Case study: Dudley College of Technology
How Dudley College used the integrated project insurance approach to construct its Institute of Transformational Technologies Centre on time and under budget.
Dudley College of Technology (DCoT) have been at the forefront of the Institute of Technology (IoT) programme.
The college has long-term ambition for a university park to:
- widen access to local higher education (HE) provision in the borough
- promote progression to higher level qualifications
- engage more closely with industry
The college was successful in the first round of applications for IoT funding in partnership with the University of Wolverhampton.
DCoT was awarded £17.4 million of capital funding from the Department for Education (DfE) to part fund a £22.5 million purpose built centre to house specialist facilities for engineering, manufacturing and medical engineering. It was also part funded by the West Midlands Combined Authority and contributions of specialist equipment from employers.
The college decided to adopt the Integrated Project Insurance (IPI) model for planning and construction as part of a pilot programme launched by the Cabinet Office.
DCoT is a large general further education college based in the West Midlands.
It has:
- an annual college turnover of £50 million
- 12,000 students
- learners consisting of 16 to 19 study programmes, full and part-time adults, apprentices, and higher education students
- been awarded Good by Ofsted at its last inspection in 2023
- invested over £80 million in its estate including a number of major new builds that comprise the Dudley and Brierley Hill Learning Quarter
The college offers both technical and academic programmes, with vocational pathways in almost all sectors and a dedicated A level centre at Dudley Sixth. The college is the lead body for the Black Country and Marches Institute of Technology and is also the sponsor for Dudley Academies Trust, which is responsible for 6 schools in the local area.
The college’s strategic plan from 2024 to 2027 affirms the mission to provide outstanding technical and professional learning, which raises aspirations, develops skills and changes lives.
Key information is on Dudley College’s website, including their:
- strategic plan 2024 to 2027
- annual strategic impact assessment
- dashboards of the college’s performance across its key client groups and additional cross college strategic areas
The college operates from 15 campuses and venues located across Dudley and Brierley Hill, including the main campus building in Broadway. The majority of facilities are clustered around Dudley town centre in the Dudley Learning Quarter.
The college’s extensive estate accounts for some 59,000 square metres of floorspace. The majority of this is assessed to be in category A or B thanks to a continuing programme of investment in new build and refurbishment projects.
The total annual running cost of the estate is £5 million.
Space utilisation is high in many individual campuses and is reported to be over 40% averaged across the whole estate.
Student numbers at the IoT have continued to grow each year, with over 1,100 student attending training in the centre in its last academic year. The plan is to be at capacity, with all new programmes rolled out, by the 2025 to 2026 academic year.
Integrated project insurance (IPI) is in essence a collaborative model for procurement and delivery of major capital projects in place of traditional competitive tendering approaches and design and build methodologies. This new approach was piloted from 2014 and seeks to achieve cost, time and carbon savings and helps to minimise exposure to cost overruns.
Dudley College was one of the very first bodies to trial the Cabinet Office’s IPI model for the construction of their Advance II construction and engineering centre. Based on the positive experience from this project, the college adopted the same approach to the IoT centre and just successfully completed trialling the approach on a smaller project for refurbishment of animal care facilities.
Further guidance on IPI is on the Integrated Project Insurance guidance page in the IPI Procurement and Delivery guidance.
The scheme is intended to manage financial risk for projects in the £12 million to £25 million range. It represents the purchase of insurance which sets a limit on liabilities for additional project costs as part of a new model of integrated project delivery. This offers greatly increased certainty in cash flow planning. It could be helpful for many colleges undertaking projects in this value range, but particularly for any with critical cash flow risks which cannot be exceeded.
The IoT vision emerged from the college’s overall strategic plan and vision for expansion of HE in Dudley and alignment with the national programme for IoT rollout.
The project gained active local support from:
- the Black Country LEP
- West Midlands Combined Authority (as part-funders)
- the council (as original landowners)
The IoT focuses on 3 main curriculum areas:
- engineering
- construction
- medical engineering
With aims to:
- reflect local skills priorities
- allow learners to progress from existing further education (FE) level provision at the college
- attain links with major employers and technology specialists
The project also contributes to regeneration of a derelict brownfield site that was formerly a railway station and freight yard.
The site is within walking distance of the Dudley Learning Quarter and is co-located with the transport technology training facility and a major new medical science facility currently under construction. In terms of transport, the site will be well served by the extension to the Midland metro which traverses the site.
The IoT building is an inspirational high tech 4,750 square metre new build over three floors designed and built by the Alliance team.
The building includes a range of sustainable technologies including:
- air source heat pumps
- a water-based cooling system
- extensive natural ventilation
- high thermal efficiency
This is to achieve low running costs, an energy performance certificate rating A and using best of Building Research Establishment Environmental Assessment Method (BREEAM), though without a requirement for BREEAM excellent.
