INFRASTRUCTURE &NET ZEROLifecycle Planning &Procurement

Infrastructure Exchange

Alberta InfrastructureArupBDPCanada Infrastructure BankCommerce DecisionsConstruction Innovation HubConstruction Leadership CouncilFoster + PartnersHawkins\BrownInfrastructure CanadaInfrastructure OntarioMaceRider Levett BucknallRoyal Institution of Chartered SurveyorsScottish GovernmentTurner & TownsendUK Department of Business, Energy, andIndustrial Strategy

With thanks to session participants from thefollowing organizations:

Authors: John Allen, Jess Neilson

The Infrastructure Lab brings togetherorganizations, businesses, government andacademia to discuss solutions forinfrastructure challenges. With Canadamaking unprecedented investments, our goalis to promote constructive dialogue, anddraw on shared experiences, to ult imatelyhelp drive the most value for communities,and governments, and a healthy maket forthe sector.

Session Co-Chairs:Lisa Mitchell, Infrastructure CanadaAlan Muse, RICS

Convener:Gilda Carbone, UK Department forInternational Trade, Toronto

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ABOUT THEINFRASTRUCTURE LAB

2021

CONTENTS

P L A N N I N G , P R O C U R E M E N T

& N E T Z E R O

I N T R O D U C T I O N

F R O M C O S T T O V A L U E

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D E F I N I N G V A L U E

G O V E R N M E N T V I S I O N

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F U N D I N G A N D F I N A N C I N G 1 1

From cost to value: UK government and industry have worked together to help shift mindsets andprovide set processes with the development of the Construction Playbook andValue Toolkit

Defining value: Incorporating whole life costs is a start as well as looking at economic, socialand environmental impacts. There are standards like ICMS 2 and PAS 2080 tohelp directly compare those costs and measure carbon

Government vision: An overall vision helps drive change with examples like Canada's GreeningGovernment Strategy and Scotland's National Performance Frameworkfocusing plans and overcoming siloed thinking

Project assessment: The UK developed a project scorecard to assess projects against policypriorities, and Scotland uses a Common Investment Hierarchy. It is alsoimportant to look holistically at wider social and environmental benefits

Planning and design:Design can reduce energy consumption though use of natural light andshading, better airflow, and materials used. It also reduces lifetime emissionsby looking at how one asset fits in overall systems

Procurement approaches:Procurement models and evaluation play an important role in driving marketbehaviour. This starts with looking at evaluation criteria including whole lifecosts, and using a range of procurement models best suited for each asset type

Funding and financing: Many institutional investors are seeking opportunities with strongenvironmental and social credentials with infrastructure banks playing animportant role in attracting private finance

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PLANNING, PROCUREMENT AND NET ZERO

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Government buying power can radically shift infrastructure delivery tobecome more efficient and deliver wider economic, social, and

environmental goals. Here are some of the key themes raised at theCanada-UK roundtable on Moving from Cost to Value and Net Zero:

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INFRASTRUCTUREAND NET ZERO:CANADA AND THE UKEnvironmental performance and economicvalue go hand-in-hand when assessed over thelifetime of infrastructure. As projects areplanned and procured it is often only theupfront costs for design and constructionconsidered, which does not take intoconsideration the costs of operating andmaintaining these buildings and infrastructureover 30, 50, or 100 years.

More innovative designs and building materialsmay have greater upfront costs, but reducelifecycle costs and substantial ly reducegreenhouse gas emissions over the years aninfrastructure asset is in use. By capturingthat l i fetime value it becomes easier to fairlycompare proposals and deliver long-term costsavings and environmental benefits .

In 2021 the UK hosts COP26 to help al ignefforts and advance global cl imate action.Moving forward and well beyond thesemilestones, as a whole of governmentapproach, the UK has pivoted its focus to aclean growth agenda, decarbonsing itseconomy and net zero ambitions. This includesthrough a lens of ‘good for business ’ , andidentifying and supporting commercialopportunities for innovative cleantechnologies, environmental goods andservices, and green f inance, and leading toinclusive and sustainable economic and socialprosperity. For this to take place, marketdynamics, policies, and planning need to al ignwith long term thinking, new perspectives andconsiderations, and a solutions drivenapproach.

Both the UK and Canada are focused on therole infrastructure wil l play in economicrecovery, and both have also committed toproducing net zero emissions by 2050. Thisvirtual roundtable, with Canadian and UKpublic and private sector stakholders, providedan opportunity to share best practices on howinfrastructure investment can deliver betterenvironmental and economic outcomes, andsupport both countries on the journey to netzero.

