How do infrastructure project cost and timelines compare across nations?

Those are two questions that a new report that examines lessons to improve project delivery has addressed.

The report, by a group of authors working on behalf of global consulting firm Boston Consulting Group (BCG), comes at a time when the energy transition and the impacts of climate change means that developed economies require larger and more complex infrastructure.

To understand how to address the challenge of shaping a strategy to building infrastructure more effectively in the United Kingdom (UK), it benchmarked the country against a range of other developed democracies.

It compared the delivery of road, rail and social infrastructure in the UK to a peer group of countries to benchmark performance across several key metrics: unit cost, time to delivery, time overruns and cost overruns. It drew data from BCG’s in-house Prism database which includes detailed information on 2,300 infrastructure projects from 16 countries.

Reproduced courtesy of BCG

Looking across seven different developed countries and regions, the median infrastructure project cost was highest in Australia, where it fell into the 62nd percentile, followed by the US in the 54th percentile, with the UK very close behind in the 52nd. Of the countries in the comparison, the median French infrastructure project performed the best, ranking in the 35th percentile.

Delving further showed that certain countries performed better than others in terms of unit costs on certain types of projects.

The UK, for example, had the highest absolute unit costs for both road and rail projects whereas it performed better on social infrastructure like schools, hospitals and prisons. In the social infrastructure category, it was the USA that had the highest absolute unit cost of the countries in the comparison.

Reproduced courtesy of BCG

Meanwhile, the report found that no country did particularly well on cost overruns. “Cost overruns are incredibly common. In fact, they are by far the norm for the UK, Germany, France and Australia,” it said.

“Furthermore, when costs do overrun, they are consistently large. France performs best with an average overrun of 47% (for projects that go over budget), an astonishingly high level for the best performer.”

As far as the relative duration of infrastructure projects, the report found that they typically took longer to deliver in Germany, which had the highest median percentile of 0.71. The typical project duration was lowest in the US and Australia, at 0.43 and 0.41 respectively.

Reproduced courtesy of BCG

6 main issues

With specific reference to the UK, the BCG report identified six main issues that contribute to cost overruns and delays on infrastructure projects, most of which occur at the pre-construction stages. They were:

1) The government sets multiple, conflicting objectives for a project with only loose budget and time constraints.

2) Risk aversion means designs are frequently changed and are often over-elaborate, with too little attention paid to value or how the project will be built and operated.

3) The planning process is too long and complex.

4) The current sourcing and contracting approach creates the illusion of risk reduction but often shifts risk rather than effectively managing it, with too much emphasis on passing risks along the supply chain instead of taking shared ownership.

5) External pressure to move to construction despite design changes means designs are often immature and the engineering risks not fully understood.

6) The construction industry (in the UK) is fragmented with little incentive to invest in capital, skills or technology.

Nine recommendations

BCG put forward nine recommendations across three categories to improve infrastructure delivery in the UK. They were:

For clients:

1) Set clear objectives and ensure they don’t conflict.

2) Target the minimum viable product.

3) Link construction, delivery and operation so all responsible parties are joined up.

Work together to improve construction risk management:

4) Rethink risk management to better address larger tail risks and avoid spurious certainty.

5) Standardise contracts with a focus on more effective risk management across the entire project, rather than passing risk down the supply chain.

Take risk out of the system:

6) Create a Centre of Infrastructure Excellence.

7) Secure supply chain certainty.

8) Take a consistent portfolio-level approach to infrastructure.

9) Reform the planning process.

To read BCG’s report, Reshaping British Infrastructure: Global Lessons to Improve Project Delivery, click here.