Procurement in the rail and road sectors has been a bit of a double edged sword. Encouraging competition with the aim of driving down prices and delivering optimum quality, and more recent moves to recognise social value in procurement for the wider public good are no doubt good outcomes. However, processes can drive up cost and if risks are not allocated appropriately between the public and private sectors, or if there are changes in scope or specification, increased cost and project delays are almost inevitable. The HS2 project is a recent high-profile example of where things have not gone well, and we hope that the most recent reset puts back on track a project which will deliver long-needed capacity and connections.
Within this context – but notably excluding HS2 – the UK’s competition watchdog the Competition and Markets Authority (or “CMA”) has been taking a long, hard look at how the Government spends money to procure its roads and railways. The CMA’s market study into civil engineering (the “Report”), in particular rail and roads (which you can find here: market study) was published on 21 May 2026 and didn’t paint a pretty picture. Covering around £19 billion of public spend in 2023/24, the CMA’s verdict was that the way Government plans, funds and procures these projects is fragmented and short-term. This means costs are pushed up, timelines extended, and innovation curtailed.
There was a silver lining: the CMA has identified several areas of improvement and reckons somewhere in the region of £2–5 billion a year (roughly 10–25% efficiency gains) could be saved if its recommendations are implemented. This seems somewhat optimistic to us, but we will have to see how the Government responds. It now has 90 days to do so.
And here’s why it matters even if you’re not active in the transport industry: the Report is a sign of the times. Regulators are starting to see procurement not just as a box-ticking exercise, but as a serious lever for shaping how markets work. That has real-world knock-on impacts for competition, investment, value for money, and how much the public trusts that their tax money is well spent. The CMA has also been pretty clear that the lessons here aren’t just for road and rail – the CMA expects them to crop up across other big-ticket procurement projects too.
The National Infrastructure Commission
If the CMA’s key messages sound familiar, that might be because they are. In 2024 – the same year considered by the CMA in the Report – the National Infrastructure Commission (the “NIC”) took a look at why big UK infrastructure projects cost so much. You can find the NIC’s report here: NIC Report.
The NIC’s view was that the UK's infrastructure costs run so high because of a lack of clear strategic direction, challenges with project clients and sponsors, inefficient consenting and compliance, and a constrained supply chain. In plenty of cases, a combination of those factors cause our roads and rail to be more expensive than what peer countries are paying. In the CMA’s own words, it is time to “drive down costs and drive up innovation and productivity”.
The CMA has picked up that baton and pointed to a handful of culprits on the buyer side: funding that only stretches on a short-term basis, procurement spread across too many different bodies, regulation that’s become onerous, and skills gaps inside the public sector. For example, if the industry has one-year business planning cycles, then projects have to be compartmentalised so that spend happens each year. That can sometimes mean the project is broken down into smaller chunks, negating potential cost and project efficiencies and driving up costs. The rail industry has also been in a prolonged period of stagnation following the commencement of the Williams Review in 2018, the recommendations of which are only now being implemented through the Railways Bill. Without certainty or an investment pipeline, there has been a skills exodus in the private sector as well. Compounded with the identified skills gap inside the public sector, and a perception that decisions take too long to be made, this does not always drive the best outcomes.
Key findings in the Report
The Report sets out a number of key findings, many of which resonate:
1. Funding is too short-term, and procurement is too scattered
There is no unified procurement decision-making in UK road and rail projects. Decisions are made on a project-by-project basis across central government, the devolved nations, Network Rail, National Highways and local councils up and down the country. Whilst the creation of GBR will create a more substantial procurement authority (and we understand this is likely to be centralised), this situation is more a product of the way government funding is distributed and the powers each body has. With devolution being a significant feature of the current Government, this seems unlikely to change going forward. What this means is that the CMA’s view that the current patchwork tends to favour the same big incumbents and squeeze out genuine competition could continue. There is then the stop-start funding. With pipelines that aren’t always visible or which keep changing, and budgets that only stretch a short period ahead, public authorities can’t plan for the long haul – so they default to safer, smaller, near-term projects. The CMA thinks the result is predictable: suppliers don’t bother investing in new equipment, training people up, or trying to innovate, because they have no long-term visibility. The CMA’s answer is straightforward – give the sector a credible, multi-year capital pipeline (at least three years), and a clearer view of what’s coming down the track. Pipeline visibility is something which the industry has been clamouring for, and there have been mixed messages about what is already available what that means for the industry.
