By Anil Sawhney, Director of the Infrastructure Sector, RICS
Empowering social value through infrastructure cost management: Joe Biden’s recently proposed infrastructure spending bill is causing a great deal of excitement in the construction and infrastructure sector–and rightly so. This is a historic reinvestment in covering America’s significant infrastructure gap, delivering much-needed upgrades across the country. The plan presents a great opportunity for construction and infrastructure professionals, particularly through public-private partnerships on everything from roads and bridges to climate change mitigation and carbon retrofitting.
More than this, however, it is an opportunity for the public sector and private sector to deliver meaningful and lasting social value through smart, environmentally, and socially sustainable infrastructure assets. A cornerstone of this will be robust cost management practices that improve cost predictions, ensure proper allocation of resources and risk management, which in turn will build the public trust that will keep infrastructure a priority long past federal, state, and local government administrations.
Overbudget infrastructure and public spending budgets have put the need for cost management into stark relief in the US, along with the shortage of qualified cost management professionals in the US. New York’s much-publicized transportation system debt is a prime example of how the industry needs transparency and professionals that can accurately assess all of the complex variables at play in even the smallest infrastructure projects.
This nationwide commitment to infrastructure then is a prime opportunity to grow the cost management profession and bring trusted best cost practices to bear. Global best practices, principles, and standards, such as through the International Construction Measurement Standards can play a significant role in ensure value for money on these large-scale infrastructure projects and programs. Data and team experience may change on each project, while states, cities and organizations have different needs, but planning, structure, cost measurement and risk assessment principles don’t. Cost expertise helps deliver infrastructure initiatives through comprehensive and forward-thinking fiscal planning. In turn, the US can build social value through its infrastructure projects, both in terms of the projects themselves and within the industries building them. But these projects need to get funded and stayed funded first.
One of the immediate benefits of the Biden plan, assuming it passes in some recognizable form, is that it is anticipated to be a major economic driver for the built environment and the country as a whole. Two recent reports from RICS–the Global Commercial Property Monitor and the Global Construction Monitor–both indicate strongly that infrastructure investors, end users and built environment professionals all anticipate major upticks in construction workloads, which brings jobs and economic development during and after the projects.
There is also a notable skills shortage in the construction industry as the workforce ages out and fewer young people are stepping in to take over, particularly in the areas of cost estimation, commercial management and benchmarking. A deep infrastructure pipeline can create new jobs opportunities for underrepresented populations in the industry–not to speak of the wider jobs benefits that these projects bring.
In turn, this pipeline of infrastructure work will help to keep cities and communities more resilient for future downturns and crises as the need for projects is truly large-scale and long-term. Follow through from the public sector and their built environment partners will require robust cost management practices to ensure budgets are maintained, costs are transparent and predictable and public trust is maintained to continue financing. After all, for all of the $2 trillion dollars President Biden is proposing, cities and states will still need to provide local funding as well. This funding is essential to delivering on parts of the plan that seek to reverse previous inequities historically designed into some urban infrastructure, such as highways that segregate communities.
One of the business issues of infrastructure projects has been a lack of investment, both from public and private sources, as it is often overlooked by financial markets. Additionally, at a government level, there is a tendency to ignore the topic or see it as too technical. Cost management can help with this, translating complex contingencies and factors into actionable plans for productive and lucrative PPP projects. Through more effective cost management and funding, the US can help make infrastructure a business priority for more built environment players and create flexibility that can ensure continued enthusiasm from the financial and private sectors.
The need for the success of these infrastructure projects reaches beyond economics, though. Environmental and social sustainability and resilience are critical to the livability of cities across the country. Reliable public transportation–that is also accessible for persons with disabilities–is crucial to increasing urbanization (a trend that was temporarily slowed by Covid, but in no way reversed). This impact economic inclusivity, as easy access to employment opportunities is key for economic empowerment.
As important as social value is for these projects, minimizing environmental impact and delivering green projects are equally important. Carbon neutrality is a broad US goal and it remains a priority for a number of major US cities. Additionally, climate change and superstorms are presenting new and unprecedented challenges. Coastal cities such as New York and Boston require major projects to mitigate water level rise and water and wind damage to transit systems. Cities across the Sun Belt in particular need to address rising temperatures, water scarcity and habitability for the future. These things require sustained efforts that bridge political terms, which means it’s crucial to create public buy-in and cost transparency.
The stakes could not be higher, and what the challenges require is transparency and comprehensive planning. The need for cost management in the U.S. is inherently tied to the need for infrastructure to provide better long-term social outcomes for the country and its communities.
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