Highway congestion, unreliable rail networks, power outages, water shortages and flooding … infrastructure issues experienced daily and extensively around the world. And all this persists, despite the fact that we know bridging the global infrastructure gap is essential to economic growth and the wellbeing of communities.
However, a swift and effective response to these challenges is currently hampered by inefficient and outdated project delivery methods.
All too often, eagerly awaited and much-needed projects encounter massive delays to get off the ground, and then, once started, they run over time and budget. The 500 industry professionals surveyed in AECOM’s Future of Infrastructure report say they have suffered significant yet avoidable delays on 40 percent of recent projects.
This is having a significant and measurable impact on economies. In the United States, a six-year delay in starting construction on public infrastructure programs manifests as a US$3.7 trillion loss of output across the economy.1 While in the United Kingdom, the cumulative impact of stalled projects during 2015–16 alone is projected to dent investment-related GDP to the tune of £35 billion (US$46.7 billion).2
The productivity gap
The frequent failure to hit targets for cost, schedule and output have made infrastructure and construction notably poor performers in today’s economic landscape. According to research by McKinsey, productivity in the U.S. construction sector has fallen by around 20 percent since the late 1980s, during which time it has risen by nearly 40 percent across the wider economy.3
The drag on productivity can be ascribed to numerous causes. The top concerns include a fragmented supply chain, with sub-optimal integration across different services; piecemeal procurement, with limited consideration of total cost of ownership or total life-cycle implications; resistance to change within the project cycle along with the effect of low margins on research and development investment; and limited adoption of new technology and best practices. For example, to this last point, according to the Future of Infrastructure report, only 56 percent of industry professionals rate themselves “good” at adopting and scaling innovative delivery models.
The result is a lose-lose for customers and the industry as a whole. Buyers get an inefficient, expensive service, often with delayed projects and poor-quality assets; suppliers struggle to survive financially.
Embracing innovative delivery models
With numerous best-practice examples and exemplary projects, it is clear that
Our proposed two-step approach to solving the productivity issue embraces first, setting up projects differently to include a more integrated approach that links across the life cycle of an asset, reduces total cost of ownership and creates assets that are more constructible and fit for purpose. And second, deploying digital tools to unlock the full power of this integrated approach, which, in turn, sees the integrated approach release the full power of digital tools. We believe this approach could produce efficiencies of around 30 percent.
Exploring these two items in more detail:
The following are some key ingredients for successful infrastructure project delivery:
- Aligning all objectives and rewards across the supply chain to meet the client’s key success factors.
- A more honest dialogue around risk – with suppliers providing greater transparency on the true nature of risk in their own programs and owners willing to absorb more risk directly themselves.
- Well-designed and performance-based partnership models that ensure all parties have “skin in the game” and are incentivized to deliver the best for the project and client (P3 being an extreme example of this, but other contract structures, such as design build or alliances, provide the opportunity to do this too).
- Employers resisting the temptation of modifying existing well-defined contract structures, such as NEC in the U.K.
- Using an organization specifically to act as “integrator” on major projects – managing the interface and relationships between different parties (including small and medium enterprises) across the life cycle – supported by the right technology platforms.
- Getting the basics right: robust project setup; streamlined governance; and continuous stakeholder buy in.
Using technology to unlock the power of integrated delivery: , by providing the following:
- A digital thread that ensures relevant asset data is passed between the phases of the project life cycle – a “running current” of consistent and appropriate information to all stakeholders through the different stages of building and operating an asset. For example, how much more efficient could maintenance be if asset operators were handed an accurate and reliable picture of the asset they had inherited?
- Enhanced and automated value engineering to create a more buildable and operable asset. For example,
- Digital engineering techniques, including automated design tools and the growing use of artificial intelligence (AI) and machine learning that not only replace repetitive manual tasks, but also use the power of machines to provide a more reliable outcome. These, in turn, enable new construction techniques such as the use of modular construction, 3D printing and increased use of robotics.
- Asset intelligence (including the capture and analysis of performance data) to drive more efficient operations and feed back into future designs.
These tools maximize the efficiency of an asset over the whole project life cycle, resulting in lower total cost of ownership and enabling the full power of an integrated offer.
The future is within sight
– and they lie in the combination of new delivery models and the smart use of technology.