2. Procurement inefficiencies are driving poor outcomes
The CMA thinks that civil engineering projects are often poorly scoped, suppliers aren’t engaged early enough (such as through pre market engagement and early contractor involvement), and the way projects and bids get designed and evaluated tends to push up bid costs while underselling things that really matter. The CMA thinks more focus is needed on quality, deliverability, innovation and how a project performs over its whole life. This could be linked to some of the previous points – once budgets are confirmed, there is sometimes a perception that the procurement has to move quickly, be awarded and delivered whilst the budget is available. In fact, the procurement would be more successful if more time was spent upfront in ensuring the strategy, scope and deliverables were right. The CMA perceives procurement processes to be long, complicated and overburdened with past experience requirements that effectively favour incumbents, even when newer or smaller players could do the job. Small and medium enterprises in particular get squeezed out. The introduction of the new competitive flexible procedure under the Procurement Act 2023, giving procuring authorities greater flexibility to set their procurement processes and even to make changes to them once in train, may alleviate some of these concerns. And then there are contract amendments. Procurement bodies tend to heavily amend industry standard contracts, and that can quietly add complexity or allocate an inordinate level of risk to suppliers, regardless of who may be better placed to manage that risk. These amendments also tend to be costly, and drive up the overall cost of projects, making on-time, on-budget delivery more difficult to achieve. Material modifications to contracts after they have been entered into also import unnecessary procurement risk, particularly where those modifications could have been avoided through better initial planning and scoping prior to commencing the procurement.
3. The public sector is short on the right skills
The CMA found that public bodies are struggling to hire and hold on to the procurement and engineering talent they need. The wider civil engineering sector is short-staffed too, and authorities aren’t great at sharing what they’ve learned (or who they know) with each other. The result is that procurement processes aren’t designed or run as well as they could be and there is perhaps an over-reliance on consultants, which can be expensive. This is a message we’ve heard repeatedly – indeed, this was one of the key findings of the McNulty Report on the rail sector in 2011. The reality is though that the public sector often finds it difficult to attract and retain people with the right skillsets and it might be helpful to better showcase the unique public sector offering for potential employees.
4. Regulation is slowing delivery
Onerous technical standards, complex planning and permitting rules, and the long list of statutory bodies (including statutory consultees) are all adding to delays and cost, and are not conducive to getting a road or railway built on time.
5. Too many tick-box accreditations
There’s also a tangle of overlapping accreditations and pre-qualifications, set by both the Government and the industry. Often, a risk-averse approach is taken whereby all of the accreditations are pre-requisites, rather than being actually needed for a particular contract. They cost time and money to keep on top of, and they hit smaller suppliers hardest, as the bigger players can absorb the overhead more easily, which makes it tougher for small and medium enterprises to break in or scale up.
6. Nobody is rewarded for trying new things
Slow approval processes and a generally cautious culture are a big drag on innovation – particularly in rail. If you’re a supplier, the risks of innovating are therefore high for little reward. Procurement processes also tend to reward the status quo – quality/deliverability is often evidenced by demonstrating where an innovation has been deployed before and its tangible benefits, rather than giving credit for as-yet unproven innovation.
CMA's recommendations
The CMA’s headline takeaway is blunt: the current procurement market is systematically underperforming. Here’s what it wants the Government to do about it:
Put someone clearly in charge
The Treasury should lead on system-wide reforms, using its cross-government muscle to align policy and delivery. We agree that there is a need for greater coordination and consistency of approach to procurement, although we are not persuaded that the Treasury is the right lead.
Set out a clear plan for the sector
The UK Government – working with the Scottish and Welsh Governments and the Northern Ireland Executive and devolved authorities where appropriate – should publish (and update each year) a UK-wide road and rail civil engineering strategy. The key is to tell the industry where the authorities are heading.
Give the industry a credible long-term pipeline
Multi-year budgets (at least three years) and clearer project pipelines are needed, so the supply chain can confidently invest in skills, capacity and innovation, as well as to commit to the longer-term vision the sector's productivity challenges really need. Multi-year budgets will also allow the public sector to plan and be more strategic about what is procured, with the prospect of delivering greater efficiencies.
Procurement for long-term value, not lowest sticker price
Giving procuring authorities more headroom to award longer contracts that reward genuine value over the life of a project is needed, instead of confining them to accepting the lowest-cost bid. There is already flexibility to do this in the competitive flexible procedure introduced under the Procurement Act 2023. The key challenge will be in fairly evaluating the full-life cost as part of a procurement, and how that is weighted against other factors such as quality and social value.
Beef up public-sector capability
Tackling the skills and capacity shortages inside procuring authorities by building stronger in-house capability, sharing expertise across bodies, and being smarter about procuring together rather than each authority navigating the procurement process alone.
Practical implications for businesses
There are a few key takeaways which business operating in the road and rail markets should be considering:
Procurement is being used more deliberately to shape markets
The Report sits within a wider regulatory shift: procurement is being used much more deliberately to shape markets. The CMA's 2026-2029 strategy explicitly highlights public procurement and regulatory barriers as areas where competition policy can help government support growth, investment and better market outcomes. Going forward, procurement choices will likely be judged not just on process compliance, but also on their effect on investment, innovation and resilience in critical supply chains.
