Project Management: The key to streamline, drive Infrastructure sector

By Raj Kalady, Managing Director, Project Management Institute

Raj Kalady

Raj Kalady

Infrastructure is highly responsible for propelling a country’s economy. The World Economic Forum’s Global Competitiveness Report values the competitiveness of economies based on its Infrastructural development. India is ranked 85th out of 148 countries studied indicating the scope of improvement needed to maintain the trajectory of growth.
The Government of India’s (GoI) emphasis on improving infrastructure has been evident since 2007, following which the country saw a series of investments from the private sector which totaled up to USD225 billion – or roughly 12 percent of GDP, much of it through PPPs, which have proliferated. The GoI eyes an investment of USD one trillion during the period 2012-2017 to boost the infrastructure sector.
The latest Flash Report by Ministry of Statistics and Programme Implementation (MoSPI) revealed that out of 735 central sector infrastructure projects costing Rs. 957,390 crore, 282 are delayed with the anticipated completion cost being Rs. 1,140,912 crore.
Out of 282 delayed projects, 55 projects have overall delay in the range of 1 to 12 months, 73 projects have a delay in the range of 13 to 24 months, 85 projects have a delay in the range of 25 to 60 months and 69 projects have a delay of 61 months and above.
These delays reflect overall cost overruns of Rs. 183,521 crore (19.20 % of original cost).
Schedule delays and cost overruns act as a major setback not only the projects but also to the economy at the large.
Project Management Institute (PMI) India along with KPMG India conducted a survey on project schedules and cost overruns. According to the study, cost overruns are fuelled by frequent changes in design and weak procurement planning, which can be mitigated by adequate training and coaching of project managers.
The dearth of qualified project managers & the practice of project management in India is a key challenge for the infrastructure industry which has the greatest influence on deliveries.
According to a McKinsey report, Project bottlenecks cost the Indian government at least 2 percent of GDP annually.

The infrastructure sector in the country is affected by time overruns that result in cost overruns at the end.

The major bottlenecks identified occur during the following phases:
I. Pre-execution phase
1. Schedule Overruns in pre- execution phase
Indian infrastructure projects are majorly affected during the planning phase of projects, although the factors affecting the project appear to be associated with external factors the reason that lies beneath is delayed or non-identification of pre-requisites to overcome these factors.
The different factors identified which contribute to schedule overruns in this phase are:
a. Delays in land acquisition and site handover are the primary reason for schedule overruns in pre-execution phase
b. Manifold regulatory approvals from several agencies leading to delay in construction
c. Poor program management resulting in ineffective co-ordination with other projects and schedule delay

2. Cost Overruns in pre- execution phase
The different factors identified which contribute to cost overruns in this phase are:
a. Scope creep and inadequate Detailed Project Report (DPR) are primary factors impacting cost overruns
b. With increasing importance of environmental safeguards, projects require additional budgets
II. Execution & closing phase
1. Schedule Overruns in execution & closing phase
It is a learned fact that the country’s infrastructure lags behind the global standards of knowledge in terms of technologies and project management. Frequent changes in the design, non-availability of funds and resources lead to schedule overruns.
The different factors identified which contribute to schedule overruns in this phase are:
a. Insufficient management of Project design/scope change is widely prevalent in the infrastructure sector
b. Availability of resources for the infrastructure sector is insufficient, majorly inadequate supply of certified project management professionals
2. Cost overruns in execution & closing phase
The different factors identified which contribute to cost overruns in this phase are:
a. Material price escalation beyond projections is the primary reason for cost overruns during execution
b. Poor connectivity to project site
c. Inadequate availability of skilled resources

India today needs the public and private sector to manage its infrastructure projects on time and within budget, which in turn will facilitate the development of other sectors. Indian Infrastructure sector needs to rise above the challenges and prepare for a stronger economy and a brighter future. Project management is that transformational tool. The industry need to embrace newer methods, adopt best practices from other sectors, build transparent and trust relationships with all the stakeholders, and employ sustainable policies for the long-term benefit.
Focus needs to be generated to spread project management to government departments and industries, like Infrastructure, heavily contributing to national GDP.
In order to curb the issue at the grass root level, the involvement of stakeholders, including government bodies, academicians, students and corporate’s is vital to create awareness about Project Management and its importance across sectors, resulting in the future readiness. Along with this, understanding the present scenario the sector can adhere to the below-mentioned recommendations for successful project deliveries that add value to the overall process.

