Friday, June 21, 2024

Transforming infrastructure performance: how the construction industry can step up to carry an ever-growing burden

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In 2023, there are more megaprojects planned or underway than ever before, with an expected spend of around US$70tn globally over the next two decades. In the US this includes wholesale renewal of road, rail and utilities under the Biden administration, which will provide better connectivity and economic benefits to communities across the country.

In Europe, major energy connections are supporting a shift away from fossil fuels and towards a more resilient grid. The Middle East is embarking on nation-building on an epic scale with new cities, ports and airports, while pan-regional passenger and freight networks are connecting major economies in east Africa in new ways. 

The breadth of investment is largely unprecedented, and there is a better understanding of the need to radically rethink the role of infrastructure in shaping a global response to major challenges.

Post-COVID-19 pandemic impacts and with new sources of geopolitical uncertainty emerging, infrastructure investment is considered a solution to the policy trend variously described as building back better, levelling-up or promoting an equal society.

The question we – as infrastructure practitioners – need to ask ourselves is whether the industry is ready and capable of meeting the high expectations of the impacts our programmes can have. There is a need to create a new value-based relationship between critical, ambitious networks and the societies that they serve.

How our sector can rise to the challenge

If this feels daunting, then there are also many reasons to be positive. The sector has a more cohesive approach to infrastructure development than in any other time in the past. 

As a globally connected industry, we can share expertise – capitalising on experience to come up with creative funding solutions and sophisticated delivery models designed to respond to a complex matrix of outcomes. 

Around the world, we see fantastic examples of excellence and ambition. The goal for our industry needs to be to make these examples the norm – driving high performance consistently. Over the next 12 months, in our Transforming infrastructure performance content series we are exploring five central themes that look at how we as an industry can do this:

1. A digital-first approach

The first area we explore is digitalisation, one of the most significant and powerful toolkits that we now have firmly at our disposal. Setting up and successfully delivering complex projects and programmes not only relies on visibility of performance at every stage, but also of the security of the systems we use to design, build and operate our infrastructure networks. 

Modern construction programmes will only be successful if digital is set in tandem with the wider delivery strategy during the set-up phase and deployed with full supply chain engagement.

Our advice is to think early, to think digital and to think integrated. As technology enters a phase of fast iteration, success hinges on strategy and approach more than reliance on a single specific operating system of suite of tools. 

2. Investable infrastructure

From here we will look at funding – with the clear link that greater digitalisation creates ‘smarter’ infrastructure. For example, it enables real-life performance monitoring and reporting on environmental, social and governance (ESG) performance, which is now of increasing importance to private capital investors.

ESG data can be used as a risk management tool to mitigate reputational and asset-value risks.

The virtue of infrastructure investment lies in its scale and long-term returns, but that story doesn’t always fit with the short-term requirements of today’s politics or markets.

Cutting through these requirements comes down to introducing creative new government policy and regulation, as well as providing financial support to attract and compete for private capital – as we are seeing in examples from the US and Europe in particular. 

We must also explore the optimal balance between public and private sources of finance. At the forefront of policymakers’ minds, and how we plan major programmes, remains the balance between management of demand uncertainty and revenue security, and meeting the healthy risk-appetite needed by investors to attract interest for new technologies.

Through the theme of ‘investable infrastructure’ we will explore different models adopted across the world and the innovation they bring in the way we search for funding and financing sources.

3. Lasting legacy

In our third theme we will examine the rebalancing relationship between infrastructure programmes and the societies they serve. Globally we have seen a shift in both the private and public sectors towards an emphasis on legacy and wider, positive social outcomes. 

Legacy goes beyond just the successful delivery of a project and its future users.

It can mean delivering new training opportunities and unlocking diverse pools of talent that will expand local supply chains for generations to come. In turn, such an approach can build capacity to deliver modern, digitally-enable programmes on future projects around the world.

We will do a deep dive into the growing recognition and evaluation of infrastructure social value, net-zero and sustainable outcomes. This theme will also address how the sector can establish diverse, resilient programmes and supply chains spreading the economic impact of infrastructure more deeply and more broadly, all while considering and limiting the impact it has on the environment.

4. Driving commercial performance

Our typical contracting and commercial strategies remain fragmented and somewhat transactional, rewarding input rather than outcomes.

With increased programme scale, ambition and complexity, these traditional contracting and commercial strategies will fail to deliver the levels of commercial performance required to deliver successfully.

Through our fourth theme ‘driving commercial performance’ we will explore how the sector can do things differently. For example, how we can lock programme benefits and outcomes into the supply chain’s commercial arrangements; how we can create an environment where commercial rewards and ambitions are aligned to common goals; how we can design commercial strategies which drive the behaviours we need; and how these can be structured to reward and unlock new levels of efficiency and productivity.

5. Delivering programme outcomes

Finally, our focus will turn to the complexity of outcomes that infrastructure is set to bear – having already looked at how we put social, human and natural capital on an equal footing with financial capital. For investment, we need greater confidence over delivery and how the industry stays on track to meet the outcomes expected from it. 

This relies on establishing operating models that are ruthlessly focused on a shared vision and understanding of what good looks like.

Coming full circle, under this theme we will look at the role of strategy, culture and governance to de-risk programmes.

This is vital for ensuring that benefits are kept constantly in-step with a business case while providing outcomes that will ultimately transform how infrastructure is being delivered, and serve the society we live in. Leaving a lasting legacy for a green, inclusive and productive world.

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