The report said a recent study had found that 80% of all large projects globally experience cost or programme overruns. © Crossrail Ltd.
The report said a recent study had found that 80% of all large projects globally experience cost or programme overruns. © Crossrail Ltd.

Late infrastructure projects 'could be costing $1.5tn'

1 April 2019

The world economy could be set to lose $1.5tn a year by 2030 due to late delivery of major infrastructure projects, according to a report. 

However, the Mace Group report A Blueprint for Modern Infrastructure Delivery said it was important not to assume projects were necessarily failures just because they were over budget or delayed.

“If the primary outcome was to deliver to cost and time then they have failed, but if the outcome was regeneration or economic growth, then many of these projects could be a success,” said the report. “This is why having clarity over desired outcomes is so important.”

The report said a recent study had found that 80% of all large projects globally experience cost or programme overruns. The recent Bangkok metro project, for example, came in at 70% over its original budget.

Other high-profile infrastructure projects in the news for the wrong reasons include the Sha Tin-Central MTR Project in Hong Kong, the CBD and South East Light Rail project in Sydney, Crossrail in London or Berlin’s new Brandenburg Airport.

According to the report such widescale problems are evidence of “a global systematic failure in project planning and delivery”.

“This in part may be due to the scale and complexity of infrastructure projects more than doubling over the last century,” it said.

“For example, the cost of the UK’s new major railway line, HS2, is equivalent to an economy the size of Sri Lanka.”

Other causes of failure may be an inability to accurately predict costs, human psychology, having the wrong people and culture, poor management or political interference.

The report said: “The most common issue that came up during our interviews was procurement and, specifically, the many poor procurement processes that people have experienced as either clients or private companies bidding for work.”

The report called for more outcomes-based procurement, to encourage innovation, and a “more constructive approach to trying to pass risk down the supply chain”.

A good example of a clear-sighted approach was Greater Manchester’s phased approach to rolling out a new light rail system for the city.

The first two phases of the project alone led to 5m more journeys taking place, which justified further expansion.

“With clear outcomes in mind, the scheme has been extremely successful. With over 40m journeys taking place in 2017-18, the line has revitalised areas surrounding the city,” said the report.

It also saw a reduction in congestion and bringing in over £70m of revenue in 2017-18 – one of the few public transport systems in the UK that does not receive a public subsidy.

The report concluded that major projects need to decide on what outcome they are looking for, and challenge every decision made so that they are coherent with that outcome.

Projects created on a whim, without proper thought, are less likely to be successful.

One key point of advice is to invest more up front in practices such as ground investigation, to cut out risk and reduce costs in the long run.

It was unfortunate, the report said, that many major projects around the world are funded in a way which means that too little time, thinking and rigorous process goes into the start of projects.

The traditional model where a client gets a small amount of funding to investigate a project, followed by many more small sums to bring in cost consultants, engineers and designers before bringing in contractors or civil engineering companies, leads to a fragmented approach.

“At each stage of the journey, a different set of suppliers is brought in with little or no continuity between them. This can promote an ‘I will just look after my phase and someone else can fix it later’ culture,” said the report.

It also recommended the better use of simulation and modelling as one way to have clearer thinking up-front.

And the report also advised what it called “infrastructure owners” to:

1. Ensure that procurement includes in-person interviews, competitive dialogue or some other type of behavioural assessment.

2. Keep the project or programme board (or senior executive team) as small as possible.

3. Repeat the outcome the project is expected to deliver.

4. Ensure honesty within collaboration.

5. Ensure project leaders are visible and build relationships with senior executives within supplier organisations.

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