3. The Way Forward
To neglect O&M is an easy option, but a false economy. Maintaining an existing asset is nowhere near as glamorous as building a new infrastructure asset; the payback in positive public perception and political reward is negligible. Maintenance is thus easily cut, and dangerously so. “Neglect is patient, but eventually it does lose its temper” – and when that happens, the consequences can be very costly.
Presumably, policy-makers have always been aware of the dangers, but have frequently failed to translate that awareness into action. They are now finding that, after decades of operational mismanagement and underinvestment in maintenance, their policies have come back to haunt them. In many countries, a huge backlog of maintenance work has accumulated; it cannot be delayed without serious danger to the continuity of vital infrastructure services, and it is going to cost far more than timely maintenance would have.
O&M is now becoming a strategic issue on the agenda of many nations. Their competitive edge is at stake. Even in this digital age, physical infrastructure remains a foundation of competitiveness, just as much as education is. Company executives, trade groups and even EU officials warn that Europe will fall further behind unless recent cuts in infrastructure spending are reversed.208 In the US, repeated presidential comments about America’s “crumbling” highways have highlighted the issue, as has former Secretary of Transportation Raymond LaHood’s remark that “America is one big pothole”.209
Time for action and investment
The moment to invest in O&M is now. First, the conditions are right:
- When combined, two factors – high unemployment and a sluggish economic recovery on the one hand, and the large economic multiplier effects associated with infrastructure on the other – make a compelling case for investing now, as a means of stimulating the economy and avoiding a legacy of deferred maintenance for the next generation.
- The increasing pressure on public budgets should be a spur to operational excellence. The solution to infrastructure problems can no longer be just more funding; it also needs to involve greater efficiency and effectiveness, in keeping with the new paradigm: “More with less”.
Second, the key building blocks are already within reach. As opportunities go, successful O&M is a very realistic one:
- It is doable. Many examples exist of good practice and lessons learned (as discussed throughout this report).
- It is affordable. The O&M interventions are hardly expensive when compared with capital-intensive construction.
- It is backed by numerous technological and managerial innovations. While many new innovations are already available, many more are in the pipeline; but, what is also needed is to apply the current innovations on a broader scale.
Only the political will is missing. So, what is needed is a wake-up call for society and the will to reform the current infrastructure system.
O&M is a wide-ranging responsibility
It concerns developed and developing countries, national and state governments, cities and municipalities, and private-sector infrastructure operators. Developed countries are under particularly heavy pressure to enhance O&M, as a higher proportion of their infrastructure stock is ageing. Developing countries need to address O&M issues of their own: their current operations are often seriously inefficient, and the rapid build-up of their infrastructure assets entails a corresponding surge in necessary maintenance work in the near future. And in fragile states, O&M is crucial for sustaining essential infrastructure services to keep the economy and society working.
Cities, too, will have to upgrade their O&M, in the effort to stretch their infrastructure services, increase efficiency and reduce their environmental footprint. Greater demands are being made on existing infrastructure resources, as cities move from the traditional model of urban sprawl towards more concentrated growth and greater density.
As for private infrastructure operators, they have a double inducement to pursue O&M excellence: rising regulatory pressure (e.g. the move from cost-plus to incentive or benchmark regulation) and the pressure to create shareholder value.
Prioritization is needed
The challenges are so formidable that countries will not be able to implement all best practices at the same time. A staged solution is otherwise acceptable, so long as work begins on it promptly and continues regularly. As a first step, policy-makers should benchmark the maturity of their country’s O&M practices, to identify the areas of lowest sophistication and greatest need. They should then evaluate the potential impact of resolving each issue, and prioritize the issues accordingly (see Figure 36 for a suggested evaluation tool). The next step is to develop solutions, drawing on the insights of this report and leveraging the ideas from multistakeholder workshops, with a particular emphasis on win-win solutions that can overcome the traditional trade-offs between dimensions. In addition, policy-makers should not only seek more funding for refurbishing or expanding existing infrastructure assets (usually the main object of attention), but also look for operational levers that improve throughput and quality, reduce costs and extend an asset’s lifetime.
There is no one-size-fits-all O&M approach. Different approaches are needed according to country, sector, asset size and criticality. The scheduling and sequencing of the measures will vary as well. In some cases, a quick fix – by realizing some of the implementation best practices – is possible and sufficient, as long as the specialist engineering and operational know-how is available in-house or from contractors. In other cases, the journey will be more expensive and take far more time, involving technology investments or large-scale organizational transformations. For many countries, sustainable O&M solutions will only be possible once the enabling conditions are improved – notably, reliable funding and the right governance structure.
The O&M challenge requires all stakeholders to participate and cooperate
The public sector. The public sector needs to build an enabling environment for O&M by developing appropriate legislation, institutions and capabilities. In addition, governments should enable the private sector by developing a resourceful and competitive set of local industries and a skilled workforce, and should effectively communicate its agenda to civil society.
The private sector. To supplement the role of the public sector, firms can contribute by building the necessary skills and organizational capabilities. Key means by which the private sector can help to optimize O&M include the following:
- Efficient operations through excellence in project management, lean methodologies, modularization, standardization and better risk management
- Technical innovation, especially in smart city and intelligent infrastructure solutions
- Transfer of learnings from other capital-intensive sectors (e.g. oil and gas, manufacturing), for instance by redeploying engineers across different industries and sectors
O&M also presents the private sector with opportunities. O&M is a source of additional stable revenues for the volatile construction industry; some companies have already adapted their strategies, and have transformed from purely construction-focused to either O&M-focused or integrated businesses.
Multilateral development banks. MDBs have a valuable role to play as well, as their financing arrangements can influence the way countries spend their maintenance budgets and operate existing assets. MDBs should direct more of their lending and technical support to the issue of O&M. Several years ago, for example, the Asian Development Bank deliberately suspended loans to Cambodia for new road construction until the country adopted stronger road maintenance measures.
The EBRD’s engagement with Ukraine can be considered as a longer-term approach. It exemplifies an evolutionary reform, through a sovereign lending programme coupled with policy dialogue and technical assistance. Each of the four loans for highway rehabilitation was contingent on road sector reforms regarding funding, the institutional set-up and private participation. Specifically, the old road funding system was replaced by a new user tax system that ensured adequate funds for maintenance. In addition, the road agency Ukravtodor was restructured, which included devolving responsibility for local roads from national to local authorities. Finally, the bank also helped to develop a PPP framework, and piloted a performance-based maintenance contract for the M06 highway.210
Multistakeholder partnerships. Collaborations between government, business and civil society organizations are very valuable. They have traditionally focused on areas of public service delivery and supply, and should continue to do so, but similar public-private joint efforts should also be launched for assessing the infrastructure O&M needs of regions and cities, and for prioritizing the key actions from an economic, social and environmental perspective.
O&M is not a silver bullet, but it is a key part of the solution to the infrastructure crisis
Even superlative O&M would not be able to close the global infrastructure investment gap on its own. So long as demand increases, construction of new assets will also be required. Still, by optimizing existing capacity, O&M best practice can reduce the need for new construction (and, in so reducing the costs of existing infrastructure, it can also free up financial resources for new construction). Of course, O&M can ease current congestion far faster than new construction, given the latter’s long lead times.
With the vast existing infrastructure asset base worldwide, even a modest improvement in O&M will make a significant impact. Certainly the baseline is fairly low in many countries and sectors at present, so the potential for improvement is great; and, thanks to recent innovations and the existing models of good practice, the improvements can be made at a relatively modest cost.
By enabling better management of existing assets, O&M best practices will contribute generously to increased competitiveness, economic growth and social progress around the globe.