Cost optimisation is a critical necessity in India. Given the infrastructure sector's role in a rapidly expanding major global economy like India's in facilitating trade, transport and communication, it is imperative for construction projects to be implemented under expert supervision to ensure their functionality and longevity.
Aerial view of the 256 km 8-lane Al Batinah Expressway in Oman that was built by India's L&T. Enhanced adoption of global best practices like cost optimisation will help in making a larger number of India-based developers globally competitive On a quiet October afternoon during the inauguration of the national road development agency, the National Highways Authority of India (NHAI)'s new building in Dwarka in New Delhi, the Union Minister for Roads and Highways & Micro, Small and Medium Enterprises (MSME), Nitin Gadkari, lost his cool. He was miffed with the 12-year period taken to complete the Rs 2.5 billion project. Generally known to be a hard taskmaster, this was the first time the minister was expressing his ire at a public forum.In a video clip that went viral shortly afterwards, the minister can be seen telling NHAI officials, "It is a tradition to extend greetings after any new work is completed. I don't know how to do that! I am ashamed. It was decided in 2008 how the building would be built.The tender was completedin 2011. But it took two governments and eight chairmen to finish the construction!"
The minister sarcastically suggested that the photographs of officials behind the slow pace of construction must be put on display in the newly constructed premises.
"The current chairman and members are unrelated to it. But the great personalities who worked on it from 2011 to 2020... If possible, their photos should be put up in the building. They delayed decisions for nine years," the minister remarked.
Till a few years ago, delays in construction projects were part of the game. Be it a megaproject such as the Tehri Dam or the strategically important Bogibeel Bridge, Pakyong Airport and Atal Tunnel, vital infrastructure projects languished for years.A recent report by the Ministry of Statistics and Programme Implementation highlighted that as many as 412 infrastructure projects worth Rs 1.5 billion or more have incurred cost overruns of Rs 4.11 trillion while another 471 have witnessed time escalation. Out of the 471 delayed projects, 127 are delayed in the range of 1 to 12 months, 112 delayed by 13 to 24 months, 127 delayed by 25 to 60 months and 105 projects delayed by as much by 61 months or above.
Ever since the announcement of the Rs 10.2 trillion National Infrastructure Pipeline (NIP), the Central Government has moved to address these issues through appropriate policy and regulatory interventions. Speaking at the virtual launch of a new policy framework for planning and executing infrastructure projects prepared by the government's policy think-tank NITI Aayog and Quality Council of India, Gadkari admitted that NHAI was facing a loss of nearly Rs 1 trillion yearly because of such delays. The Central Government is targeting $ 5 trillion economy by 2025. The presence of a robust infrastructure framework will play a critical role in the achievement of this ambitious goal. "When we seek to attract greater investment domestically or from abroad, every investor is going to look at the quality and efficiency of infrastructure. It is, therefore, very important for us to get this large magnitude of projects off the ground expeditiously and efficiently for rapid economic growth and consequent creation of jobs. When you have so many projects competing for capital, that becomes another driver for optimisation," KshitishNadgauda, Managing Director Asia, Louis Berger, told INFRASTRUCTURE TODAY in an interview.A case in point is the 14.2 km-long Zoji-la tunnel that will provide all weather connectivity between Sonmarg and Drass towns that lie close to the Line of Actual Control (LAC) in Kashmir- Ladakh Himalayas. The budget for the project was pegged at Rs 110 billion. However, following a proper technical and financial review of the project, the Ministry of Road Transport and Highways was able to save Rs 50 billion on it.
A Critical Necessity
According to domain experts that this magazine spoke to, cost optimisation is a critical necessity in India. Given the sector's roles in creating maximum employment to investment relative to other sectors of the economy, there is a dire need to improve the cost-effectiveness of projects.
But the stoppages are not always caused by bureaucratic red-tapism. Other factors, too, play a role. As per the Ministry of Statistics and Planning Implementation report, these include issues related to land acquisition, forest and environment clearances and lack of infrastructure support and linkages.
Among other reasons for logjamscited by the report are delay in tie-up of project financing, delay in finalisation of detailed engineering, change in scope, delay in tendering, ordering and equipment supply, law and order problems, geological surprises, pre-commissioning teething troubles and contractual issues.
"Apart from completing the projects on time, optimisation is required in every aspect. Better design, judicious utilisation of resources, latest technological inputs and state-of-the-art engineering have to come together to deliver the project. Further, wherever possible, the target should be to deliver the project before time," Raj Kumar, Chairman & Managing Director of the New Delhi-based Rodic Consultants stated. Given the infrastructure sector's role in a rapidly expanding major global economy like India's in facilitating trade, transport and communication, it is imperative for construction projects to be implemented under expert supervision to ensure their functionality and longevity.