OF EMISSIONS COME FROMCONSTRUCTION, OPERATION,

AND USE OFINFRASTRUCTURE.

ESTIMATED TO REACH 80%BY 2030 AS ELECTRICITY

DECARBONIZESSOURCE: UK INFRASTRUCTUE CARBON

REVIEW, 2013

50%

THE UK NATIONAL GRIDESTIMATES EVERY 2%

CARBON SAVING RESULTS INA 1% DROP IN COST. CARBONIS A PROXY FOR ENERGY AND

MATERIAL USESOURCE: NEW CIVIL ENGINEER, 2018

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Construction PlaybookDeveloped by the UK Department forBusiness, Energy, and Industrial Strategy(BEIS) , the playbook sets out howcontracting authorities can better procureprojects and be more collaborative. Its aimis to improve the quality of what the publicsector can procure from the industry,creating more cooperation through thesupply chain, including delivering widersocial value. It focuses on creating morestable and fair contractual payment terms;encouraging outcome-based specif ications,longer term contracting, and standardiseddesigns; driving innovation; creating win-win contracting arrangements; andincreasing speed of delivery.

1 FROM COST TO VALUEThe UK has made a concerted effort over recent years to shift the focus ofprocurement towards value, and to factor in economic, social , and environmentalimpacts. This came in response to a perceived race to the bottom with contractingauthorities selecting the lowest cost solution, and an increasingly si lo-drivenmentality. With an emphasis on lowest cost bid, and l itt le scope for innovation, it hadan increasingly negative impact on the market that was seeing large players go under.From the government’s perspective there was also a sense of a missed opportunity notmaking the most out of the spending to effect change and address l i fecycle assetmanagement.

Collaboration between government and industry led to developing tools to change theindustry ’s mindset. Two key documents reflect this.

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Value ToolkitCreated by the Construction InnovationHub, and a col laboration betweengovernment and industry, the toolkit looksat how procurement could changebehaviours and outcomes on projects.Focusing on value and whole-l ifeperformance, it is underpinned by the f ivecapitals model, and designed to drive bettersocial , environmental and economicoutcomes. It sets a definit ion of value, hasguidance on selecting the best deliverymodel, designing procurement processes,and robust evaluation and measurementstrategies.

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2 DEFINING VALUE

Value goes beyond cost and the constructionphase. It considers economic, social , andenvironmental factors over the l i fetime ofinfrastructure. This requires a change inapproach to drive more informed decision-making. It provides bidders with an abil ity toinnovate in a way that can provide a loweroveral l price across the l i fetime of the asset. Itgives contracting authorities the abil ity todrive strategic policy in areas such as reachingnet zero or developing local jobs. Mostimportantly, it also ensures early stages ofdesign and construction consider how peoplewil l use the infrastructure over decades of itsl i fecycle.

Canada is also working on the low carbonassets through l i fecycle assessment (LCA2)init iative. This is being led by the NationalResearch Council (NRC) to build the base forpublic and private entit ies to undertake whole-asset l i fe-cycle assessment. This wil l alsoprovide a platform for the development of al i fe-cycle inventory for Canada.

PAS 2080: Is a standard for managingcarbon from infrastructure created byArup and Mott MacDonald, togetherwith the Brit ish Standards Institute. Itprovides a framework for contractingauthorities, designers, constructors,and suppliers to manage carbon overthe whole of an asset ’s l i fe. It providesguidance on setting targets andbaselines, transparent reporting, andsets stages for when to get the biggestcarbon and cost benefits from thesupply chain.

ICMS2: The International ConstructionMeasurement Standard, led by theRoyal Institute of Chartered Surveyors(RICS), is now in its second iterationand has been expanded to includelifecycle costs. This standard providescontracting authorities with the abil ityto directly compare overal l costs andother data between bids, and help toevaluate the merits of projects in theplanning phase.

There are standards that help to provide aframework to build procurement around:

3 GOVERNMENTVISION

Canada’s net zero program extends to theentirety of government. The Government ofCanada's Greening Government Strategy aimsto reduce the carbon footprint of its realproperty portfol io. It uses a CAD$300 cost ofcarbon and requires a ful l l i fe-cycle costing.Governments can demonstrate leadershipwhere they are asset owners, where they arefunders (by putting in place requirements) andcan also help build capacity - including withrespect to data.

