Delivering future-ready infrastructure on time and on budget
Governments are increasingly embracing new technologies and processes to optimize every stage of infrastructure development
Infrastructure underpins everything. The bridges, roads, rail transit, subways, cables, transformers, sewers, and water treatment plants that governments have installed over the decades—and constantly work to maintain and upgrade—are what make modern life possible.
Large public works projects have had world-changing impacts, from the Panama Canal’s rerouting of global maritime supply chains1 and the US interstate highway system’s changing an entire national culture,2 to the England–France Channel Tunnel enhancing regional connectivity.3 Countless smaller projects, of course, are in progress in every state, county, city, and town around the world, helping businesses operate, commuters get to work, and households function.
However, too many projects exceed their budgets, fall behind schedule, or both. In fact, research suggests there are multiple factors that lead to cost and time overruns in infrastructure projects, including inadequate scoping and planning, labor shortages, technology changes, funding and budget shortfalls, and lack of coordination among different stakeholders.4
Finding the money to get things built is one thing. But keeping everything operating is a perpetual challenge—and it’s getting harder. In planning projects for the years to come, governments face new environmental threats that make future-proofing critical infrastructure an immediate priority. According to a 2023 report from the Coalition for Disaster Resilient Infrastructure, the global average annual loss of infrastructure due to changing weather patterns is between US$732 billion and US$845 billion.5 Extreme weather events are threatening bridges, dams, power plants, and other historically safe structures, even as acute heat adds stresses no builder anticipated.6
There are also growing demands on existing infrastructure, which often needs upgrades today to manage future growth. For instance, analysts expect the growing ubiquity of artificial intelligence and generative AI to drive exponential growth in data centers over the next decade, which will, in turn, strain the grid and power infrastructure.7 While hyperscalers will likely build out much of their power infrastructure, grid modernization must match this growth.8 Governments need to support these modernization efforts and adopt agile regulatory approaches while exploring an ever-broader range of energy sources, such as nuclear small modular reactors.9
This trend focuses on how governments are addressing these new and perennial challenges in delivering infrastructure fit for future purposes. Doing better means not only taking threats into account but also changing processes to accelerate traditional timelines. Too often, infrastructure projects are overtaken by technological advances, shifting demand forecasts, and even new construction methods.10 Forward-thinking leaders are looking to new technologies, processes, governance, and funding mechanisms to ensure that essential and critical infrastructure is not only delivered on schedule and within budget but also capable of responding to the intricate and ever-evolving demands of society and the environment.
Key challenges
- Weather and other man-made threats like cyber-attacks on infrastructure: Risks and threats to infrastructure are increasing in severity and unpredictability, requiring heightened security measures, physical bolstering, and more redundancy planning, which all exacerbate budgetary challenges.
- Cost and time overruns: Infrastructure projects often face cost and time overruns due to engineering complexity, changes in political leadership, divergent stakeholder interests, budget constraints, evolving technology, talent gaps, and supply chain issues.
- Funding and financing gap: Global investment in infrastructure is far below needed levels, with a US$15 trillion funding gap projected through the 2030s despite annual investments exceeding US$5 trillion.11
- Aligning stakeholder interests: Misaligned stakeholder interests can cause delays, especially as the private sector often shies away from financially risky projects without clear revenue models.
- Talent shortages: With projects increasingly drawing on technology and advanced skills along with large-scale construction work, governments and economies often face a widespread talent shortage.
Trend in action
Infrastructure projects are massive, complex undertakings designed to serve large groups of people over the long term: powering homes, transporting people and goods, supporting critical services such as health care, enabling digital communication, and more. The scale demands collaboration among government agencies, contractors, financiers, and skilled workers while tapping into global supply chains.
Speed of delivery will likely always be an issue since governments must adhere to a broad set of public commitments and proper stewardship of public money, obligations that inevitably slow decision-making and delay permitting. Additionally, divergent interests of diverse stakeholders—such as citizens, businesses, nonprofits, and other public agencies—although important, can stall projects further. Leaders must work within those parameters to get tomorrow’s infrastructure underway as efficiently as possible.
Embedding resilience in project scoping and planning stages
Of course, every infrastructure project should be planned effectively. However, the process is often challenging because of such projects’ inherent complexity, including the need for planners to forecast usage and maintenance years into the future. This complexity is further compounded by the increasing frequency and severity of extreme weather events, which place additional strain on already demanding planning processes.
