5 Ways to Improve the Delivery of Road Projects

By Brendan Halleman and Nicklas Garemo

Brendan Halleman is vice president of Europe & Central Asia at the International Road Federation.

Nicklas Garemo is a senior partner in McKinsey’s Abu Dhabi office.

Jun 25, 2019 | Infrastructure | 5 comments

Roads are the world’s first social network. People and goods need to move for an economy to grow, for wealth to be created, for prosperity to be shared. Much as a dynamic economy depends on the movement of goods and services, people everywhere rely on roads to access employment, education, and health services.

Many authoritative studies have underscored the growing gap between investment needs on the one hand, and the combined spending on road construction and upkeep on the other. Research shows that road-sector investment needs to be approximately USD 900 billion per year to keep pace with projected growth—currently, it falls short of this figure by USD 180 billion per year

Far less attention has been paid to the policies and mechanisms required to stretch available funds through better project selection, efficient procurement strategies, and effective delivery practices. Many road-infrastructure tenders receive too few bids and there are often significant cost variations. There is a lack of value-assurance processes and there are significant challenges to scaling innovation. These figure among the recurrent challenges expressed by road agencies worldwide. Additionally, experience shows that, to significantly and sustainably improve a country’s road network, the whole delivery system must be taken into consideration. It is not enough simply to increase funding.

Against this backdrop, the International Road Federation, a non-profit organization with a mission to assist countries in progressing towards better, safer, and smarter road systems, partnered with McKinsey & Company, a worldwide management consulting firm, to explore what can be done to enhance the whole delivery system. The partnership seeks to ensur that the spend results in the best possible road network – defined as the road network that best fulfills the transportation needs of the economy.

A study of more than 20 national and sub-national road-infrastructure delivery systems across the world was undertaken, to uncover root causes and improvement pathways. In consultation with leading industry experts, we developed a diagnostic for the full infrastructure delivery system across five key areas:

  • Fact-based project selection
  • Streamlined project delivery
  • Making the most of existing road networks
  • Strong governance
  • Robust funding and finance

These areas were further broken down into 30 categories and 80 sub-categories, each representing a globally leading practice, and connected to a database of over 500 examples of best practices found across the world (exhibit).

 

 

Our efforts have yielded significant insights into the root causes behind the challenges in the infrastructure industry in general and the road sector in particular. They have also enabled us to identify successful and proven approaches to overcome these challenges.

The solutions are complex, and there is no single quick fix. However, we have identified five best practices that should inform every country’s improvement journey.

1. Maintain rigorous, fact-based, and transparent project selection.

The key to improved project selection is to establish (and stick to) a rigorous, fact-based project evaluation and a transparent process for establishing what can be done and in what order. Having one entity responsible for evaluating projects and establishing a fact base enables policy makers and elected officials to properly prioritize. Ensuring an outcome-focused approach to prioritization will bring the greatest benefits to citizens and businesses. Transparency in the process and on the criteria for prioritization also helps with stakeholder management. It is equally important that the fact-based project-selection method originates in the infrastructure strategy and is linked to the overall strategic goals of the society.

2. Streamline delivery.

The key to streamlining delivery is to boost sector cooperation across contracting, tendering, site management, and stakeholder management. The infrastructure owner decides the type of contract and how to tender the projects. For example, a decision to move away from design-bid-build contracts toward design-build contracts may pay dividends. Of course, design-build contracts are not a panacea, but their increased use can improve cooperation, align incentives, and enable stakeholders to better draw on each other’s strengths. Equally, the use of negotiations under the framework of public procurement laws can deliver benefits. Negotiations can help limit erroneous calculations, reduce overly wide discrepancies in risk estimates, and encourage improved use of alternative construction methods. However, they also increase the need for advanced tendering capabilities from infrastructure owners and suppliers.

3. Make the most of existing infrastructure.

Governments often seek to address transportation needs by launching new projects, but the existing stock of roads will always be more important than network additions. Making better use of the existing network is key. Our diagnostic shows that many countries do not focus enough on this lever. Additionally, building a fact-based maintenance strategy to reduce road lifecycle costs and ensuring that assets are not allowed to deteriorate to a point where reconstruction costs start to rise sharply enables governments to increase network reliability and reduce overall cost of ownership.

