resist any fancy dan changes to the oversight model, the contractual arrangements and realistic budget that delivered Phase 1 on time and within that budget. As I shall explain, the particular change I have in mind is the replacement of the Dispute Review Board system by the Dispute Resolution / Adjudication Board system. The Review Board is the brainchild of an American, the late Al Mathews who chaired one of the two boards set up in Lesotho.
The Chunnel Structure
The Chunnel’s delivery was assigned by the British and French Governments to construction companies and bankers in the private sector; it might be the forerunner of the PFI / PPP model. Just as repeatedly happens with mega-projects in the UK, the reported budget of £5 billion was hopelessly optimistic compared to the reported cost of £9.9 billion; even at that price the completion of the project was a year late. Having experienced these faux pas on the Chunnel, Jack Lemley resigned from heading up the delivery of the Olympic infrastructure programme for £2 billion; it took three times that amount to allow the Games to commence on time. Either as taxpayer or customer the public has to meet these costs; as they do for everything.
When I last looked, the British law reports were redolent of UK mega-projects, and indeed lesser ones, going wrong. As the judges observed, the result is that money which could be better spent is squandered on costly litigation / adjudication. Worse, some cases are conducted during the course of construction and poison the atmosphere to the detriment of progress.
The LHWP structures
Although it was later tweaked (a process in which I participated), the LHWP enterprise was set up in a Treaty between the two countries. The Treaty provided that the Lesotho Highlands Development Authority (“LHDA”) was responsible for activities on the Lesotho side of the border with South Africa, with the Trans Caledonian Tunnelling Authority (“TCTA”) being responsible for those on the other side. Overseeing each was a body consisting of three representatives of the Lesotho Government and three of South Africa’s. Initially called the Joint Permanent Technical Commission (“JPTC”) it was later changed to the Lesotho Highlands Water Commission (“LHWC”), reflecting that its remit extended beyond technical matters.
With my background in local government before joining the construction contractors’ hurly-burly world, none of this bureaucracy was new to me. I had also experienced some actual PFI approaches with a contractor, one of which led to my resignation, as I thought the contractor was taking on financial risks it did not understand: I certainly did not. However, in neither capacity had I encountered another brick built into in the structure on the Lesotho side of the LHWP, namely the previously mentioned Dispute Review Board; in fact there were two Boards.
Very briefly, one of a Review Board’s responsibilities is to use their project experience to warn the highest echelons of the contractual parties of potential problems before they develop into disruptive disputes which they will have to review. Another is to recommend how those that do so develop might be better resolved without litigation before a court or an arbitral tribunal; either of which would have a distracting and poisonous effect on uncompleted projects.
The important difference between Review Boards and the Resolution / Adjudication Boards, that have since surfaced, is that the latter decide disputes.The danger is that the decisions can lead on to court or arbitral processes if they are not implemented. I would suggest that is the last thing needed on a partially completed project of any size; let alone mega-projects that Wales is now mooting. The Review Board approach has been further developed in Hong Kong and Australia to provide an oversight of whether the contractual arrangements match the projects state of preparedness: but this is not the place to elaborate on those forms of independent scrutiny.
The current state of Wales’ Infrastructure Programme
With the possible exception of floating Transport for Wales, I see nothing that suggests that the Welsh Government has created any structures matching those that delivered Phase 1 of the LHWP. Even Transport for Wales’ schemes seem to be mired in the uncertainty that afflicts most, if not all, of the other mega-transport projects in the pipeline across the whole of the UK.
Chris Grayling’s laissez-faire attitude that Brexit will be “alright on the night” is in keeping with his view that the UK is experienced at delivering infrastructure projects.That might be so, but the record is poor when it comes to completion on time and within budget; let alone engaging local businesses in the supply chain and improving the lot of local people.
It’s time that the UK showed a little humility and a willingness to learn from other people such as Lesotho’s Basotho; just as they and the South Africans did from us. In that respect, Wales might lead the way in establishing the kind of oversight structures set up in Lesotho, and the policies they adopted. These would serve well the economic, timely and social benefits delivered by the mooted: South Wales Metro; Cardiff Capital Region Economic Regeneration Strategy and Swansea Bay City Regeneration Strategy, all of which embrace more than one authority.
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I once expressed the view to a very senior politician in the Welsh government that a project as complex as the South Wales Metro – in its full Mark Barry form with integrated bus services, through ticketing and housing planning decisions co-ordinated – could not be delivered without a competent statutory authority set up for the purpose. His reply “that’s obvious”. Yet we are now attempting to do the Metro using Transport Wales, a department with some seconded civil servants and a handful of consultants. The companies asked to tender for Metro contracts are effectively being invited to design the system because the Welsh government has not set up a body or brought in the expertise able to do it. I fear this is an abdication of responsibility. What administrative overhead would you expect for a project of £1.5 billion if it is to be done properly – 5 per cent? That would imply the Welsh government should not flinch at setting up an executive agency and importing talent at a cost of £75 million if need be. Much more will be wasted if the project goes wrong or, indeed, does not happen at all. If Cardiff Bay needed a development corporation, why should organising mass transport across ten local authority areas not need as much? I fear we are in a bind. The Welsh government does not command the resources to deliver very large projects (no shame in that) yet is reluctant to create other centres of authority with the requisite capability – a hangover from the old “bonfire of the quangos” mentality. Where do you go from there?
Perhaps, unsurprisingly, I could not agree more with Mr. Holtham. For how much longer can we afford continuing to deliver projects that are late and go over budget? The latest example is the Heads of the Valleys Project, which compared with others in the pipeline such as the M4 this side of the Severn and the Metro cited by Mr. Holtham is hardly a mega-project.