To speed up the planning process, governments are increasingly using new technologies to collect and analyze large volumes of disparate data to enhance the effectiveness and efficiency of those planning processes. Additionally, they are embedding resilient design principles at the core of their planning processes, helping projects be better equipped to withstand future environmental uncertainties.
Using emerging technologies to improve planning and building resilience for changing weather patterns
Officials in Raleigh, North Carolina, are using AI-based technology to bolster the city’s water and sewer systems. Sensors detect early signs of blockages and forecast flooding and overflows during storms. Machine learning helps predict water main breaks, directing the municipal water utility on where to perform preemptive maintenance.12
Raleigh officials are also using a digital twin to guide development. Microclimate modeling is enabling them to avoid development that can create heat islands—an increasingly critical initiative as the region anticipates more frequent extreme heat events in the future. This approach addresses the challenge of extreme heat and its impact on residents and future infrastructure development. The simulation ingests developers’ new permits and building designs, allowing officials to visualize how these developments will affect shade and wind flow in the area.13
Adopting resilient design principles
Infrastructure is built to endure, and many of the systems we rely on daily—highways, railways, and power grids—have served us well for decades. However, the rising frequency and intensity of extreme weather events are increasingly testing these systems. From wildfires that devastate power and water infrastructure to floods that paralyze transportation networks, the resilience of infrastructure is under strain like never before.18
This isn’t due to poor design or planning. Decades ago, no one could have anticipated the scale and severity of today’s environmental challenges. Now that the risks are understood, it’s important to plan and build with the future in mind, helping to ensure that the infrastructure constructed today can withstand the next century, even as environmental conditions worsen.
Around the world, infrastructure planners are increasingly adopting design principles that enhance resilience to extreme weather. A cornerstone of extreme weather-resilient infrastructure design is accurate weather data—both current and forecasted. By utilizing precise weather forecasts, planners can assess the long-term impacts of changes in weather patterns on infrastructure, prioritize investments, and implement adaptive strategies that ensure these critical systems remain functional in the face of future challenges.
The Sydney Metro, the largest urban rail investment in Australia’s history and intended to last 100 years, integrated extreme weather resilience into its core design, prioritizing adaptation at every stage. From the outset, risks were assessed across three time horizons: short term (2030), medium term (2070), and long term (2100). Leveraging long-range climate models, Sydney Metro identified high, medium, and low risks for various parts of the system and adjusted the infrastructure design to address them.19
For example, the north-west section of the network—the first stage of the project in operation since 2019—was identified as highly vulnerable to flooding and heat waves. To mitigate these risks, critical equipment was placed in temperature-controlled rooms capable of withstanding extreme heat. Ventilation systems in tunnels and stations were specifically designed to maintain customer comfort on the hottest days. Additionally, water-sensitive urban design features, such as permeable surfaces, were incorporated to reduce flood risks during heavy rainfall.20
A key element of extreme weather-resilient design principles is the use of materials capable of withstanding the increasing frequency and intensity of extreme weather events. Governments are collaborating with universities, research institutions, and the private sector to assess how such events will impact infrastructure over its lifespan. This insight allows for the design of infrastructure that incorporates materials specifically engineered to endure and mitigate the effects of extreme weather.
For instance, transportation and infrastructure planners in Virginia are using modeling created by the Virginia Institute of Marine Science at the College of William & Mary to design more resilient infrastructure. These models, which forecast sea-level rise through 2050, enable planners to assess how extreme weather will affect infrastructure. For example, they analyze the effects of rising salinity on bridges and culverts, determine changes needed in metallurgical standards for structures, and identify suitable materials for coastal roads that are increasingly vulnerable to flooding.21
Streamlining permitting and improving transparency
Policymakers often craft laws and regulations with the best of intentions: to ensure infrastructure projects meet high standards, minimize ecological harm, protect marginalized communities, and gain the support of diverse stakeholders. However, well-meaning safeguards can create barriers to development, with projects tangled in policy webs spanning local, state, and national authorities. It’s challenging to lower barriers once raised, but some leaders are taking the initiative to streamline processes to get things done.