At the same time, pricing mechanisms such as congestion charges can improve road-network utilization and lead to higher economic effectiveness, while environmental effects are often positive. Furthermore, the capacity of existing assets can increase by making them more “intelligent.” This includes familiar solutions such as adjustable road signs, and adaptive traffic lights, as well as newer technology such as navigation apps with crowd-sourced traffic information. In the future, connected and self-driving vehicles may increase the capacity of existing infrastructure significantly, both by cutting accidents and the reduction of “stop-and-go waves.”

4. Ensure effective sector governance.

Our diagnostic efforts found that, across the board, three enablers need improvement for the road infrastructure sector to work better—capabilities, collaboration, and governance:

  • Our research across thousands of infrastructure and construction projects shows that project-management skills make all the difference—no other factor correlates as strongly with the outcome of the project. Attracting, developing, and retaining talent is imperative, but also something that many governments and private-sector representatives acknowledge to be a challenge.
  • An effective road sector requires collaboration between a broad range of stakeholders from the private sector, public sector, and citizens. Our research has consistently shown that this lacks efficiency, often because there is not a commonly shared goal for the road sector.
  • Finally, cooperation across government can pose challenges. Separating technical and political responsibilities can help clarify roles and facilitate improved governance—but solutions must be tailored to the political situation in each country.

5. Enhance funding and finance frameworks.

While funding of roads will likely continue to be predominantly sourced from government budgets, many countries would be better off if they could complement public funds with access to private money. No one solution is right for all countries, but tools ranging from toll stations, infrastructure bonds, real-estate appreciation capture, congestion charges, public-private partnerships, build-operate-transfer, and other methodologies can be part of the toolbox and considered as a way of topping up available funds.

Given the complexity of the task at hand, all stakeholders have a role to play. Governments can set up the playing field right and enable sufficient flow of funds. Infrastructure owners can build comprehensive plans for investments, maintenance and, improved use. Companies can strive for innovation. Courts and municipalities can streamline permitting. Citizens can make their voices heard on effectiveness measures. The task may feel overwhelming, but as our work has shown, a good way to start is to take stock of the current state and design an inclusive plan for improvements based on the desired future state.

To read more on our findings and continue the conversation, please visit https://www.irf.global/mckinsey-irf-diagnostic/

Discussion

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5 Comments

  1. I have a question not a comment. I am a retired municipal bond analyst very familiar with project based infrastructure financings. In comparing US roadways to global competitors was there any research into the durability and longevity of US roadbeds compared to those built in Europe? It is irksome to witness the accelerated deterioration of roads in the US. A very knowledgeable French official holding a top position with an acclaimed transportation firm candidly informed me that the quality of US road materials has not improved in the past 50 years compared to what is used in Europe. As a culture we are so accustomed to planned obsolescence that we are unwittingly complacent about it. Is there any evidence that the useful life of European highways exceeds that of the US?

    Reply
    • Hi Gerard – this is an incredibly difficult question, and there isn’t much consensus within the research community. Different pavement deterioration rates can be ascribed to a range of factors, including of course the quality of the pavement materials. As someone with an economic background, however, I always tend to look at the incentive mechanisms, in particular those that place the onus of meeting long term performance targets on the shoulders of the contractor. Europe has developed sophisticated models which I would be happy to describe in greater detail (feel free to shoot me an email at bhalleman@irf.global).