Ownership & Accountability
"The best way to ensure cost optimisation is to carefully assign ownership and accountability of the project to a single person. The target should be to complete the project on or before time as it helps in containing costs and setting best practices and standards. A highly motivated team backed by adequate resources is critical for cost optimisation," suggested Kumar.
Louis Berger's Nadgauda felt that costoptimisation also meantmaximising the benefits from the project. In his opinion, valueengineering - a standard practice in developed Western economies - easily resulted in 10-20 per cent savings. It was needed to be incorporated in project tenders here as well.
In his opinion, the best way of achieving cost optimisation was through Pareto Analysis. Pareto Analysis is a statistical technique in decisionmaking to identify a limited number of tasks that produce significant overall result. It uses the Pareto Principle or the 80/20 rule, where by doing 20 per cent of the work an entity can generate 80 per cent of the benefit of doing the entire job.
"At every stage, you would break down the cost of the project to identify your big-ticket items. For instance, if you have a conventional bridge or a highway project, then it's typically concrete and reinforcing steel that constitute the big-ticket items. In highway projects, there is optimisation everywhere but earthworks, etc.
tend to be low-priced. There you could look at optimising asphalt usage," averred Nadgauda.
This can be done through betterdesign, prudent use of resources andutilisation of latest technology
Adoption of Technology
Today, technologies like artificial intelligence (AI), machine learning, internet of things, big data and blockchain are not only altering the way infrastructure is created but also introducing more efficiencies in the sector. But stakeholders are required to do this in a very planned mannerto maximise benefits.
"Infrastructure operations are very complex, spreading across multiple sites with a variety of domains and spanning horizontally across departments. To enhance operational efficiencies, Infrastructure operators need to develop a digital transformation road map, which seamlessly integrates systems, processes and people across multiple sites," said Douglas Nunez Sr, Infrastructure and Utilities Marketing Manager, AVEVA.
"Digitally transformed infrastructure drives asset lifecycle management, optimisation of resources like workforce, energy, water, fuel, etc., and the ability to predict future possibilities, which enhances the sustainability," added Nunez. The Indian infrastructure sector, which was a little slow in adopting new age solutions, is now doing so especially after the COVID-19 pandemic. Technology is also ensuring that infrastructure projects remain sustainable long after their execution.Talking with reference to a high investment, low-yield business like aviation, Ashutosh Shukla, Director Transportation and Mobility, Schneider Electric India, said, "With the existing operating technologies and infrastructure available to you, how can you make the airports much more efficient. Energy guzzling systems like heating, ventilation and air-conditioning (HVAC) and lighting can be optimised using energy management platforms like EcoStruxure. They help you in not only optimising power utilisation but also guide you on resources available at the right cost. During peak hour time of electricity tariffs, you can switch over to solar or any other renewable energy resource."
Shukla pointed out that was one way of improving revenues at upcoming mega-airport projects like Navi Mumbai and Jewar."The larger way of doing this is to build a smart city around the airports to throw open a lot of revenue streams for the airports.We have seen the Aerocity at Delhi airport.Newairports are going to develop large logistics parks, hotels, residential colonies, etc., around them," he added.
Roping in Project Managers
The Central Government is also working on replacing the system of hiring independent engineers with project management consultants (PMCs) for infrastructure projects. The selected PMC will take care of everything from preparation of the detailed project report (DPR) to land acquisition to utility shifting to environmental and forest clearances to supervision of construction.
"A new national programme on project management in the policy framework is being enacted by the Central Government. It is being spearheaded by the NITI Aayog and the Quality Council of India. This is, perhaps, the best indicator that the government has finally woken up to the fact that unless you have professional project management at the centre of these projects, you will continue to exhibit the same lack of results," declared Dr. Srini Srinivasan, Regional Managing Director South Asia, Project Management Institute (PMI).
Dr. Srinivasan compared the role of a PMC to that of an air traffic controller."The air traffic controller watches the entire radar for all the flights that are in the territory and spaces them to avoid mishaps. Therefore, the three aspects of discipline, process and stakeholder management are the key and only a good project manager can pull it off efficiently," he pointed out.
Also welcoming the government's move, Nadgauda said that it will be equally important to ensure that the role of the PMC must be adequately defined so that theyarein full control of the project assigned to them.
"Very importantly, the PMC must understand how the project is going to be executed and have a tabulation of all potential hurdles along the way well in advance and have mitigation strategies in place, with all stakeholders. This is where value engineering workshops are also useful. It is equally important to work as a team," he asserted. Enhanced levels of global best practices like cost optimisation in infrastructure projects within the country will help in making a larger number of India-based developers globally competitive. This, in turn, will help them successfully bid for infrastructure projects overseas. And only then together with "Make in India', "Made by India" will have found success on a global stage.