Making business-to-government interaction easier
For businesses, navigating government regulations and permitting processes can be challenging. With different rules and procedures and various government entities involved, project implementation can be impacted and lead to additional costs, extended timelines, and hesitancy from the private sector to partner altogether. Efforts to simplify the permitting landscape seek to minimize applicants’ challenges to obtain the full range of necessary permits.22
In our previous trends report, we highlighted how governments are increasingly embracing a “single-window” approach to licensing and permitting. In Denmark, the Danish Energy Agency now serves as a single point of contact, coordinating with relevant public authorities to provide all key wind farm licenses.23 The country can now process wind farm permits in just over 10 days, enabling businesses to install an offshore wind project in only 34 months, compared to timelines of up to eight years in other European Union nations.24
Building transparency into the permitting processes
Governments worldwide are enhancing transparency in the permitting and licensing processes. The Michigan Infrastructure Office has developed a publicly accessible dashboard that displays major state infrastructure projects selected for a coordinated permitting process. Similar to the Danish Energy Agency, the office collaborates with state departments to identify the necessary permits and determines the most efficient order to process permit applications.
Applicants can use the dashboard to track the necessary permits for a project, their current status, and an estimated timeline for completion.25 And, in the interests of transparency and accountability, the dashboard also allows the public to monitor the state’s progress in reviewing and expediting permits.26
Building consensus with diverse stakeholders
Stakeholder engagement and consensus-building are critical components of successful infrastructure projects. Engaging stakeholders allows planners to identify the specific needs, objectives, and pain points of those affected by a project—an understanding crucial for aligning project goals with community and other stakeholder expectations and requirements.
Participatory planning and engagement with communities and other stakeholders
The Economist Impact’s Infrastructure for Good barometer highlights the critical need for participatory planning and stakeholder engagement in early-stage assessments. The barometer examines the infrastructure ecosystems of 30 countries and benchmarks their capacity to deliver efficient and quality infrastructure that addresses economic, social, and environmental needs. It indicates that only half of the countries surveyed engaged in participatory planning and need assessments in the early stages of a project.27
Infrastructure Victoria in Australia is an example of participatory planning and deep engagement with communities to assess future infrastructure needs. Victoria Infrastructure Strategy, the organization's 30-year regional plan (2021 to 2051), views infrastructure development as a system rather than an amalgamation of individual projects. It projects the region’s needs over a long period, creating a blueprint for what needs to be refurbished and what needs to be built at the system level. The plan was developed by making residents and communities co-owners in planning and needs assessments and by establishing a thorough consultation and engagement process.28
Water infrastructure is another critical area that often does not receive as much attention as other infrastructure projects. Watershed management and resilient water infrastructure development affect a wide variety of stakeholders, from businesses to communities. The Chesapeake Bay Program provides a glimpse into methods that find common ground between different stakeholders and pave a way forward to solve the critical issue of watershed management. The program is a public-private partnership dedicated to protecting and restoring the Chesapeake Bay watershed, the largest estuary in the United States and the third largest in the world, spanning six states and home to more than 18 million people and 3,600 species of plants and animals.29
Founded in 1983, the program aims to align federal, state, and local goals in a collaborative water management strategy. Using written agreements that include periodically updated collective value principles, it engages federal and state agencies, local governments, nongovernmental organizations, businesses, academic institutions, and communities in a holistic approach that addresses water quality, habitat restoration, community engagement, and industry improvement around the Chesapeake Bay.30
Using new tech-driven tools to drive stakeholder engagement
Understanding the motives and aspirations of different stakeholders is crucial, as is engaging with them meaningfully. Helsinki, Finland, has been at the forefront of utilizing digital twin technology for enhanced urban management and boasts one of the world’s longest-running digital twin programs. The city is currently leveraging this technology to enhance citizen engagement and participation.31
By providing access to the city’s digital twin tool in the Kalasatama neighborhood, Helsinki offers a highly visual platform on which stakeholders, including current and prospective residents, can view project information and provide input, including via mobile devices. The initiative serves as a model for future projects throughout the city and illustrates how digital twins can help meet the growing needs of urban environments over time.32
Incentivizing private-sector participation in infrastructure
Agencies, often short on manpower and financial resources, routinely collaborate with companies to make large-scale infrastructure projects happen. However, corporate objectives may not align with national infrastructure goals, and delays or rising revenue risks can stymie large projects. To help counter this, some governments are adopting strategies to reduce financial risks for private investors, making risky or unviable infrastructure projects more appealing.