The total scheme cost of £22.5 million included land acquisition and specialist equipment costs of over £4 million. By year 5 of operation the centre is targeted to accommodate over 1,200 learners per year.
Role of the independent facilitator
The independent facilitator plays a key role in IPI projects and makes certain aspects of the traditional project manager role redundant. An early action once the decision was taken to follow the IPI methodology was the appointment of the independent facilitator who supported the work of the alliance team from start to completion of the project.
Costs for this function represented around 1.5% to 2% of the total project costs but were significantly offset by savings on external project management and quantity surveyor costs not required under the model.
Alliance team
The alliance team was assembled to progress the project acting almost like a board of directors with input from the independent facilitator plus:
- the college as client
- the architect
- the main construction contractor
- civil and structural engineers
- mechanical and electrical engineers
- mechanical and electrical contractors
- a digital coordination consultant
Once the project moved to implementation, the alliance team was supplemented by an integrated project team that involved a wider membership that met on a weekly basis to monitor progress.
Feasibility study
An important part of the planning phase was the completion of a feasibility study with associated work to reach agreement in principle with the council (as landowners) on site acquisition.
This early work included securing planning permission (with reserved matters) which the college believes strengthened their case in their funding application and eliminated one of the risk factors that commonly delays major capital projects.
The feasibility stage also identified the affordable investment target – effectively the financial ceiling within which the alliance team is tasked to deliver the project.
While the upfront costs of feasibility work had to be funded by the college and fell outside the grant application, the college is convinced this was the right thing to do. It helped them make the case for the substantial grants that external funders contributed to the final project.
Insurances
The college secured the unique insurances for IPI through the specialist brokering partner, who also employed a technical risk assurer and a financial risk assurer to validate the proposals for insurance cover. These proposals were informed by the opportunities and risks plan developed by the alliance team.
The insurance premium amounted to approximately 1.5% of the design and construction budget, offset in part by savings on performance bonds, administering collateral warranties and professional indemnity insurance. For this project, the cover meant that should the construction costs increase by up to £3.5 million, only the first £875,000 excess would fall on the alliance team members.
Benefits of building information modelling (BIM)
With all partners contributing to the digital model from commencement, design is developed and critiqued by all parties in real time. Everyone understands and buys into the concepts selected and those with responsibility for delivery advise on buildability and offer alternatives. This is often simpler and easier to implement methods and assemblies.
Increased visibility through the digital model, especially when synchronised with the programme:
- enhances predictability
- reduces surprises
- enables fine-tuning
This means savings in one area can be redeployed as enhancements elsewhere without compromising delivery timeline or quality.
Preliminary work on the project started in spring 2018 with the process of procuring and assembling the alliance partners. By summer 2018 work began on phase one planning and design validation. This was completed by January 2019.
Initial project approval was confirmed by DfE and the Cabinet Office in spring 2019 from which point the project was progressed ready for site enabling works to start in February 2020. Shortly after this the COVID-19 pandemic meant suspension of site works for 2 months, although design work was able to continue online due to the adoption of a digital model.
The final stages of design development and confirmation of IPI policy cover were concluded in summer 2020. Commencement of the site works began in August 2020 and completion and user acceptance 12 months later in August 2021 in time for the 2021 to 2022 academic year.
The IoT was officially opened on 21 October 2021 by Rt Hon. Michelle Donelan, Minister of State for Higher and Further Education. It is important to recognise that the extended planning period for this project was considerably longer than is often possible for other capital projects, for example those funded by the FE capital transformation fund. In these cases, the IPI model may not be feasible, may require a degree of modification or may involve the college using alternative funds to progress the development phase of the project.
The college confirms it is exceedingly happy with the IoTT project and to date student numbers are on target. The second prospectus report produced by the alliance has more details of the successes.
The IoTT was joint winner of the Constructing Excellence West Midlands Region 2021 Collaboration and Integrated Working Award and was commended in the 2022 MacEwan Award.
The college corporation delegated aspects of project oversight to its finance and estates committee. In practice both the committee and the board received regular updates on the scheme progress with the board making the key decisions regarding:
- project scope and funding bid
- selection of the IPI model
- funding and approval of contracts
Key risks were reflected and updated in the college-wide risk register.
Planning ahead
Adoption of the IPI methodology meant that the college and its collaborative partners spent more time upfront on the planning. This additional planning time meant that later stages of construction and completion went more smoothly and compensated for the extended planning phase.
The IoT project suspended works on site due to COVID-19 for 6 weeks with a further 2 weeks for the close down and re-enabling period. The fact that project completion in summer 2021 was achieved just four weeks behind schedule is considered by the college to be a major achievement given the extensive delays experienced by other projects as a result of the COVID-19 pandemic.
Flexibility by design
The IoT was a new concept for the college and a key feature of the design was to base delivery spaces on a standard 82 square metre footprint with scope to subdivide into smaller classes of 40 square metres if needs be. This has given the college flexibility to match space to demand but importantly leaving extensive scope to teach in larger and more efficient groups more common in the HE sector.
