Strategic Infrastructure: Steps to Operate and Maintain Infrastructure Efficiently and Effectively
Infrastructure assets are often managed sub-optimally. Here is a framework for how governments worldwide can achieve a step change in their operation and maintenance.
Around the world, many countries are experiencing severe infrastructure needs because of growing populations, economic growth, increasing urbanization, and aging legacy assets. Although demand is skyrocketing, supply is impeded by various factors, resulting in a global investment gap of about $1 trillion per year.
To bridge the gap, most governments emphasize constructing new assets, but this strategy is not a silver-bullet solution; after all, public-budget constraints exist, as do multiple difficulties in getting projects from idea to implementation in a reasonable time frame. A complementary and potentially more cost-effective approach is to improve the utilization, efficiency, and longevity of the existing infrastructure stock—in short, to make the most of existing assets by means of optimal operations and maintenance (O&M).
In reality, many governments in both developed and developing countries neglect their existing assets, and current O&M practices are often seriously deficient. In operations, they fail to maximize asset utilization and to meet adequate user quality standards, while they incur needlessly high costs as well as environmental and social externalities. Maintenance is all too often neglected, since political bias is toward funding new assets. As a result of the maintenance backlog, existing assets deteriorate much faster than necessary, shortening their useful life.
A proper solution will require a step change in the management of infrastructure assets. In fact, such a transformation is feasible. There are many examples of O&M best practices from the various infrastructure sectors and other heavy industries around the world—they just need to be adopted more widely. And thanks to recent innovations in digital technologies—such as remote sensing, advanced analytics, autonomous operations, and integrated scheduling and control—traditional “bricks” infrastructure can now be used more effectively and operated and maintained more efficiently. Most important of all, O&M solutions are affordable. They are highly cost effective in an otherwise capital-intensive industry. Even small O&M improvements can make a remarkable impact given the large size of the global asset base. And in addition to generating financial savings, O&M improvements can also bring considerable social and environmental benefits that are in line with governments’ public-service missions.
“Strategic Infrastructure: Steps to Operate and Maintain Infrastructure Efficiently and Effectively,” a new World Economic Forum report, developed in collaboration with The Boston Consulting Group, outlines government best practices for operating and maintaining infrastructure assets. Citing more than 200 real-life examples from the various infrastructure sectors, the report presents a detailed discussion of the actions that the governments and operators of infrastructure assets need to undertake. The report examines two types of best practices: implementation best practices for asset operators to enhance O&M performance and enablement best practices for policymakers to create the conditions for sustainable O&M. The implementation best practices are structured around three themes:
- Increasing the utility of infrastructure by maximizing asset utilization and enhancing the quality for users
- Decreasing the total cost of infrastructure by reducing O&M costs and mitigating environmental and social externalities
- Increasing the lifetime value of infrastructure by extending asset lifetime and reinvesting with a whole life-cycle perspective
The report not only recommends specific actions for improving O&M but also addresses the root causes of O&M underperformance, such as insufficient funding, immature capabilities, and inappropriate governance structures. To make high performance O&M sustainable, policymakers need to put three key enablers in place:
- Ensuring stable and sufficient funding
- Building institutional and individual capabilities
- Reforming governance
Excellence in infrastructure O&M is certainly a key means of narrowing the global infrastructure gap, but it is no panacea. Most countries will still need to construct new assets in order to address the vast infrastructure deficiencies. Still, by optimizing existing capacity utilization, best-practice O&M can at least reduce the amount of new construction. And by optimizing operating costs, it can also free up financial resources for whatever new construction is needed. Furthermore, optimization can ease current congestion far faster than new construction would be able to. Such well-designed O&M strategies and policies offer both developed and developing countries a great opportunity for boosting their infrastructure, strengthening their competitiveness, and fostering socioeconomic progress and prosperity.
The original version of the report was published by the World Economic Forum and can also be found at www.bcgperspectives.com.