Deploying derisking strategies
Financing costs, driven by the cost of capital, represent a significant portion of the expenses involved in constructing and operating infrastructure projects, whose diverse risks can elevate the cost of capital—and the overall project cost—as investors and lenders demand higher returns to offset these uncertainties.
The risks associated with infrastructure projects can be broadly categorized into four categories: macro, market, technical, and financial.33 Governments have begun deploying a mix of derisking strategies designed to manage risks across all categories, helping reduce the cost of capital and, subsequently, the overall project expenditure. The reduced risk and lower financing costs can also enhance the projects’ initial commercial viability and sustainability.
Collaborating with multilateral agencies can help governments of developing nations derisk infrastructure investments. For instance, the World Bank’s Multilateral Investment Guarantee Agency offers political risk insurance to protect investors in infrastructure projects within developing countries from losses due to political risks, including currency inconvertibility, transfer restrictions, expropriation, war, terrorism, civil disturbances, breach of contract, and non-honoring of financial commitments.34 Similarly, the Global Infrastructure Facility, a G20 initiative, provides funding and advisory services to governments on how to select, design, structure, derisk, and bring high-quality infrastructure projects to market.35
According to a Deloitte estimate (figure 1), employing a tailored mix of derisking strategies—including favorable policies, guarantee mechanisms, offtake reliability, the development of domestic capital markets, and leveraging blended finance—could drive a US$40 trillion reduction in energy transition costs by 2050.36
Rebalancing the financial risks between the public and private sector
The high risk of delays and cost overruns in infrastructure projects can deter private developers and lenders, particularly when revenue models are unproven. To encourage private-sector involvement, many governments are adjusting how financial risks are distributed, taking on a greater share of the financing and revenue burden. The construction of highways in India serves as a powerful case (see “New revenue models to accelerate road development in India”).
Building supporting infrastructure
Infrastructure relies on interconnected systems to function effectively. For instance, the electrification of transport requires an extensive network of charging stations, expansion in power generation, advanced battery storage systems with rising capacity, and transmission lines to connect power generation sites to the national grid. Private companies often hesitate to commit resources to projects when the necessary supporting infrastructure—critical to ensuring their success—is not yet in place.
Governments have particularly struggled to find willing private partners for renewable energy infrastructure projects. In most cases, locations with abundant energy sources, such as solar or wind, are remote and lack ready connections to existing grid infrastructure—and, therefore, may attract little commercial interest. The challenge lies in the prohibitive costs for individual developers to not only build a plant but also invest in connecting it to the grid dozens or hundreds of miles away.
Australian state governments aim to address the investment issue with renewable energy zones, which are designated semi-remote areas with abundant renewable energy resources. Each renewable energy zone clusters large-scale renewable energy projects, such as wind and solar farms, alongside dedicated storage and transmission infrastructure.38 State governments have committed to installing long-distance transmission lines to connect these zones to the existing grids.39
The concentration of multiple large-scale plants in a single location enables economies of scale, while the energy storage and transmission infrastructure curtail transmission losses and ensure integration into the national grids—an approach that can make it commercially viable for private companies to develop energy plants in remote locations. Australia has identified nearly three dozen locations across the country as possible renewable energy zone sites.40
Bridging the talent gap
The talent and skills gap in infrastructure is a challenge that can affect agencies’ ability to implement projects effectively. At the market level, workers are increasingly scarce in construction, engineering, renewable energy, and other emerging areas.41 Moreover, there is a growing talent gap within governments to drive tech-aided infrastructure development and other softer skills, such as cross-sector collaboration.42
Funding upskilling and reskilling of workers
The widening skills gap is impacting infrastructure development across regions. Infrastructure is a labor-intensive industry: Projects simply do not get built without a steady supply of skilled engineers, architects, crane operators, electricians, construction laborers, solar energy technicians, cybersecurity professionals, and many more.
