Rethinking infrastructure planning | KPMG | AU

Rethinking infrastructure planning – preparing for an unpredictable future

Rethinking infrastructure planning

Planning for the world that we know, not the immense change that is coming, could see Australia with infrastructure that fails to meet the needs of our communities. Adrian Box, Partner, Infrastructure & Projects Group, KPMG, explains why shaking up traditional approaches to planning must start now to safeguard Australia’s productivity.

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Partner, Infrastructure & Projects Group

KPMG Australia

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Preparing for an unpredictable future

A growing and ageing population, exponential advances in technology and the effects of climate change are just some of the forces that Australian governments and industry must consider when planning new infrastructure. How we live, work, connect with each other and sustain our scarce resources in the future will be radically different to today. However, traditional approaches to infrastructure planning are deeply ingrained and often influenced by short-term political cycles.

As the rate of change increases and funding constraints continue, we must rethink our approach, to ensure we deliver infrastructure fit for an unpredictable future. While we have made some progress, the convergence of sectors and the risk of infrastructure obsolescence means that we need to keep evolving our planning frameworks – or risk damaging our competitiveness and productivity.

How can the infrastructure sector adapt?

     

1. Understand people – not just assets

Changes in consumer behaviour can have a massive impact on the infrastructure we need and how it will be used. For example, it was not long ago that getting into a stranger’s car was akin to hitch-hiking, and something most of us would never do – let alone do with our children. Now with ride-sharing services such as Uber, it is common place. The same can be said for the shift to on-line retail and the power of social media.

New technology is expected to transform many areas of society, including how and where we work, shop, learn, socialise, travel and receive medical treatment. Our traditional assumptions and models for predicting a wide range of activity and resources including traffic volumes, hospital beds, energy demand and schools may have less validity going forward.

As a result, seeking to understand, monitor and forecast human behaviour – and the impact of technological change – is critical to our ability to plan and delivery infrastructure that meets the changing needs of our societies.

As an industry, we are a long way behind other sectors on the capture and use of data. Capturing consumer related data to factor this into more efficient and effective infrastructure planning should be 'business as usual' (BAU). While there are some positive examples, such as the data that Transurban and Uber have been capturing and assessing, this far from BAU.

 

“There is a strong need for our infrastructure planning and delivery functions to include a ‘Chief Data Scientist’ as a function that is at least as important as our ‘Chief Engineers’.”

John Sams
Partner, KPMG Infrastructure & Projects Group

 

While there may be concerns over data privacy, much of this data is captured in some form already – the biggest issue is the fact that it is not effectively and/or consistently integrated into our planning frameworks.

2. Think beyond tomorrow

While many governments have started to think about longer term needs, this is often inconsistent and significantly hampered by the short-term political cycle.

The current short-term decision making framework needs to shift to a 20–30 year horizon to support more integrated and resilient planning outcomes. While you can’t predict the future, we are getting to a point where we can better model and understand the interdependency between infrastructure assets and their roles in delivering resilience and flexibility to support society.

Agencies will need to assess a wide range of longer term information, beyond that directly related to a particular asset. These could include consumer trend forecasts, population demographics, migration expectation, economic outlooks, climate change statistics, consumer health data and more. As an example, in the UK, the National Infrastructure Commission has been established to provide independent advice on major long-term infrastructure challenges.

The difficulty many agencies face is creating a stronger evidence base that is used to inform a political decision, which will still ultimately be a subjective judgement. We need an environment where infrastructure planners are able, and encouraged to, think ahead, and where governments have the confidence to make long-term decisions.

3. Envisage multiple possibilities

An extrapolation of our current mindset and approach into future predictions of infrastructure needs is almost certain to lead to sub-optimal outcomes. To counter this, we must think beyond the predictable future to envisage multiple possible futures, and create or use infrastructure in a way that allows for flexibility.

This can be incredibly challenging. Large projects take many years to be considered, designed and ultimately developed. While the needs of our communities are constantly changing.

