The insurance market has failed to keep pace with the construction sector – it’s time to improve collaboration. Check this report from Constructing Excellence (CE) for what you need to do.

Key players in the construction sector recently met with leading construction insurers to discuss current trends and debate the future outlook for their industries. The meeting of minds was organised following a discussion between Lucas Fettes & Partners and Constructing Excellence, CEW’s sister organisation that is charged with driving the change agenda in construction in the rest of the UK.

In light of the rapid changes in the construction sector, CE wished to explore with insurers the way in which new insurance models could be created to better align the interests of both the insurance and the construction industry and enable innovative and more efficient funding frameworks in a way that would reduce risk and encourage more collaborative working.

As the construction sector changes, insurers are finding that their traditional products and underwriting techniques are in danger of becoming outmoded. Whilst many acknowledge the need to change, acting on it is a huge challenge, and the development of new approaches can only happen if there is effective collaboration between clients, investors, contractors and the insurance industry.

The report from the workshop that was set up is enlightening and CEW thoroughly recommends you download it and check out the links and watch the video. Here is the main link and please watch these videos as well.

We have produced a video: Where will the construction insurance market be in 5 years’ time? A dialogue that is long overdue.

Key insights from the discussion include:

• On any given project there are multiple insurers underwriting the same risk, resulting in significant over-insurance and driving behavioural norms towards a litigious rather than collaborative approach. Projects too often seem to be to be set up for a win-lose scenario. True collaboration can only come from the alignment of each party’s commercial needs.
• An insurance product that caps out-turn costs could take away the potential for conflict by looking at how much can be priced in, instead of out, of cover. Again, success requires a shared commercial interest.
• Connectivity and the Internet of Things may bring about an insurance product that extends beyond the build project and into the operational lifecycle of the building. “If you can understand how a building is going to age, then it is possible to model.”
• BIM creates the availability of tools to provide information – management information is readily accessible on a tablet or in app form. Will that drive different lending behaviours or create different types of lenders? New technological underwriting techniques will be a major disruptor, making it possible to bypass traditional means of insurance.
• Technology is only ever an enabler. The maturity and competency of the client is critical. What is their track record? Do they have the right leadership? How much do they care? Just how invested are they in the project? Businesses that derive the most value will be those that invest in building BIM into their transformational programmes, such as health and safety and HR.
• Data now is far more valuable than the physical assets that underlie it. Competitive advantage does not come from holding on to your own data, but from sharing and pooling data, then competing on the ability to analyse and get value from it.
• Underwriters must have a joint seat at the table with a client. Brokers have traditionally enjoyed being able to control the relationship but, now, a good broker will allow the insurer to get in front of the client.

https://www.youtube.com/watch?v=8O09Tc0vzVI

A £1.2bn Cardiff city region infrastructure improvements deal has been given a boost after local council leaders backed the plans.

Ten local authorities backed a report outlining a future economic strategy for south east Wales. Recommendations in the report included more collaboration between local councils to support public and private investment in infrastructure and to develop housebuilding and regeneration plans around the region.

The £1.2bn investment fund includes £325m committed to the Valley Lines Electrification programme and more than £400m allocated to the south east Wales metro scheme. Some £50m will be invested in constructing a new technology centre and the Welsh Government will work in partnership with local authorities in the region to regenerate the area.

The Cardiff city region deal is expected to create a further £4bn of private investment in the region.

City of Cardiff Council leader Phil Bale said: “The leaders welcome the commission’s report, and work has now begun to include recommendations within the CCR city deal implementation plan, which will be considered by all the councils concerned in the near future.”

Both the UK and Welsh Government will contribute £500m to the city region deal, with the 10 local authorities in the Cardiff Capital Region contributing a minimum of £120m over the 20-year period of the fund.

The government recommitted to implementing the Cardiff city region deal in last year’s Autumn Statement. Chancellor Philip Hammond said the agreement “remains at the heart” of the government’s strategy to develop local regions.

