Benefits, not cost, should be key focus of major infrastructure projects
More focus should be placed on the benefits of major infrastructure projects and less on cost, a report by the Institution of Civil Engineers has said.
The report, published today, looks at how the built environment sector can reduce the gap between cost estimates and outturns for major infrastructure projects.
ICE’s investigation into infrastructure forecasting shows, globally, that it’s incredibly difficult to forecast time and cost for major projects due to there being many unforeseen issues that can arise during delivery.
Despite these uncertainties, the ultimate measure of success continues to be initial cost forecasts.
The Institution recommended that the success measures for projects should shift from an over-focus on costs towards whole-life benefit. The survey data illustrates support from the general public for such a move.
Miles Ashley, Chair of the report’s steering group, said:
“Infrastructure is a vital part of society, with major assets helping to stimulate economic growth, improve health and well-being of the population and protect communities from the effects of extreme weather and climate change.
“We cannot continue to dismiss from the conversation these important benefits. Industry and government need to work smarter, find ways to reduce the disparity between forecasts and outturns, but also to change the narrative and ensure the wider public, the end users, are also aware of the whole-life benefits these incredible infrastructure projects are bringing to them.”
There is public support for the recommendations, with nearly three quarters (74%) of adults agreeing that politicians should talk to the public more about the benefits major infrastructure projects bring, rather than the costs.
The survey, conducted by YouGov, also found that only 3% of adults feel that a low overall cost of construction should be the most important measure of success of major infrastructure projects.
ICE asked adults across Great Britain what they considered most important in deciding the success of major infrastructure projects:
- 3% said for overall cost of construction to be low;
- 17% said for the project to strengthen economic growth in the long-term;
- 27% said for the infrastructure to be reliable and cost-effective in the long-term;
- 30% said for the project to regenerate communities
Adults were also asked to what extent they agreed that politicians should talk more to the public about the benefits of major infrastructure projects.
- Agree – 74%
- Neither agree nor disagree - 16%
- Disagree – 5%
- Don’t know – 5%
The report recognises the impact that relying on early estimates, created before full scope and complexity is known, can have on the final cost versus outturn conversation.
To minimise the disparity between early and final costs, ICE recommends industry adopt the principles set out in the government’s Outsourcing Playbook. It further discusses the way asset owners can use should-cost estimations to obtain fairer and more accurate tenders.
The report also suggests how the Infrastructure Client Group’s Project 13 approach can help the sector move away from transactional arrangements towards an enterprise model.
Chris Richards, ICE Head of Policy and Public Affairs, said:
“Cost and time overruns on major projects is not an issue unique to the UK, it is a global industry challenge. Our paper outlines some of the ways the infrastructure community and government, can work together to narrow the gap between cost forecasts and outturn to help alleviate the friction this can cause.
“We can't get away from the fact that major projects by their nature are large, unique and are built over a long time period with many factors that change over that time. The public are alive to that fact, but it is equally important that we continue to highlight the huge benefits these infrastructure projects bring to society.”
The report makes four recommendations:
- Infrastructure owners should complete scope, design and exploration before commencement of work is allowed, to avoid scope creep or retroactive changes, taking steps to include contractors in design at an early stage.
- The government and infrastructure owners must move away from capital cost as the most important metric when assessing project benefits, recognising the importance of whole-life economic, social and environmental value.
- Principles set out in the Outsourcing Playbook should be mandatory for government infrastructure owners, this includes infrastructure owners undertaking should-cost modelling to help inform their expectations and knowledge of appropriate tender prices during the procurement process.
It should be mandatory for all public infrastructure owners undertaking procurement to award contracts based on a cost estimate range, using a should-cost estimate as a reference point, with an amount of contingency allocated appropriate to the level of project maturity.
ICE will continue to work with government and industry to get these recommendations in practice.
Article & image source - ICE