Complex Infrastructure Projects: A Critical Perspective

By Anthony Holmes

Infrastructure projects represent one of the largest asset classes globally with the estimated cost of potential new projects planned to 2030 totalling US$70 trn.
The sector splits into social infrastructure which is the group of projects that support urban living and economic infrastructure that, following the recession that began 2007/8, has become the global economic methodology du jour to stimulate economic growth.
However, unless the host state has surplus financial resources, as has China and the Gulf states, large scale investment may be not be affordable given the capacity constraints and fragility of the international capital markets.
Moreover the majority of large complex infrastructure projects are delivered late and over budget. Whatever the initial estimates and plans, sponsors face project distress usually in the last quarter of the development with budget increases ranging from 40% to over 100%.
Many major projects are socially necessary but sponsors will fail if they persist in trying to attract investment by pretending that projects are financially viable using the criteria employed by commercial concerns. A new methodology is required.
This book explores the reasons these large projects rarely conform to their original plan and what can be done about it. It also examines how the trend to greater complexity will exacerbate this problem unless a new methodology is adopted.
The book concludes that unless more realism is introduced developed nations will be unable to renew their infrastructure and developing nations will not be able to establish the foundation of a modern economy.
The author is a director of the Institute for Infrastructure Studies and consults globally.

• Language: English
• Publisher: Harriman House
• Release date: Oct 1, 2014
• ISBN: 9780857194442

Anthony Holmes

Paul M. Sammon's distinctive career can best be described by the film industry expression "hyphenate." As a writer, Sammon has published numerous articles, short stories and books. His many film journalism pieces have seen print in The American Cinematographer, Cahiers du Cinema, The Los Angeles Times, Omni, Cinefex, and Cinefantastique. Sammon's fiction has appeared in Peter Straub's Ghosts (1995), and he recently edited both the 1994 "dead Elvis" anthology The King Is Dead plus the "no limits" anthologies Splatterpunks: Extreme Horror and Splatterpunks II: Over the Edge (1995). But Paul M. Sammon does not only write about movies--he works in them as well. He first entered the industry as a publicist in the late 1970s, before moving on as a second-unit director, special effects coordinator, still photographer, electronic press kit producer, and Vice President of Special Promotions. Some of the scores of motion pictures on which Sammon has labored include RoboCop, Platoon, Blue Velvet, Conan the Barbarian, and The Silence of the Lambs. By the late 1980s, Sammon was working in Japanese television, where he coproduced popular entertainment programs like Hello! Movies for the TV Asahi network. By the 1990s, Sammon had served as Computer Graphics Supervisor for RoboCop 2; he recently was Digital and Optical Effects Supervisor for 1995's XTRO: Watch the Skies. Despite this background, however, Sammon still likes nothing better than sitting down with a good movie. And Blade Runner remains one of his favorite films.

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Publishing details

HARRIMAN HOUSE LTD

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First published in Great Britain in 2014

Copyright © Harriman House 2014

The right of Anthony Holmes to be identified as Author has been asserted in accordance with the Copyright, Design and Patents Act 1988.

ISBN: 978-0-857194-44-2

British Library Cataloguing in Publication Data

A CIP catalogue record for this book can be obtained from the British Library.

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About the author

Following a career in strategic consulting and investment banking, Anthony Holmes became an international corporate turnaround specialist. In 2010 he became chairman of British Consulting which specialises in the project management of large complex infrastructure developments and he was a founding member of the Institute for Infrastructure Studies think tank. He has written and lectured extensively on managing instability, leadership and the economics of infrastructure.

Introduction

This book is about large, complex infrastructure projects. By this I mean mega projects that cost in excess of US$1bn each and on which our modern, urbanised, globalised society depends.

Infrastructure is the framework of society. Ports, roads, airports, railways, water supplies, energy generation, telecoms networks, hospitals and schools are not optional. They are essential. Their availability and functionality is every government’s paramount responsibility.

The projects are of such epic scale that, when complete, their presence modifies the behaviour of a large fraction of the people who live within their catchment. Some even affect the behaviour of people and businesses on an intercontinental scale.

Facilities of this importance ought not be planned and executed haphazardly, but they are. We can manage their development better, and we should.

The subject is relevant because we live at a time when population is growing, urbanisation is increasing and economic globalisation is accelerating. These trends have generated unprecedented international demand for infrastructure development, much of it in the form of large, complex projects.

The execution of these projects requires the management of significant economic risks. The investment is not discretionary and so these risks cannot be avoided by not proceeding, as to not do so would risk uncompetitiveness, inefficiency and inadequate civic amenities.

The projects may be socially necessary but the process can be politically toxic. Policy discussion is often marginalised and, while judgements ought to be dispassionate and framed in a long-term coordinated vision, expediency tends to predominate.

Political intervention is unavoidable as these facilities provide the framework of modern society [¹] and each project is so costly and intrusive that government must be involved. But, despite its social significance, infrastructure policy tends not to win or lose elections, even if problems with implementation can destroy political careers.

Most projects are expected to have a useful life in excess of 30 years but unhelpfully governmental investment decisions are strongly influenced by short-term political expediency. Mega projects transcend the three to five-year political cycle and the six to eight-year business cycle, so their social value exceeds the horizon of political expediency. To those such as politicians whose primary interest is to demonstrate short and medium-term success, trans-cyclical infrastructure investments are difficult to evaluate and therefore hard to justify.

Nations with political systems that are less democratic, such as China and the GCC states, are not constrained by such short termism and are better placed to take long-term investment decisions that are not necessarily commercially viable.

Notwithstanding these issues, global demand for infrastructure investment has never been greater, to the degree that desired expenditure [²] exceeds the financial capacity of many countries. This inability to finance projects at the scale being demanded is particularly acute in developing nations, where it is believed their societies’ escape from poverty depends on this investment. In fact, the current aggregate demand for infrastructure development is so great that it probably exceeds the funding capacity of the international financial system.

Beyond the horizon

In an era in which instant gratification dominates the technical language, the elongated timescale of infrastructure projects renders the subject tiresome unless a scandal is revealed or some other controversy emerges. Citizens are usually impressed, even excited, by a new amenity but are indifferent to the process of gestation and construction, unless it goes wrong. Maybe this is because projects originate bureaucratically in the public sector, have a development period of five to seven years and an economic life of around 30 years. Maintaining general enthusiasm over such timescales is impossible. Watching paint dry is faster!

Infrastructure suffers from being difficult to understand holistically as it combines engineering, construction, economics, urban planning, finance, sociology, politics, and increasingly systems engineering and IT. Rarely do representatives of the entire system congregate in the same room to discuss the integration of these dissimilar areas of expertise – this is an activity which I shall argue is growing in importance but accorded too little significance