Over the past decade, the size, expense, and number of organizations working on engineering and construction (E&C) projects has grown exponentially, spawning a new species dubbed “megaprojects”.
The risk inherent in megaprojects is massive. In many cases, mitigating “mega-risk” on these projects require alternative delivery methods – such as joint ventures (JVs) and public-private partnerships (P3s) – to prevent a single organization from shouldering the burden of risk alone.
So, how can you tackle a megaproject with the help of alternative delivery models?
Some people might ask. “Why shouldn’t we just keep working as we always have?”
We may be able to answer that question very simply by looking at growth and opportunity.
PwC projects that by the year 2030 construction output will grow to $15.5 trillion worldwide. That means that just a 1% reduction in costs would provide savings of over $150 billion.
The reality is that the size, volume and complexity of today’s and tomorrow’s projects cannot be supported using yesterday’s methods.
The One Belt One Road (OBOR) initiative in China is an estimated $5 trillion infrastructure program spanning across Asia, the Middle East, Europe, and Africa.
Almost 70 countries and international organizations have signed up for the mega-infrastructure project, focused mainly on transport and energy including: roads, railways, bridges, ports, power plants and gas pipelines.
OBOR has created vast opportunities for construction companies focusing on infrastructure projects. With so many OBOR projects routinely launching, the question looms: how can companies best structure their project management and obtain finances to begin these projects?
Thinking about keeping your infrastructure program on track? The following scenarios might sound familiar – and trigger some anxiety:
- Your program just gained approval and funding, and the clock is ticking. You need to ramp up your program quickly, which means bidding and awarding contracts, getting the site ready, and coordinating the many people, processes, and systems, all in a matter of months.
Budget and schedule overruns have plagued infrastructure programs for decades.
McKinsey Capital Projects reports that distressed programs often lack adequate controls. These faltering programs do not have robust risk-management protocols – nor do they provide comprehensive reporting on budgets and timelines – ultimately hindering their ability to manage program delivery and control cost overruns.