The Construction Training Fund (CTF) in Western Australia illustrates how an industry and government-funded statutory authority can drive upskilling and reskilling in the construction industry. For more than three decades, the CTF has administered a training levy on building and construction work. The state then pours the revenue back into the industry via a range of training grants and subsidies.43
The CTF coordinates with employers, government, and training providers to align training programs with industry needs. It also conducts deep research and labor market needs-demand analysis to understand the current and emerging labor market.44
The CTF drives skilling efforts through apprenticeship and traineeship grants,45 which employers can use to offset their costs up to AU$34,500 per apprentice or trainee.46 The program offers participants bonuses on completion and additional payments for each further year of training.47 For existing construction workers, it incentivizes upskilling by providing a rebate of up to 80% of the total cost of training. In the fiscal year 2023 to 2024, the CTF allocated AU$24.1 million toward apprenticeship programs and an additional AU$ 2.9 million for upskilling existing workers. Consequently, more than 16,000 workers trained with CTF support joined the infrastructure workforce. A survey of employers indicated a nearly 90% satisfaction rate with the quality of CTF training, underscoring the enhanced skill levels within the workforce.48
Building public sector capacity to deliver on infrastructure
The private sector is invariably involved in delivering large public infrastructure projects, often through partnerships. But, given the growing complexity of developing infrastructure, public-private partnerships increasingly require innovative structures.56
To help public officials envision and implement new structures, the World Bank created the Infrastructure Finance Academy, offering resources and tools to support infrastructure financing. The academy provides multiple online courses that deliver training in key areas, such as creating an enabling environment to attract private capital, using different financial instruments, and preparing transactions to meet market requirements.57 The program also maintains a database of 6,400 public-private infrastructure projects from 137 low- and middle-income countries, illustrating a wide range of cases for public officials and policymakers.58
Helping smaller governments to help themselves
Without support from regional governments or the right partners, smaller local governments can struggle to deliver on large infrastructure projects. In fact, the challenge often begins in applying for competitive grants available from state and national governments. Philanthropic partners and even national governments can step in to help make sense of complex grant-making processes.
For instance, proficiency in writing and applying for grants is essential for local governments, as stronger applications increase the likelihood of receiving funding. Bloomberg Philanthropies’ Bloomberg City Network helped to bridge this specific skills gap through its Local Infrastructure Hub, which supported more than 700 small- and medium-sized cities through grant application boot camps. These programs trained city officials to develop competitive grant applications and improve technical writing, enabling them to tap into funding sources.59
Tools and strategies to deliver on infrastructure
Governments worldwide are exploring, piloting, and reimagining multiple tools and strategies to tackle the infrastructure delivery challenge. Given the scale and complexity of large infrastructure projects, time and cost overruns are often inevitable. The following portfolio of tools and strategies can serve as considerations for government leaders as they look to deliver resilient infrastructure fit for future purposes.
- Digital twins and AI-driven scoping and planning: Collect and analyze vast amounts of data, providing planners with insights, simulations, and virtual renderings for better decision-making.
- Permitting process improvements: Deploy innovative approaches such as a “single-window” system to streamline the complex permitting landscape.
- Systemic transparency: Incorporate transparency in infrastructure projects by developing publicly accessible dashboards that display details of infrastructure projects under review.
- Stakeholder analytics: Analyze various stakeholders’ motives, priorities, and aspirations to help improve consensus-building on large, complex infrastructure projects.
- Derisking strategies: Address various risks affecting an infrastructure project, with the objective of reducing financing costs.
- Financial risk rebalancing: Distribute risk between the public and private sectors for high-risk projects, with governments assuming a larger portion of the financing and revenue burden.
- Networked infrastructure development: Prioritize the development of interconnected networks of infrastructure that depend on one another for optimal functionality rather than concentrating solely on isolated projects without the necessary supporting infrastructure.
- Critical skills workforce training programs: Fund and develop skills training programs that align with industry standards and requirements by partnering with the private sector and academia.
- Public-sector workforce upskilling: Develop and deliver training programs designed to enhance the capacity of the government workforce in effectively implementing infrastructure projects.
By
Michael Flynn
Kelly Marchese
Gianni Ciufo
Mahesh Kelkar
Akash Keyal
The authors would like to thank Jacqueline London, Kushal Singh, Michael Isman, Stijn Vandeweyer, Sudeep Sinha, and Vishal Rander for providing feedback and suggestions at critical junctures. They would also like to thank Carmen Swanwick from the Utah Department of Transportation for her valuable input in the “My take” section.
Cover image by: Sofia Sergi; Adobe Stock
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