Infrastructure projects can be game-changing events for cities and municipalities, carrying significant social implications, providing upgraded transformation and communication arteries, and singlehandedly reshaping regional workers' future livelihoods.
Unfortunately, they share a commonality that plagues all too many construction projects: They have a nasty habit of going way over budget or schedule—or both.
How often does this happen?
Per a KPMG analysis
, just a quarter of infrastructure projects finish within 10% of their scheduled deadlines. McKinsey, a global management consulting firm, reports
that large infrastructure projects take 20% longer to complete than planned and run 80% over budget. And Bent Flyvbjerg, an expert in project management from Oxford’s business school, says
that “megaprojects”—defined here as transportation or infrastructure projects that exceed $1 billion in construction costs like airports, tunnels, highways, and some digital expansion
plans—exceed their budget nine out of 10 times.
The percentages remain disturbingly unfavorable when broken down by infrastructure type. For instance, bridge and tunnel projects experience a 35% cost overrun, on average. Rail structures, meanwhile, incur nearly a 45% cost overrun, on average, per another McKinsey analysis
Many projects, McKinsey says
, “are approved with a 20% return on investment expected.” In other words, in most instances, headline-making projects that are expected to be cash cows fast become money pits.
When this happens, who foots the tab? In most instances, the private or public entities financing the project pay the price, McKinsey reports.
Our industry can do better. So, can you.
Here are three solutions from McKinsey
and other industry leaders on how to complete a project on time and budget with the proper local contracting services
while also beating many of the systematic planning hiccups that curse far too many infrastructure projects.
Understand Engineering And Risk Analysis Before You Regret
One of the first steps, when you begin planning your project, is engineering and risk analysis.
Obvious, right? Engineering and risk analysis is automatic—or should be. Where else would you start?
The truth is, it’s a reliable piece of advice that is rarely followed. Too bad, McKinsey adds. It improves project performance so much more, lowering project timelines and costs by about 20%.
No question, the benefits are quite substantial. So why is this crucial step so often skimmed over or skipped?
Simple: Upfront costs.
The reasons why project sponsors and developers hesitate to invest in the preliminary engineering and design stages vary. They lack the funds in the project’s initial phases to spend heavily on design and engineering. They scratch the itch to break ground and start construction in hopes of making a splash too early. They also believe that the project's design will change once work kicks off, so why bother to pour large sums of money into up-front design costs?
This glanced-over design phase frequently points out the challenges that need to be solved before construction commences. Spending 3% to 5% of the project’s capital cost in this preliminary phase is all you need to do the trick.
Permit Approval and Land Acquisition Made Simpler
Time is money, as they say, and perhaps no part of the construction process takes up more of the former than the approval or permitting process.
McKinsey says it’s prevalent for the approval process to take longer than the construction phase itself.
In response, the project could be fast-tracked if the project's approval process was streamlined, argues
Common Good, a nonpartisan reform coalition. In their argument, the group underscores an analysis that reveals how a six-year delay in starting work on public projects costs the country more than $3.7 trillion. In comparison, the country needs just $1.7 trillion through the end of this decade to efficiently modernize its infrastructure.
Industry underscores three best practices for obtaining permits and approvals:
- Prioritizing projects
- Identifying clear-cut roles and responsibilities
- Setting specific time limits—public review included
You could piecemeal such a process together or streamline by obtaining a contracting firm with the chops in planning, land acquisition, permitting, rights-of-way approval, and construction
—a one-stop-shop for reducing time-consuming legal and land battles, if you will.
It’s a method that has worked for others.
Take England and Wales, both of which, per reports
, slashed the time required to approve power-industry infrastructure from 12 months to just nine—far better than the whopping four years, on average, it takes similar projects to be greenlit elsewhere in Europe.
Similarly, after a private design company orchestrated a strategy to work around hundreds of homes, state officials in Virginia successfully widen its Interstate 495, a main transportation conduit. The plan reduced costs and project timeline.
Right Team, Right Abilities, Right Project
You need to do more than just complete a project; you need to complete a project in a manner that packages the best return on investment—on time and budget, with minimal delays or setbacks.
Accomplishing such a project requires having the right mix of well-resources and qualified advisors, investors, project managers, controllers, and construction labor come into play.
And obtaining this network starts and ends with the project’s investors and owners, McKinsey advises.
“It is not enough for them to have a vague theoretical overview of how the project should work,” the organization stresses in a report
“They need to create a detailed, practical approach to deal with such likely eventualities as managing quality risks, escalating contractor’s costs, or replacing a high-tech supplier,” the report says.
Further, hiring a few well-experienced project managers, while a commendable first step, won't cut it alone, the report authors say. Your project team must include other critical skillsets to ensure its success, including:
- Legal and technical expertise
- Contract management
- Project reporting
- Regulatory approval and right-of-way knowhow
- Stakeholder management
- Polished government and community relations
Yet again, this is where the all-in-one, turnkey engineering and construction service provider
is most valuable—suggestion No. 2 on this list. Such a firm checks off all the boxes
, ensuring a complete project continues to make headlines for all the right reasons, on time and well within budget.