Readers will be aware that the rail industry is going through a period of fundamental change and reform. Operations previously delivered by private operators under franchises or, more recently, National Rail Contracts, are gradually being renationalised. Great British Railways (“GBR”) will also be created over the coming years once the Railways Bill completes its passage through Parliament. With the integration of the railway, there are obvious opportunities to make procurement more efficient and effective. At the same time, care needs to be taken to make sure there remains a thriving and competitive market for the provision of supplies into the market.
Rolling stock procurement and maintenance is a key area where change is already being developed. We understand there are concerns about maintenance costs in particular, which cover about 2/3 of the whole-life costs of rolling stock. This links in with some of the themes discussed by the CMA about adopting a whole-life approach, as well as the long term rolling stock strategy currently under development. The long term rolling stock strategy has been long-awaited by the industry with the hope that it will offer a pipeline of future rolling stock orders, as well as be aligned with infrastructure changes. With a dominant rolling stock user going forward, there are opportunities to align the terms on which rolling stock is purchased, financed, leased and maintained. In doing so, however, we would discourage a “take it or leave it” approach to ensure there remains genuine competition within the market to deliver the benefits of public procurement. In developing a future approach to rolling stock, care needs to be taken to ensure compliance with the Procurement Act 2023 and maintain genuine competitive tension within the market.
Value for money and outcomes are taking centre stage
In practice, infrastructure procurement is going to be increasingly judged on whether it delivers real long-term value, supports service quality and resilience, and can be clearly explained to regulators, procuring bodies and the public. Transparency will matter throughout, not just at tender stage, but right through award, performance and termination with procuring authorities subject to considerable reporting obligations including annual reporting on suppliers’ performance against set key performance indicators. Many of these principles are reflected in the Procurement Act 2023, and only more recent procurements will have been undertaken within this new framework. Further procurement reform is also under active consideration by the Government, and we can expect these themes to form part of that. The CMA frames the whole reform package in terms of better outcomes for taxpayers and the people who will use the infrastructure. These are outcomes which should not be controversial.
Expect the same playbook in other sectors
Whilst the Report focuses on road and rail, the CMA has been clear that the same principles will apply in other sectors – think energy, utilities, and other capital-heavy public projects. These are all sectors where the same issues come up around pipelines, tender design, who carries the delivery risk and what value for money really means.
What you should be doing now
The Report doesn’t change the law overnight. But it’s a pretty clear signal of where procurement frameworks are heading. If you’re active in the rail or road markets, here’s what’s worth thinking about now:
- Take a fresh look at your bidding, consortium and subcontracting models: Check that your governance, the way you share information internally, and how you allocate risk still hold up in markets subject to repeat procurement and close supplier interaction.
- Stress-test: In particular, take a close look at where your business model leans on things that may be about to change – like short-term frameworks or uncertain pipelines.
- Get ready to talk long-term value: Be able to clearly show, in plain terms, how your pricing, innovation, delivery track record and resilience translate into better public outcomes over the life of a contract, not just at award.
- Tighten up your record-keeping and transparency: This is particularly relevant anywhere a procurement, pricing or delivery decision might later need to be defended in a more data-rich, more visible procurement regime. Under the Procurement Act 2023, there are much more stringent requirements about in-life reporting, such as against key performance indicators, and any material non-compliances. This could clearly impact on the ability to take part in future competitions, so ongoing compliance is becoming increasingly important.
- Get involved during the 90-day Government response window: Influence the Government’s response where possible and keep an eye on the CMA’s upcoming work on public procurement and market shaping (expected later this year).
Conclusion
What’s really clear from the Report is that the CMA wants to be seen as an enabler of growth, using competition policy to push for structural reform. Whether that momentum leads to change will depend on what the Government does in its response to the CMA’s recommendations, and on the CMA’s further work on public procurement and market shaping later this year. Bid rigging is firmly in the CMA’s sights, although our experience is that procuring authorities tend to be good at implementing measures to prevent collusion and ensure an even playing field. But the direction of travel is hard to miss: more competition, better productivity, and projects that actually deliver.
For businesses in road, rail and the wider infrastructure space, the message is pretty simple: get involved early and start adapting now. Pressure-test your existing procurement strategies against the direction the Report is signalling, contribute to the policy conversation while the response window is open, and prepare for a procurement world where long-term value, transparency and accountability really matter. The risk in procurement is more than just how you behave on a single bid, the authorities will also review how procurement itself is designed for public infrastructure.
How Stephenson Harwood can help
At Stephenson Harwood, we work across rail, road, infrastructure, procurement, competition and regulatory matters. Here are some of the ways we can help:
- Reviewing procurement, bidding and collaboration models (including information-sharing and competition risk);
- Stress-testing procurement strategies against likely reforms (pipelines, tender design, risk allocation);
- Engaging strategically with the CMA and Government;
- Strengthening governance, transparency and substantiation processes;
- Training bid teams on procurement and competition risk; and
- Supporting clients in managing CMA scrutiny and enforcement.
