Saving $1 trillion per year with a systemic approach to infrastructure

Insufficient or inadequate infrastructure—and the resulting congestion, power outages, and lack of access to safe water and roads—is a global concern.

Mckinsey has identified practical steps could boost productivity in the infrastructure sector—a long-time laggard—by as much as 60 percent, thereby lowering spending by 40 percent for an annual saving of $1 trillion. Over the next 18 years, this would be the equivalent of paying $30 trillion for $48 trillion worth of infrastructure

1. Optimize project portfolios. One of the most powerful ways to reduce the overall cost of infrastructure is to avoid investing in projects that neither address clearly defined needs nor deliver sufficient benefits. Choosing the right combination of projects and eliminating wasteful ones could save $200 billion a year globally.

2. Streamline delivery. This area presents an opportunity to save up to $400 billion annually and accelerate timelines. To streamline delivery, it will be necessary to speed up approval processes, invest heavily in the early stages of project planning and design, and structure contracts to encourage time and cost savings. Contracts can lead to costs savings by, for example, encouraging the application of lean manufacturing to construction and the adoption of advanced construction techniques such as prefabrication and modularization.

3. Make the most of existing infrastructure. Rather than invest in costly new projects, governments can address some infrastructure needs by getting more out of existing capacity. Boosting asset utilization, optimizing maintenance planning, and expanding the use of demand-management measures can generate savings of up to $400 billion a year.

To spur change programs and capture potential savings, governments must move beyond a project-by-project view and upgrade systems for planning, operating, and delivering infrastructure.

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