PLQP night viewRecommendations – Next Steps

Based on the survey responses along with our research and experience of project management’s leading practices, we have identified 10 recommendations for Government, policy makers and project owners that could help in de-bottlenecking infrastructure projects and improve project delivery in the country.
1. Set up a single window clearance mechanism to simplify the regulatory approval process: To expedite infrastructure projects, there is a need to develop an effective ‘single window clearance’ mechanism. The mechanism facilitates and streamlines interaction with different regulatory authorities and provides a single point of contact for all permits and approvals necessary for infrastructure projects. This will help in promoting infrastructural development by allowing simplification of processes, documentation, screening, and clearances and increasing transparency in the approval system.
2. Setup a three-tier project/program management office (PMO) structure in the country to monitor and de-bottleneck infrastructure projects: There is a need to set-up a three-tier project management office in the country. This PMO would monitor and provide oversights at national level. All projects above a certain threshold limit (say over INR 100 crore), or the projects of national importance would fall under this structure.
3. Modify bidding criteria procedures: One alternative to the existing bidding process could be the average-bid method. Under this method, the contract is awarded to the contractor whose bid satisfies a certain relationship with the average of all bid prices. The basic advantage of the average bid method, from an owner’s perspective, is that it safeguards against signing a construction contract for an unrealistically low bid price that would almost certainly lead to disputes during project execution.
4. Develop robust process for fast and efficient dispute resolution: In India, dispute resolution through judiciary is a tedious, lengthy process and may take several years to resolve. A few initiatives that could improve the dispute resolution process in India – strengthen existing arbitration laws, encourage institutional arbitration, and create dispute resolution Board.
5. Institutionalize project management training for professionals: The lack of project management skills in professionals working on infrastructure projects is impacting efficient project delivery. Although, a rich industry experience helps in gaining oversight, in today’s rapidly changing world and evolving technology, there is a need to impart formal training to project managers and regularly update their skills.
6. Reform India’s Vocational Education and Training program to create a large pool of employable work force: To create a large pool of readily employable labor force, both government and industry need to come together and develop a mechanism to impart training and develop skills.
7. Setting up of National Skill Development Corporation (NSDC), a Public Private Partnership (PPP) non-profit organization to facilitate skill development in the country is a step in the right direction. NSDC targets to enhance skills of 150 million people by 2022. Along with this, the following two initiatives could help in solving the labor scarcity in the country i.e.
a) Developing skills of local people by corporate,
b) Creating a National Board for vocational education.
8. Develop efficient transport and logistics system in the country to enable faster project implementation: Following steps could help in improving the transport infrastructure in the country:
a) Expedite the construction of Dedicated Freight Corridors (DFC) and create new DFCs
b) Increase national highway networks and improve road maintenance program.
9. Create an exhaustive list of empanelled vendor at Central level for infrastructure Projects: Many state governments and departments maintain different empanelled list of vendors for their respective projects and services. For infrastructure projects, where most of the qualifying criteria are same, it would be appropriate to create an exhaustive list of empanelled vendors at central government level.
10. Promote Public-Private Partnership (PPP) in Infrastructure sector: Traditionally, projects for development of roads, airports, railways, and ports have been funded by state and central governments. However, due to budgetary constraints, the Government is looking at increased participation from the private sector for transport infrastructure projects. Following steps could help in promoting PPP investment in the infrastructure projects:
a) Create a detailed policy for implementing PPP projects
b) Ensure adequate returns to private players
c) Develop long term debt market for infrastructure projects
In a nutshell, in today’s world of competitiveness and quality driven outputs project management acts as a path to achieve greater efficiency, improved competitiveness and an ability to maximize performance and profits. The Anderson Economic Group’s study ‘Estimating Project Management Practitioner Skills Gap, 2010-2020’ states that India is projected to need almost 400,000 new project professionals in project-oriented industries like infrastructure every year up to 2020. Thus, it is the important for all the stakeholders to contribute in facilitating a better future.

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