02 Apr 2019
India to face Rs 91 bn unexpected bill every year by 2030: Mace report
It is nearly universally accepted that good infrastructure has significant benefits for the economy and peoples’ quality of life. India currently has a predicted annual infrastructure spend of $432 billion a year by 2030.
However, there is a significant problem. According to Mace’s new report, up 80 per cent of large infrastructure projects are delivered late and over budget, and then under deliver on benefits. This has a substantial cost to taxpayers. Modelling done by Mace, the consultancy and construction company behind projects such as the transformation of Mumbai Airport, London’s Shard, the London 2012 Olympics and Dubai Expo 2020, shows that if major projects continue to experience issues at the rate they do now, taxpayers will be faced with an unexpected bill of Rs 91 billion every year by 2030.
According to Jason Millett, Chief Operating Officer for Consultancy, Mace, “According to our calculations, unless something changes, Indian taxpayers will be stung with an unexpected bill of Rs 91 billion a year by 2030. Sadly, many large infrastructure projects do not have the right measures in place to properly plan, develop and deliver these vital schemes. This leads to cost increases, delays in completion and under delivering on the benefits they promised.”
The Mace Insights report, A Blueprint for Modern Infrastructure Delivery, looks at the main reasons why so many large projects go wrong and what we can do to put it right. Nearly 40 senior executives from around the world were interviewed for the breakthrough report, alongside a review of the latest academic literature and new modelling.
Some of the main issues identified include:
- Lack of clarity of outcome when deciding on which schemes to take forward. Often decisions are driven by political pressure rather than rigorous cost and benefit analysis.
- The poor predictive abilities of project teams in their early stages, who are pressured into providing fixed point price estimates and programmes well before accurate predictions are possible or realistic.
- Procurement based on cheapest price rather than value. On large and complex projects, cheapest price procurement is a false economy.
In India, Mace delivers programme management, cost consultancy and facilities management for some of the country’s largest and most high profile developers. Completed projects include the delivery of the Crest, a 765-apartment development for DLF in Gurugram across six towers.
Drawn from the report, top solutions for addressing concerns with Indian infrastructure are:
Create a department for growth
In many countries around the world, the political responsibility for planning, business regulation, housing and transport are separate. This means that when a mega infrastructure project comes along, it cuts across multiple policy areas with a wider range of stakeholders. Bringing relevant elements together into a coherent single government department would improve decision-making and efficiency.
Create an independent scrutiny panel
If your project or programme is large enough or you are a government agency with many large projects, you should create a panel of industry heavyweights outside normal public sector structures to challenge the project scope, timescales and costs. Their sole role should be rigorous challenge. This independent scrutiny panel needs to have the teeth and executive support to get the information they need for proper challenge. The London 2012 Olympics and the Hong Kong Aviation Authority have both taken this approach. Governments may choose to use this panel to challenge their top 10, 20 or 50 projects at regular intervals.
Training academy for project sponsors and leaders
Many large infrastructure owners are public bodies who can struggle to attract the right caliber of people to work for them due to pay constraints. Hence, it makes sense to provide high quality practical training to current government employees to try and up skill them and enhance their skills. A particular focus should be given to the understanding of probability and risk and what that means to a project alongside how to hone in on a clear outcome for a project to achieve.
Pawan Maini, Country Director for India, Mace said, “The delivery of infrastructure in India is the key to continue to enable economic growth across the country. As population pressures on our urban centres grow, we must keep pace with our infrastructure delivery. The government rightly has ambitious plans for huge infrastructure programmes across India but if we can’t deliver them effectively, we risk huge costs for Indian taxpayers.”