Strategic Infrastructure: Steps to Operate and Maintain Infrastructure Efficiently and Effectively

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Against the backdrop of increasing user demand, constrained financing, and an aging asset base, it is imperative for governments to make the most of their existing infrastructure assets–specifically, to increase their productivity and longevity. This slideshow recommends ways of doing just that.

For more information, please check out the full report from The World Economic Forum with BCG, "Strategic Infrastructure: Steps to Operate and Maintain Infrastructure Efficiently and Effectively" (http://on.bcg.com/1lnDqv7).

Published in: Business, Economy & Finance

Strategic Infrastructure: Steps to Operate and Maintain Infrastructure Efficiently and Effectively

  1. 1. Overview of 2014 WEF and BCG report: Strategic Infrastructure Panama, 30 March 2014
  2. 2. 1 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. Overview of the report "Strategic Infrastructure: Steps to operate and maintain infrastructure efficiently and effectively" Context and objectives of this report — Infrastructure is essential for sustained economic growth, competitiveness and social progress. While building new infrastructure assets ranks high on the global agenda, governments in both developed and developing countries often neglect their existing infrastructure assets. — Against the backdrop of increasing user demand, constrained financing and an ageing asset base, it is imperative for governments to make the most of their existing assets – specifically, to increase their productivity and longevity. — This report recommends ways of doing just that. It provides a structured and comprehensive framework for implementing operations and maintenance (O&M) best practices, as well as many real-life examples. In addition, it covers the enabling factors for O&M such as funding, capabilities and governance. — Using the guidance provided in this report, governments and operators can systematically consider all possible optimization levers and so reap the full potential of their infrastructure assets. Audience of the report — This report is designed primarily for senior government leaders and for the officials responsible for managing infrastructure assets on the strategic and operational level. — Other stakeholders would also benefit from the report – the private sector, multilateral development banks, the donor community and civil society – as it enables them to have a more productive engagement with governments. — Finally, private infrastructure operators as well will value the report, as many of the best practices listed in it can be applied equally to privately operated infrastructure assets. Scope of the report — The report is intended to serve as a “roadmap” for directing governments and other stakeholders to the critical success factors in infrastructure O&M. It does so by providing a comprehensive framework, actionable lessons learned and more than 200 real-life examples and case studies. — The framework and recommendations can be applied broadly in developed and developing economies, and across many sectors of economic and social infrastructure. — The O&M best practices are collected from infrastructure assets that are delivered under public or private modes, or under public-private partnerships (PPP), and can likewise be applied to all kinds of delivery modes. — The report is not a compendium of the whole infrastructure life cycle: it excludes initial design and construction, and takes those decisions as a given; and, its focus is exclusively on O&M and end-of-life-cycle decisions of existing assets. Source: World Economic Forum; BCG
  3. 3. 2 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. The infrastructure gap can be narrowed via three levers: Optimization of existing assets often neglected The global infrastructure gap Three levers to close the gap Report focus Asset demand: rising needs Build new assets Existing asset supply: Ageing asset base Optimize existing assets Reduce demand New asset supply: limited funding 1 2 3 Gap Time Infrastructure asset demand/supply Gap ~1.0 Supply (based on construction activity)3 Demand (based on OECD estimate)2 ~2.7 ~3.7 in % GDP4 ~5.4% ~4.0% ~1.4% in US$ trillion, annual (average 2010-2030)1 1. Including economic and social infrastructure 2. Infrastructure to 2030 (Volume 2): Mapping Policy for Electricity, Water and Transport, June 2007. Paris: Organisation for Economic Cooperation and Development (OECD) 3. IHS Global Insight Construction Database, March 2012 4. Using $70T as global GDP, non-PPP adjusted (2011) Source: World Economic Forum; BCG
  4. 4. 3 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. There is a massive opportunity ... ... and it is realistic to achieve Source: Asset Management Survey 2011 (European Federation of National Maintenance Society); CIA World Fact Book 2012; World Economic Forum; BCG Significant value can be unlocked through proper infra O&M The O&M opportunity Low maturity of infra asset management Huge global infrastructure stock Many examples of optimized O&M — within infra: e.g. Singapore airport, non-revenue water reduction in Manila — from other sectors, e.g. Oil & Gas Recent wave of innovations — e.g. dynamic traffic management — e.g. e-tolling — e.g. smart meters and grid O&M solutions are low-cost — Low capex and quick payback — High benefit-cost ratios ~ 1.2 B fixed line > 33 M km roads > 43 k airports ~ 1.1 M km railways >20,000 TWh p.a. produced > 600,000 km waterways Process Industries 3.1 Manu facturing 3.0 Infra structure 2.7 1 = lowest maturity 5 = best- practice
  5. 5. 4 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. Scarce financial resources Little information and skills Unclear incentives and accountabilities No life-cycle view in design & build; no integrated budget Lack of coordination across functions and agencies Few systems/tool support, e.g. AM systems, TQM Lack of skilled staff, as engineers prefer build-projects No comprehensive O&M plans and strategies Lack of independent, pro- fessional public agencies Public budgets biased to new assets, for political motives Insufficient public funding for infrastructure overall Annual budgets not suited to stable, multi-year O&M needs Low cost recovery via user fees and user-charge evasion Inadequate governance Weak capabilities Insufficient funding Little data on asset use and condition, O&M spend Limited benchmarking and evidence on O&M impact Corruption, bureaucracy, lack of accountability Little private-sector participation & competition Little use of ancillary revenues and land value capture Low O&M performance due to three root causes The O&M challenges Notes: AM = Asset Management; TQM = Total Quality Management Source: World Economic Forum; BCG
  6. 6. 5 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. O&M excellence needs a comprehensive approach O&M best-practice framework 1.1 1.2 1.31.4 1.5 1.6 Maximize asset utilization Enhance quality for users Reduce O&M costs Reinvest with a life cycle view Extend asset life Mitigate externalities 2.1 2.2 2.3 Ensure funding Build capabilities Reform governance Enablers Source: World Economic Forum; BCG
  7. 7. 6 Copyright©2014byTheBostonConsultingGroup,Inc.Allrightsreserved. Operators need to benchmark O&M best-practice checklist Increase utility Increase lifetime value Decrease total cost 1.1. Maximize asset utilization 1.2. Enhance quality for users 1.3. Reduce O&M costs 1.4. Mitigate externalities 1.5. Extend asset life 1.6. Reinvest with a life cycle view Apply demand management Optimize availability/ reduce downtime Enhance peak capacity and effective throughput Enhance the end-to-end user experience Use smart technologies to refine user performance Adopt a customer-centric operating model Rightsize management and support functions Optimize procurement costs and outsourcing Implement lean and automated processes Cooperate with relevant stakeholders Embed sustainability/HSE into routine operations Arrange comprehensive sustainability/HSE plans Enhance disaster resilience Control excessive asset consumption and stress Invest in preventive and predictive maintenance Select contracting mode for best value for money Prepare for efficient project delivery Prioritize project options with whole life cycle CBA Capture ancillary business opportunities Apply inclusive user charges Dedicate user taxes via maintenance funds Conduct training and develop talent Apply data, benchmarks and tools Introduce asset management planning Consider private-sector participation & competition Foster cooperation between agencies Corporatize and profes- sionalize public agencies Enable O&M best practice 2.1. Ensure funding 2.2. Build capabilities 2.3. Reform governance Note: HSE = Health Safety Environment; CBA = Cost-Benefit Analysis; Source: World Economic Forum; BCG

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