A new terminal could be built at Cardiff Airport over the next ten years to replace the current building.

Chairman Roger Lewis said he was expecting the private sector to buy a stake in the Welsh Government owned site as part of the move.

The announcement came following a 16% rise in passenger numbers over the past twelve months, making it "one of the fastest growing airports" in the UK.

More than 1.3 million people used the airport near Rhoose, in 2016. Bosses say they target continued growth in 2017 with more routes "at better prices" and at "better times".

Chairman of Cardiff Airport, Roger Lewis said:

"This has given us a great sense of confidence on the journey we're taking. We're heading for some two million passengers a year coming out of Cardiff and our ambition is to get that to three million. To achieve that, we'll need to invest significantly in the infrastructure of the airport and without question, we need to improve our terminal facilities. Within the planning and discussions is a new terminal for the airport and is something we wish to progress."

He added: "To achieve such significant financial investment we need to look for equity partners within the airport and it's something I'm beginning to discuss with the Welsh Government on how we can attract external private investment in the airport to take the enterprise forward." 

Cardiff Airport was bought by the Welsh Government in 2013 for £52m following a slump in passenger numbers.

Economy Secretary Ken Skates said: "We welcome this ambitious and long-term vision from the airport to deliver the best possible facilities for the people of Wales and would expect any such ideas, with private sector investment, to form part of the airport's long-term master plan for future growth and improvements."

The airport's 2016 annual report shows:

• 16% year on year passenger growth
• More than 1.345 million passengers flying from Cardiff
• 25% of passengers are visitors to Wales
• 2,600 people employed
• Cardiff Airport is worth over £100m to the local economy
• Airlines fly direct to over 50 destinations
• Airlines fly to over 900 destinations via 11 hub airports
• Flybe launched new services to Verona, Berlin and London City Airport 

Debra Barber, Managing Director and Chief Operating Officer, added that 2016 had seen "significant growth" positioning Cardiff as "one of the fastest growing airports in the UK", according to the UK Civil Aviation Authority.

Iberia Express will join Cardiff Airport as a new airline in 2017 and introduce flights to Madrid, while new airline Blue Islands will launch a new service to Guernsey over the summer months. Flybe will begin operating a new service to Rome from March.

Energy company EDF has finally signed the main civils contract for Hinkley Point C with preferred joint venture with  Bouygues Travaux Publics and Laing O’Rourke. 

The French contractor revealed it has sealed the deal worth over £1.45bn alone to the firm. The construction deal is a big boost for Laing O’Rourke, which recently revealed group losses of around £246m last year.

Philippe Bonnave, Chairman and Chief Executive of Bouygues Construction, said: “We are proud to have been selected by EDF for this extraordinary project, a choice that reflects Bouygues Construction’s expertise in the field of nuclear civil engineering.

“We will be undertaking this project alongside Laing O’Rourke, our internationally renowned British partner. We share the same values and give the same priority to employee safety and the importance of skilled workers.”

The £18bn nuclear power station project will involve some 3,500 site workers at peak periods. The Hinkley Point C plant will consist of twin EPR reactors with total capacity of 3.2 GW. It will supply 7% of the country’s electricity consumption, providing power for more than 5m homes.

Bouygues Construction won the civil engineering contract for similar EDF power station projects in Finland and France. Both projects which started around ten years ago, are taking longer than forecast and running over budget. Bouygues said the Hinkley Point C project would benefit from the experience gained on these two projects, and would see a number of key innovations implemented, such as digital modelling.

The Swansea Tidal Lagoon is in the news, everyone has a view despite the backing of the Hendry Review. Sion Barry of the Western Mail summarised the story last week.

Plans for the £1.3bn Swansea Bay tidal lagoon project, which would be a world first in renewable technology, is being recommended by a UK Government backed independent review.

Former Energy Minister Charles Hendry will publish his findings into the proposed project off the coast of Swansea, saying that it should be the first in a series of larger lagoons around the UK coast - creating a new £15bn industry in tidal energy.