Risk management
The insurance cover secured through IPI meant that the college’s exposure to cost over-run on the alliance contract was effectively limited to around £190,000 with the balance (up to £3.5 million) being met either by alliance partners or the insurers. Given the college’s relatively limited cashflow headroom at the time, this significantly reduced the risk of destabilising the college’s financial health. This was a benefit that the college considered worthwhile even though the premiums could only be funded from college funds and not capital grants.
Opportunity identification
An important component of the IPI model is the opportunities register that captures ways in which enhancements and efficiencies can be achieved. This approach helps:
- incentivise and promote upsides as something of a counterbalance against downside risks
- leads to affordable solutions being adopted without the need for traditional value engineering recovery
The college found that the IPI model incentivised every member of the alliance team to promote efficient solutions through the gainshare mechanism.
Examples of efficiencies identified include alternative solutions for oak capping of handrails (£50,000) and alternatives to piling of foundations (£90,000).
Value for money
The target savings for a typical IPI project are set at somewhere between 15% to 20% of the original budget target based on industry norms. For this project the benefits are seen by the college more in terms of scheme enhancements and cost containment.
The overall unit costs for construction of £3,337 per square metre is considered by the college as a positive result for an HE standard facility.
An external review by a commonly used Construction Cost Indicator and Royal Institution of Chartered Surveyors (RICS) post project suggested that unit costs were £57 per square metre below the school’s benchmark, notwithstanding the specification and highly specialised purpose of the IoT and £129 per square metre against a bespoke benchmark for this specified functionality.
The final construction costs came in marginally below budget (£270,000) and this meant the college benefitted from their element (22%) of the gainshare, which was distributed to alliance team members according to a pre-determined percentage split.
Additional costs attributed to the COVID-19 restrictions were kept to a minimum (£210,000 in total) though these fell outside the IPI insurance cover and therefore had to be picked up by the college.
Running costs per square metre for the IoTT are the lowest across the whole college and around 60% less than some of the older or less efficient buildings.
Cover against defects
One of the benefits of the IPI model is the inclusion of a 12 month defect period (a budget of £50,000 to proactively manage this period was built into the cost plan). This effectively eliminates the complications of retention sums. In addition to this the IPI insurance provides 12 years of latent defects insurance.
Importance of the client role
In the college’s view having completed 2 IPI projects, the role of the client representative takes on particular importance. The college were fortunate to have an experienced and RICS qualified executive director of estates and capital projects supported by a similarly qualified estates manager. Both individuals have developed a sound understanding of FE and were able to ensure the full and active engagement of curriculum staff and teachers in setting our end user requirements.
Compliance with procurement rules
The collaborative approach that underpins IPI is compatible with government procurement rules and is based on achieving the most economically advantageous solution rather than traditional forms of procurement, which focus more narrowly on the lowest cost solution. Close involvement of the chief financial officer is important throughout the project and will be able to advise on compliance with the college’s own financial regulations and contract standing orders.
Flexibilities with application of IPI methodology
The college encountered a few challenges finding a bank willing to help set up a separate project bank account for the IoT project, which is one of the features of the IPI model. In practice this aspect was not implemented and was not considered by the college to prevent the benefits of IPI from being achieved. The college finance team used dedicated project codes as an alternative way of ringfencing project finances.
Net zero carbon
While the IoT embraces a range of sustainable technologies the project funding did not extend sufficiently to allow for solar panels to be included. This is to some extent a lost opportunity and remains an ambition for the college as part of its strategies for achieving net zero carbon.
The Institute of Technology, developed through the IPI methodology, is one of our most successful developments to date. We originally adopted the IPI methodology as a way of mitigating risk, particularly controlling financial risk in substantial projects where we operate in a set budget.
However, you soon realise that there are many more benefits to this collaborative approach.
By working with the alliance partners right from day one it allows you to invest more time in careful design of the project, leading to more efficient construction and ultimately a very high standard of end product. This is demonstrated perfectly in the IoT, with a facility that managed to open in time for the new academic year (despite COVID challenges), was delivered within budget and most importantly has created an aspirational technical training facility that we are incredibly proud of.
I would certainly recommend the methodology to other colleges undertaking substantial capital developments.
The IoT makes a positive impression as you enter the building and makes a powerful statement about the cutting-edge technologies that are integral to the facility and the higher-level skills training delivered.
The transformation of this part of Dudley is ambitious in terms of the scale of investment and the potential it offers to create a university park bringing together the college with partners from HE, employers, local and regional agencies.
Whilst IPI may not be suitable for every major capital project, for Dudley College of Technology it is clear that the benefits in terms of the end product and the risk mitigation it offers significantly outweigh the upfront costs of additional planning and insurance that are involved. We hope this case study will contribute to a wider understanding in the FE sector of IPI as a potential alternative approach to management of major capital projects for colleges to consider.