Global infrastructure: making up the deficit

An infrastructure for infrastructure

2 November 2018

If the world is to meet its infrastructure needs the sector must work to global standards and take advantage of opportunities to transform itself, insist Alan Muse and Anil Sawhney

Every nation needs high-performing infrastructure to enable growth, prosperity and its citizens’ economic and social well-being.

According to the Global Infrastructure Hub, we need to invest $94tr in infrastructure by 2040; yet annually, we only spend around 3% of GDP on infrastructure as compared to the 3.55% required to meet this target, leaving a gap in investment of around $0.7tr a year (see breakdown by region in Figure 1).

Meanwhile, in its report Infrastructure productivity: How to save $1 trillion a year, published in 2013, McKinsey Global Institute proposes that such a saving can be made by improving project selection, streamlining delivery and making the best use of existing infrastructure.

However, by using a set of widely recognised sectoral challenges such as urbanisation, climate change, digital technologies and globalisation as opportunities, the sector can address issues in construction and infrastructure project management and infrastructure finance, among other things.

Total forecast infrastructure investment gaps by region

Figure 1. Total forecast infrastructure investment gaps by region (2016–40). Source

Global perspective

Notwithstanding its socio-economic importance, the infrastructure sector continues to face several challenges. Most stakeholders believe that the current state of infrastructure assets is below expected levels and that the existing models for planning, funding, financing, delivering and managing these assets are not fit for purpose. Although there are numerous exemplary projects, best practice and models do not pervade the sector, and there is a broad consensus that the industry faces the following core challenges.

  1. Delivery issues: infrastructure projects continue to underperform in terms of cost, quality, sustainability and meeting schedules. This leads to poorly performing assets that do not fully meet the requirements of project sponsors and end users. Project selection, project structuring, estimating and budgeting, procurement regimes, delivery practices, and risk and knowledge management practices all need modernising.
  2. Sub-optimal performance of existing assets: due to limited uptake of the whole-of-life worldview, the sector does not deliver, operate or maintain high-performing infrastructure assets. Assets are considered at an individual level – for instance, project owners or sponsors focus on a single bridge rather than considering the entire transportation network – which means that networks and systems do not always provide the best value or perform well over their whole life.
  3. Lack of standards: standards that enable efficient project selection, project delivery, reduced operating costs and useful benchmarks at the same time as enhancing asset performance are not widely available. Core statutory and regulatory standards exist, but standards that include outcomes and value as well as cost and output are needed.
  4. Barriers to innovation: the sector is marred by low diffusion of innovation, and frequently rejects disruptive ideas and technologies. Though some exemplars exist, grassroots challenges to adoption remain for all in the supply chain.
  5. Limited attention to sustainability, affordability and useability: current practices and procedures do not allow the vital issues of sustainability, affordability and useability to influence the planning, design, operation and management of infrastructure assets, networks and systems.
  6. Skills gap: while design and engineering expertise is available in the sector, professionals who understand the business of infrastructure delivery and management are in short supply. It is also alarming that there is practically no education provision that focuses on these aspects of business.

Transformational themes

Turning these challenges into opportunities is pivotal if we are to meet the infrastructure needs of this changing world. The construction sector can begin to address these challenges through the adoption of global standards: these will allow better management of projects and bring much-needed transparency and consistency to the sector, which will in turn attract investment for essential infrastructure.

International standards also enable projects and assets to be benchmarked, which is crucial to ensuring that they meet the needs of users, asset owners and society. Such standards can help consistently measure and benchmark time, cost, quality, carbon emissions, sustainability and the performance of projects, assets, networks and systems. Data can then be collected on these through the whole life of the asset, improving the decision-making abilities of project teams.

Along with 40 global professional organisations, RICS is part of the coalition that has launched the International Construction Measurement Standards (ICMS) for benchmarking, measuring and reporting project costs. ICMS comprise a high-level suite that aims to provide greater global consistency in the classification, definition, measurement, analysis and presentation of costs at a project, regional, state, national or international level.

While design and engineering expertise is available in the sector, professionals who understand the business of infrastructure delivery and management are in short supply

The standards have already been adopted by many leading global construction consultancies, including Arup, Arcadis, and Turner & Townsend. In Canada, Infrastructure Ontario has embarked on the use of ICMS on its projects with the help of project partners.

The role of such international standards in establishing a common language and common definitions to unify the various global professions associated with financial management of infrastructure is now becoming clear. This approach to cost benchmarking can similarly be used to benchmark time, quality, sustainability and other aspects of infrastructure. However, in conjunction with these measures, standards and professional practice statements are also needed to ensure project success by:

  • helping develop integrated plans;
  • setting clear project objectives;
  • providing accurate estimates of time and cost;
  • defining delivery structures and project governance;
  • clearly articulating commercial and risk mitigation arrangements.

Such additional standards will enable the development of models and systems that ensure efficient project delivery and commercial management.

In these ways, the sector can start accounting for the social value of infrastructure projects and assets and providing an holistic appraisal of their impacts on society. Incorporating social value into the analysis will influence project selection and formulation, improving the operational performance of assets. Ultimately, this will result in smart, high-performing assets that combine physical and digital infrastructure to extract maximum performance from a new or existing asset.

Further cross-cutting initiatives on education and qualifications standards, embedding ethics and increasing the use of digital technologies will also be necessary to drive improvement in delivery and management.

The path forward

Using international standards to bring together key infrastructure stakeholders, we can establish a basis for these changes. In doing so, the construction sector must collaborate with government and academia to explore opportunities to overcome the long-standing challenges.

It is envisaged that international standards will help unify built environment professions, which are already benefitting from a more holistic approach to several issues affecting the sector. Standards will help forge new partnerships and encourage professionals to undertake initiatives that benefit individuals, organisations and the infrastructure sector as a whole.

[Next year, the Construction Journal will include articles from experts working in different parts of the world on the issues highlighted in this article. Experts will discuss current trends and market insights and provide a rich mix of innovative ideas that can have a positive impact on the infrastructure sector.]

Alan Muse is Global Director of Built Environment at RICS. Anil Sawhney is Director of the Infrastructure Sector at RICS

Further information

Download a complete “Global infrastructure: making up the deficit” PDF