However, the Swansea project, which could create more than 1,200 jobs during its construction, will still need a marine licence from Natural Resources Wales, but also an agreed green subsidy for the UK Government - a so called strike price - to make energy generation commercially viable.

How the Swansea Bay tidal lagoon will work, how many jobs it will create and how it will look 

That could be confirmed in the Budget in the spring.

The backers of the project, Tidal Lagoon Power, are seeking a strike price of just over £89 per megawatt hour for energy produced by the lagoon over 90 years.

It would generate energy enough to power 150,000 homes.

The lagoon would involve a U-shaped breakwater built out from the coast, with a bank of turbines turned by water which would harness the rise and fall of the tides to generate renewable electricity.

Cut away view of a turbine installation in the planned Swansea Bay tidal lagoon.

The lagoon would generate clean tidal energy from its turbines, which would be assembled in Port Talbot, for 120 years.

If a strike price and a marine licence is agreed work on the project could start next year. Energy could be generated from the project in the early 2020s.

Speaking to BBC Radio 4, Mr Hendry said the lagoon, and further planned larger ones, including those off the coast of Cardiff and Newport, would be a "world first." and create a viable, secure and long-term new energy supply for the UK.

Everything you need to know about the 'incredibly exciting' giant tidal lagoon planned for Cardiff

He added: "We know it absolutely works,"If you look at the cost spread out over the entire lifetime - 120 years for the project - it comes out at about 30p per household for the next 30 years. That's less than a pint of milk.

"That's where I think we can start a new industry and we can do it at an affordable cost to consumers.

2017 is crunch time for projects that promise to transform the Welsh economy

"One of the great advantages is it completely predictable for all time to come - we know exactly when the spring tides and leap tides are going to be every single day for the rest of time."

At a glance

• Tidal lagoons could create a new £15bn industry for Wales and the UK.
• The Swansea Bay tidal lagoon would power more than 150,000 homes.
• The project still needs a green subsidy from the UK Government and a marine licence to proceed.

Greenpeace UK's Chief Scientist Doug Parr said "Tidal Lagoon Energy is the most reliable source of renewable energy for the UK and the Swansea Bay project is an opportunity to generate clean power from the tides".

He said: "Up to now, cost has been considered a barrier but the Hendry report suggests that tidal lagoons can potentially play a cost-effective role in the UK energy mix.

"And the Government should get on with it because it could be the first of a wave of tidal lagoons across the UK, and even internationally. We can lead the world in providing a new renewable innovation to meet our clean energy needs.

"If Swansea is successful it could prove the investment case for further major projects that could potentially generate a significant chunk of the UK's electricity needs, and help towards meeting our carbon targets, whilst creating thousands of new infrastructure jobs too."

But some conservation groups have raised concerns about going ahead with a series of lagoons before the impacts of the Swansea scheme on wildlife are assessed.

Business reaction

Policy Manager David Morgan of the Royal Institution of Chartered Surveyors in Wales said: "The support for the Swansea Tidal Lagoon from the Hendry review is very good news for Wales, and has the potential to generate an entirely new multi-million-pound industry bringing additional investment and creating jobs, as well as helping ensure certainty of energy supply.

"We urge the UK Government to work with Welsh Government and other stakeholders to deliver this project as soon as possible.

"As we made clear in the RICS Wales Manifesto, this kind of infrastructure investment is key to growing the Welsh economy, and it is essential that the policy-makers move forward quickly on other major projects too.

"The availability of construction skills remains a key concern – particularly in light of competition from other major projects such as HS2 rail, and Hinkley Point.

Why it's too soon to know what impact Hinkley Point will have on Welsh jobs and the economy 

"Government, industry and the education sector must continue to work together to ensure that Wales can maximise opportunities like the Swansea Bay Tidal Lagoon to their absolute potential.”