In addition to the Construction Playbook, theUK recently introduced a Social Value modelfor procurement. This mandates that socialvalue makes up 10% of the weighting inevaluating bids. This includes considerationsaround tackling cl imate change, reducingwaste, promoting new jobs and ski l lsdevelopment, and driving equal opportunities.

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The Scottish government put net zero at theheart of its f ive-year infrastructure investmentplan. Scotland set goals for net zero,integrated inclusive economic growth goals,and building resi l ient and sustainable places. Italso focuses on outcomes, as opposed toinputs. These outcomes are derived from aNational Performance Framework, which al ignswith its Sustainable Development Goals,reduces inequality, and reflects the values andaspirations of the people. Scotland is alsodeveloping a new carbon assessmentmethodology.

4 PROJECTASSESSMENTThe UK is also developing a new ProjectScorecard for major projects through theInfrastructure and Projects Authority. This wil lset out a clear framework l inking thecontribution of a project to the government’spriority outcomes as defined by the UK’sPublic Value Framework and social valuemodel. This wil l al low contracting authoritiesand suppliers to make informed decisionsthroughout the project l i fecycle.

Considering some of the historicalinfrastructure that Scotland has, it priorit isesmaintaining and investing in existinginfrastructure rather than building new. It hasdeveloped a common investment hierarchythat informs future investment choices. Thisstarts by looking at future need if for example,new technologies wil l change how services aredelivered, it then looks at maximizing use ofexisting assets, then repurposing or co-locating, and f inal ly replacement or newbuilds.

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A holistic view is absolutely necessary indetermining how quickly a piece ofinfrastructure can pay off . On an individualproject level it is important to consider legacyand l i fecycle. The UK has thousands of roads,some that are thousands of years old. The M4motorway extension in South Wales was amajor project to be assessed for carbon impactby Arup. This process looked at the whole l i feof the road through capital , operational , anduser carbon. Given the impact on reducingcongestion, shortening journey length, andtaking cars off hi l ly alternative routes, theproject was found to offset the init ial capitalcarbon expended. This also accounted for anycapacity-induced traff ic that would come fromadding capacity.

5 PLANNING ANDDESIGNThe design stage has the greatest impact onoveral l l i fetime cost and carbon, and the twoare intrinsical ly l inked. It also helps to deliverbetter experiences and outcomes for endusers. For example a study in the UK by RICSfound that better design could help improvelearning in schools by 10 percent, and reducerecovery time in hospitals by 27 percent.

The UK’s National Infrastructure Commission(NIC) published a set of design principles foral l infrastructure of national signif icance tohelp encourage the industry to understand theimportance of design focused on cl imate,people, places, and value. Investing more indesign can reduce energy consumption thoughthe operations period by greater use of naturall ight and shading, better airf low, and use ofmore insulating materials . The design alsoshapes how much and which materials are usedfor construction.

Better design can also shift user behaviour, forexample, increased transit use. Transit stationdesign, building location and proximity totransit and mobil ity options are important.According to Foster + Partners, for a locationclose to transit , 20-25 percent of the overal lcarbon can come from travel l ing to and fromthe building. When a building is located awayfrom transit that f igure can rise to three timesthat amount.

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As electricity grids become increasinglydecarbonised other factors become moreimportant, such as embodied carbon. This isthe carbon used in construction through theprocesses and materials used. There is agrowing emphasis on retrofits over new buildswith the construction sector producing 35-40percent of national emissions and 63 percentof waste. Hackney Town Hall was updated,with UK’s Hawkins\Brown appointed to carryout the restoration of the building, adding 70percent occupancy and introducing intel l igentbuilding controls, and durable easier tomaintain materials .

Repeated and predictable models can also havea signif icant effect and unleash the potentialof modular and off-site manufacturing.Network Rail launched a competition to designfootbridges that could be used around thecountry. Network Rail has around 2,400footbridges throughout the UK, by usingstandardised design and modular constructionthey could reduce costs and embodied carbonby 30 percent.

6 PROCUREMENTAPPROACHESTender evaluation is becoming more complexwith a shift from lowest cost compliant, tobest value with more of a focus on theoutcomes. The required outcomes are now alsobecoming broader with a wider set ofinterested stakeholders and policy directives.As well as confidence in the quality anddelivery of the procurement subject as anoutcome, there are now a number of socialvalue considerations that need to be balancedwith this, including environmentalperformance.

