McKinsey's Tim McManus a vice president partner in Boston and Mukund Sridhar a partner in the Singapore office provide advice on getting infrastructure projects complete on time and budget.

Infrastructure has a problem. Delays and cost overruns are common. Poor planning and execution, unbalanced contracts, inadequate controls and ineffective risk management are rife. Productivity has been subpar, innovation slow, and margins thin. Simply put, the current approach is not working. 

The industry needs to accelerate innovation, including the use of digital solutions. That may sound obvious, but research has found the construction sector to be a technological laggard, with low levels of digitization and R&D spending. Our research has shown that emerging technologies could boost productivity by 25-30%.

We have identified four ways project owners can improve the odds of success, embedding in each digital tools. Other ideas are quickly emerging, such as advanced analytics for predictive maintenance and geo-location solutions to manage workforce and materials. Non-digital methods, such as modular design and pre-fabricated and preassembled volumetric construction, and even 3D printing are also promising. 

In 2013, McKinsey calculated that $57 trillion of global infrastructure spend would be needed by 2030 just to keep up with economic growth. Learning from successful – and unsuccessful – projects can help companies to improve their outcomes, and the communities they serve. 

Manage the project as part of the overall business case 

Finishing on time and budget is important, but a project can meet those criteria and still not work well. Think of an airport that is obsolete the day it opens. The owner should appoint someone to monitor the business case (not the designer, construction manager, or contractor, who are too close to the project to provide a dispassionate view). The monitor should have the authority to prevent changes during design and construction that could hurt performance. By using advanced analytics on project performance, commodity price trends and contractor performance, owners can do a better job of spotting how projects could fail in time to mitigate problems. 

Match the delivery method to the project 

Particularly in the public sector, there is a tendency to opt for the same delivery method, such as design-bid build or design-build, for all capital projects. The better practice is to decide which method is most appropriate. This means evaluating a variety of factors, such as permitting, land-site control, owner priorities, geotechnical analysis, and organisational and supply chain capacity and degree of risk. Digital tools can improve the efficiency and accuracy of this process, cutting the time needed from months to weeks. For example, advanced surveying and geo-location technologies such as drones improve site assessments and project planning. 

Balance risks 

It is common for owners to try to transfer risks and liabilities. Contractors then seek to cover themselves through higher bids, additional contingencies, costly insurance policies, or adversarial contract management. This can lead to disputes, delays, and failure. Counter-intuitively, when owners, designers, and contractors share the risks, they may actually lower them – and also make the project run more smoothly. 

Technology can play a vital role: next-generation building information modelling, boosted by augmented-reality solutions, can help provide a common platform for owners, designers, engineers and contractors to identify risks and work together to address them. 

Involve operations and maintenance right from the start 

The costs associated with operating and maintaining (O&M) infrastructure assets over 20-30 years are many times higher than those for design and construction. To ensure running costs are considered in design, O&M experts need to be involved early. Many oil and gas companies use this approach for big capital projects, finding that such projects are ready to go upon completion. New technologies can enable a smoother transition from construction to operations. The use of 5D building information modelling provides O&M staff with a more accurate representation of what has been built, meaning less confusion and fewer changes.

Tim McManus (Tim_McManus@McKinsey.com), in Boston, is a vice-president in capital projects & infrastructure. Mukund Sridhar (Mukund.Sridhar@McKinsey.com), a partner in the Singapore office, leads digital & technology research globally for capital projects & infrastructure.