Liz Maher, president of the South Wales Chamber of Commerce, said: "We are delighted that the Hendry Review is backing the Tidal Lagoon proposed for Swansea Bay.

"The Swansea Bay Tidal Lagoon has the potential to significantly impact the economy of South Wales and the Chamber of Commerce is wholeheartedly behind the project.

"We anticipate construction jobs being created while building the lagoon, manufacturing jobs around the turbines and research and development opportunities for Welsh universities.

" One of the most exciting parts of the project is that skills will be developed in Wales that will help the industry grow beyond this first lagoon, keeping Wales at the heart of green technology development for decades to come.

"The supply chain opportunities for Welsh businesses provided by this new industry are substantial and the Chamber of Commerce, with our experience of connecting businesses and supporting international trade, is well placed to ensure this project is a success for the whole of Wales."

Leader of Swansea council

Leader of Swansea council, Rob Stewart said: "This is a game changing moment for Swansea because the Tidal Lagoon project has the power to improve lives and significantly boost the city’s economic prosperity.

"This project, combined with the Swansea Bay City Region’s City Deal bid to the UK Government, would be worth close to £3bn to the regional economy.

Indoor arena plans for Swansea move forward as operators shortlisted 

“I said when I took over as Leader two years ago  I’d create new partnerships to deliver major investment into Swansea, and we’re now starting to reap the rewards of all the hard work that’s been taking place behind the scenes for the benefit of Swansea residents.

“2017 was always going to be the year of delivery when the re-building of Swansea really gets started. We’re still only two weeks into the New Year, so this announcement augurs well for the signing of the City Deal and significant progress for other major Swansea regeneration schemes in coming months.

“Our plans aren’t just pretty pictures – they’re viable, deliverable projects that will benefit local families, boost skills and create new opportunities.”

Haf Elgar, Acting Director of Friends of the Earth Cymru, said: “This is welcome news – a Tidal Lagoon in Swansea Bay could play a significant role in generating clean energy in Wales, and will be an important test of this exciting new power source but UK government mustn’t ignore solar and wind investment.

“Tidal lagoons could have a big future; however, it is crucial that any potential impacts on wildlife and the wider environment are properly considered and addressed before any new developments are given the go-ahead.

“New clean energy sources are important – but it is crucial that the government also ensures that adequate investment is targeted right now in low cost, renewable technologies, like solar and wind, that already generate a quarter of UK power.” 

Constructing Excellence is CEW’s sister organisation operating out of London and our mentor and partner too. What’s going on there and how are things working out with the BRE? Read the New Year message from Don Ward.

Happy new year! It was good to come back after a refreshing long break to find few new emails, so clearly most people also took the ten days off and I hope you and your families had an enjoyable time.

As promised we hit the ground running this year in our new mode with BRE, and you will see below some theme groups and other events already lined up. I am particularly looking forward to welcoming Mark Farmer and various experts to our members’ forum to discuss the vital area of offsite and pre-manufacturing. That is a month away yet – meanwhile please have a read of our #CEprocurement theme group’s blog on the implications of Brexit, and comment online on whether you agree that this could be a case of a baby and the bathwater if we are not careful – standardised and transparent procurement processes are very much required.

There are plenty of examples in our sector where the current OJEU regulations have been followed and used well to deliver a value-based procurement. Dudley College’s Advance II project featuring Integrated Project Insurance is a fine example of this – and I do commend a read of their interim case study which we published just before Christmas. This is a landmark project being monitored by ourselves with Reading University which has several CE members involved and many others following its fortunes closely, as there are plenty who believe this is an approach which can unlock the true power of collaboration and the value it delivers for the client. Check out their project webcam – I know the project team are planning some open days, and we are hoping that our #CEprocurement theme group will hold its next meeting there, so do contact us if you are interested to learn more. Meanwhile see here for the official Cabinet Office guidance on how the approach works – and let us know of any clients or projects wo could be interested in adopting this approach.