National Defence Canada has fol lowed thisapproach for a number of years with supportfrom Commerce Decisions. High value projectsare required to have Canadian Industrial/Technological benefit ( ITB/VP) as a dimensionalong with cost and capabil ity. Additionaldimensions and evaluation share is becomingmore prevalent in infrastructure procurement.

Work needs to go into building understandingamong bidders and within contractingauthorities on what the change in approach istrying to achieve. This new approach alsorequires new ski l lsets from procurementprofessionals and organisations. InfrastructureOntario for example, has provided internaltraining around whole of l i fe costing, and theUK introduced a broad requirement that 10percent of scoring must be dedicated to socialvalue, including cl imate impact.

Infrastructure Ontario announced changes toits procurement approach to boost innovationand drive competition, to rebalance bidscoring, and move toward outcome-basedspecif ications. As well as scoring criteria,governments can mandate through the use ofspecif ications. The Canadian Government alsointroduced a requirement that federal projectsuse low-carbon cement that produces 10percent fewer emissions than regular cementas of 2021.

Ontario has developed a highly successfulpublic-private partnership model. By includinga requirement of maintenance over 30 yearsalong with design, f inance and construction itensures that l i fecycle considerations areforefront in the design and construction stage.It also provides scope for bidders to investmore in design and construction, knowing thatthere is an opportunity to save in areas such asenergy costs over the l i fe of the contract.

Successful projects start with extensiveconsultations with community stakeholders, inthis case teachers and pupils . One example isthe Waid Academy in Scotland designed byBDP. It is a community school that includes ahigh school, police station, l ibrary and acommunity hub. The energy performance ishitting benchmarks, and the sustainablecampus is having a positive impact on learningoutcomes.

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7 FUNDING ANDFINANCINGOne area both the UK and Canada are lookingto unlock is promoting a larger role of privatefinance, particularly large public pensionplans, to invest in infrastructure. The CanadaInfrastructure Bank (CIB) was set up to attractprivate f inance into revenue generatinginfrastructure with CAD$35 bi l l ion to invest.The bank recently released a CAD$10 bi l l iongrowth plan to support a transition to a lowcarbon economy. It wil l invest in zeroemissions buses, clean power, greeninfrastructure, broadband, and trade andtransport.

The CIB also included CAD$500 mil l ion forproject acceleration, to help projects get to apoint where they are attractive for investors.It encourages organisations to start a dialoguewith them early to determine if projects couldbecome viable investment opportunities. Totap into a wider pool of ideas, the Governmentof Alberta has also developed an UnsolicitedProposal Framework as a way to attract privateinvestment in infrastructure. Organisationssubmitting bids wil l negotiate an advantage asthe project moves to procurement to ensurethe government can provide some competitivetension and be fair to the originators.

With Environmental , Social and Governance(ESG) factors driving more investmentdecisions, infrastructure assets seeking toattract private f inance wil l need to meethigher standards. The Thames Tideway Tunnelproject, a 25km sewer under London, has beenparticularly active in setting benchmarksaround environmental and social performance.The project secured private investment and isbeing funded through a surcharge on waterbil ls to pay for the urgent upgrades to a 150year old system built for a much smallerpopulation.

In Canada, the Tlicho al l-season road in theNorthwest Territories is a public privatepartnership with a 28-year maintenancecomponent. Unique to the project is a bespokeclimate change risk-sharing regime thatrequired a rel iance on cutting-edge modell ingto enable bidders to better price risk exposure.

Another innovative scheme is Greater LondonAuthority Retrofit Accelerator. Thegovernment funded programme managed byTurner & Townsend helps bring together apipeline of retrofit work on social housing andother public sector estates. A lot of privatesector cl ients are overwhelmed as they feell ike they do not have enough funding to runthe schemes or programmes effectively.However, developing the business case, theycan bring different funding streams to thetable to provide low-cost f inancing to getschemes off the ground. Government fundinghelps increase the scale of investment.

SUMMARYAs mentioned throughout the roundtablecarbon and cost have a very close relationship.A lot of work has gone into developingframeworks and tools to better leverageinvestments in infrastructure to drive valueand meet policy goals such as net zero.However, there remains opportunities forimprovement via data.

Anecdotal estimates suggest 75 percent of datais generated during operational stage of asset.That data is not always used and opportunitiesto learn lessons that could provide evidencethat can be used up front in the construction,delivery and planning of assets and how it canhelp. It wil l also help address some of thesi loed thinking in the sector.

Technology and data can help make processesand decision-making become more systematic.This requires a host for al l the information inone place to enable objective comparisons ofinformation and unlock further progress.

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