The ability to achieve the required social, economic and financial return from infrastructure investments, that have historically created a pay-back based on very long-term benefits, is increasingly risky for all participants including, creating risks for:

  • governments – deciding which projects to invest in
  • investors – in terms of achieving financial returns based on potentially changing usage patterns and
  • asset managers – that need to re-design and adapt the infrastructure to meet changing requirements.

For example, in a world where traffic lights may not be required, as the guidance system in cars mitigate the need demand for our roads, current day decisions around investing in, or the design of roads, will be materially impacted.

However, this future uncertainty needs to be balanced with addressing the current challenges and potential future disruption. It should not be used as an excuse for inaction.

4. Take a holistic approach

As sectors converge, populations grow and communities change, we need to think more holistically about our infrastructure planning. We should not plan the development of a new hospital without consideration of the transportation links. Or an urban precinct without consideration of the mix of social and economic activity.

To achieve this future-fit way of thinking, infrastructure agencies and the wider sector must collaborate. Governments can no longer afford the luxury of siloed infrastructure planning. We should not think about State or Commonwealth Government problems – there are simply community and economic problems that require a holistic solution.

Agencies must form deeper working relationships across the sector including other agencies, industry, think tanks and academia. The Infrastructure Transitions Research Consortium (ITRC) in the UK is an example of a collaborative effort to forecast future infrastructure needs, helping to pinpoint vulnerabilities in planning and quantify the risks of failure.

A more collaborative and integrated way of planning for city or regional level development is starting to take hold in Australia, having worked well in the UK. The ‘City Deals’ approach provides a framework to guide investment and ensure that all tiers of government are driving a consistent narrative and a cohesive program of investment and outcomes.

5. Engage the community – with data

The power of the individual and minority groups, continue to rise. This has been demonstrated by the relative political instability over the past decade.

To harness this, while enabling critical long-term decisions to be made, we need to better engage with our communities. To do this in a way that provides objectivity, consistency, transparency and increases understanding of the impacts of decisions – data is critical.

For example, in order to introduce road pricing reform, significant data and analytics (in an easily understandable form) will be required. This will help people understand the impacts on travel time, taxation and the selection of mode of transportation.

Infrastructure agencies must work hard to engage their stakeholders, from individual citizens to business groups, in order to help them better understand the implications of infrastructure investments. From social media platforms to specialist independent organisations, the tools are available to facilitate meaningful dialogue at scale, and foster greater feelings of ownership around these decisions.

6. Rethink asset utilisation

We know that we cannot just build our way out of problems. Even if we had significantly more money than we do, the uncertainty of the future means we don't always know what we need to build.

Therefore, we also need to rethink our project selection process including the projects that provide maximum benefits, those that maximise the capacity and utilisation of existing assets, those that better manage demand, and those that create flexibility of use. An example is smoothing out the peaks of demand for road or rail infrastructure, rather than investing in increasing peak capacity.

KPMG modelling for Infrastructure Victoria, estimated that a 5 percent reduction in the morning peak traffic volume, would lead to a doubling of travel speed. For context, a 5 percent reduction is similar to the reduction experienced during school holiday periods.

It is important to emphasise that governments cannot solve the infrastructure challenges by themselves, and they need to work in partnership with the private sector. Part of this will be enhancing our regulatory environment to encourage and enable innovation and skill development.

Not perfection, but progress

At a macro level, this new way of thinking needs to allow the decisions of today to create a more globally competitive future for Australia. At a micro level, it is about creating the right environment to make more informed decisions about our priorities.

We need to re-think our infrastructure planning frameworks to be more holistic, forward thinking, to allow for multiple possible futures, and to enable us to better engage our communities. We also need to think creatively about the use of existing assets, and the incorporation of demand management and capacity enhancement initiatives. Without this, there is a significant risk that our investments will continue to fall short of the changing needs of our communities.

While there isn’t a perfect way to plan for the dynamic and diverse Australia to come, thinking differently, holistically, far ahead and collaboratively is a vital start.

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