      Reply
  2. To provide services to real people, to prevent approval delays, and to avoid protests, the needs, desires, and wants of the broad public (including various demographic groups) should be considered and addressed very early in the planning process. Social equity issues should be addressed, and disparities eliminated, reduced, and ameliorated. Tom Sanchez and I address some of this in our book, Planning as if People Matter: Governing for Social Equity, Island Press, 2012. I also provide a schema in my paper, Social Equity Impact Assessment, available upon request. mbrenman001@comcast.net

    Reply
  3. Undoubtedly you are beautiful people.
    The information that this article gives is valuable as everything I have read here, in the line of my interest I only get valuable sums that can contribute a very different horizon, a balance of this quality puts reality on the hands of destiny with all ease, thanks.
    Thinking about an infrastructure strategy that is linked to the general strategic objectives of society with a solution that must take into account all the aspects in itself is difficult according to aspects 2 to 5 indicated below, a very complex challenge, although approaches from all its forms to a solution that can be decisive if the vehicles disappear along with the streets …
    It would be similar to stop looking for techniques and technologies to cut the grass if it acquires a certain size and is never altered …
    The expense and effort in the development of contracts, projects and construction is really important, without a doubt this is a great study presented here brings together in a single analysis the effort made by decades and millions of people around the world, for example. You can not stop thinking about how incredible this is.
    The burden of decisions and experiences of governments to indicate the destiny of all after the mobility and purposes of the countries in their growth and development is crucial against the balance between the duration and maintenance of roads. A decision that varies as new related technologies are developed.
    These technologies have managed to glimpse more convenient developments among others, such as intelligent automated driving from risk and mobility variables, among others parking and communication networks.
    The so-called networks have their axis in a common aspect, development and growth, some of them solve mobility with minor movement and nothing has been said about it, many but most of the motives of mobility by road networks can be suspended if the consumerism is replaced by self-consumption, applying communication and energy networks and others already fully developed.
    It is clear that although the roads have been until now the first social network in the world, this is leaving us immobile and with growth and development dependent on them, a limit that only moves with new technologies and complementary strategies, beyond, but that we can easily reach again.
    And state control becomes more complex and difficult along with strategically objective growth and development.
    And we can not ignore the fact that the manufacture of cement and the burning of fossil fuels caused and maintains the global climatic catastrophe in the making.
    But my desire is not to repeat what has been said, but to open the most hidden, perhaps to get to the fucking that is not touched, without roads of high costs very well exposed here or fossil fuels and decisions that inevitably quarrel with the most precious, the growth and development that question us the true concept of development, is it perhaps quality of life? , then the Masvlov hierarchies for all without exception of none is the ideal pursued to consider, to transcend.
    Well, to my modest judgment, 10 billion is more than enough to achieve this goal; levitation. Do you know how little energy you need to give a boost to this vehicle? Its inertia takes it very far almost free, do you know how many displacement networks can be implemented above 6 meters high? Achieving this goal I think it is much easier and closer than we know if we just stop thinking about a terrestrial direction of Henry, I’m not talking about children’s contests of miserable prizes for changing the world that only make famous the one that contributes dollars, I’m sure that with a billion dollars we find the technology to levitate, I know, and with the rest we manufacture and market it on a large scale in the short term. Everyone wants to stop this madness that drains the environment and space at ground level, in addition to our time and reason for Being.
    In the beginning due to lack of capacity, supposedly, all vehicles of less than 6 people would levitate for example with automatic driving control systems and the heavy load would continue to use a fraction of the existing roads in the meantime, and thus, the algorithm that appears is absolutely incredible to apply what we learned technologically and economically with these concrete and real experiences in front of a small investment decided to grow and develop without limits, well at least for what we now know, this was the beginning of Henry Ford, he did not think from the existing underdevelopment of that time but with what supposedly was without limits, now we know more, without doubts.

    Reply
  4. My apologies, I have read my opinion, but the traslator that I use has such expressions that I do not use, although perhaps they are more adequate in English to achieve the objective.
    But my desire is not to repeat what has been said, but to open the most hidden, perhaps to get to the fucking that is not touched, without roads of high costs very well exposed here or fossil fuels and decisions that inevitably quarrel with the most precious,
    this is the translation of the original text is this, the other a trick of fate
    But my desire is not to repeat what has been said, but to open the most hidden perhaps to attack the focus that is not touched, without roads of high costs very well exposed here, more fossil fuels and decisions that inevitably quarrel with the most precious.
    I’m sorry or thank you, I do not know
    Regards

    Reply

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