This post is sponsored by Oracle Construction and Engineering.
Neglecting infrastructure can be costly for cities on many levels, and that challenge is compounded by the constant need to strategically budget scarce funding. In 2015, the District of Columbia set out to revamp its asset management system to address some of these issues. Like most cities, the District faced budget constraints that led to decades of underinvestment in infrastructure.
The District found its public schools needed $6 billion for improvements following more than 30 years of deferred maintenance. Allocating money to that need meant there was little left for roads, transit, fire stations, and other necessary projects. The underinvestment in upkeep also brought surprise expenses, such as the $50 million it had to pay a contractor for one weekend’s snow removal because the District’s plows were out of commission.
“We knew we couldn’t sustain this,” said David Allen Clark, Program Manager in the District of Columbia city government. “We had to find a way to get our arms around what have and what we need.”
The team embarked on the task of pulling together a centralized database of the life cycle for nearly every vehicle, road, sidewalk, building, and piece of equipment the District owns.
Global spending continues to rise
Growing spending on public construction underscores the need for sound prioritization and planning. Federal, state, and local governments were expected to spend $340.6 billion for the year on public construction as of May 2019, a 10.8% increase from May 2018. And that’s only the beginning.
Annual global infrastructure spending is projected to be $3.2 trillion from 2016 to 2040. However, the actual need is expected to average $3.7 trillion per year. Governments must find resourceful approaches to stretching their budgets, raising more capital, and managing an increasing number of projects. This is no easy task.
Numerous stakeholders and departments must effectively collaborate to successfully deliver a range of projects, including: highways, streets, transportation hubs, educational facilities, and more.
Local governments need to tackle five looming challenges to effectively manage infrastructure projects, according to Oracle Construction and Engineering Director of Industry Strategy Werner Maritz.
Five challenges to successfully managing infrastructure projects:
- Managing numerous projects in various phases across departments
- Ensuring financial governance across projects and contracts
- Protecting the supply chain through timely payments
- Coordinating multiple stakeholders across globally dispersed locations
- Maintaining a city’s assets across the life cycle
Managing various constituents
Clark understands the challenges inherent in coordinating across multiple stakeholders and government agencies. The team contacted various departments to assess inventories and other data necessary for asset tracking. This foundational list of assets, while not initially comprehensive, helped the District start the process of transforming their asset management.
“The message is to start somewhere,” Clark said. “You will never get perfect data and you will never have it all. Pick a spot to start, get the best data you have and make decisions that respect the data.”
Many governments grapple with managing the financial aspect of assets. Limited budgets must address initial budget funding, operations, and maintenance. City administrators need to maintain traceability of funds and transactions for a variety of projects and contracts, Maritz said.
U.S. infrastructure funding is beginning to broaden beyond municipalities, according to Yves Courtois, KPMG partner. “Cities are being challenged when it comes to public financing. Municipalities are increasingly leveraging public-private-partnerships (P3s) and encouraging the private sector to bid for projects,“ Courtois said.
The rising popularity of P3 partnerships is heightening the need for financial governance, according to Maritz. “Cities must identify, evaluate, and administer these projects in a transparent and efficient way,” said Maritz.
The complexity of massive infrastructure projects is creating significant operational and cost challenges that can threaten project success. Fortunately, local governments can dramatically reduce wasted resources, and ultimately create better assets.
Budget shortfalls are part of the operating environment. Yet, there are best practices and tools available to help local governments better understand their assets and financing needs throughout the life cycle. Implementing appropriate tools, systems, and technology can transform how large-scale infrastructure projects are managed and improve cities for all residents.
To learn more about how to transform your public project management please join us for our webinar,“Best practices for managing public infrastructure projects” on July 25, 2019, featuring Clark, Courtois, and Maritz. Register today!