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Ensuring Effective Infrastructure Planning: A Case for Independent Authorities and Advisory Bodies

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McKinsey & Company

A dossier edited by ISPI, Centre on Infrastructure, with the knowledge partnership of McKinsey & Company.

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Effectiveness, transparency and predictability are more and more imperative words in infrastructure planning and realization. In the last few years, a rising number of Independent Infrastructure Advisory Bodies have been established to ensure a support to national and local governments in planning and realizing a long-term infrastructural strategy. These institutions may represent a very important tool to evaluate on an objective basis the entire life cycle of an infrastructure, from the design to the post-mortem assessment, eventually reducing realization and maintenance costs. The spreading of such institutions on a global scale would help to reduce the political discretion in decisions concerning infrastructure, potentially reducing the risks of wasting public money, and increasing the share of private financing in infrastructure investments.

How are these institutions designed to ensure independence and strengthen the credibility of infrastructural projects? What are the main best practices established in the EU, Canada, Singapore, Australia and UK? How can these practices smoothen each phase of the process?

Advisory Bodies for Infrastructure Planning

by Stefano Napoletano (McKinsey & Company)

Investments in infrastructure represent a fundamental component of the economic and social development of a country and geographic area. State-of-the-art and efficient infrastructure provide substantial benefits such as new jobs, reduction in production and transportation costs, interconnected markets, and privileged access to key services like health and education. Sound infrastructure allows to effectively size the benefits of globalization and ensure such benefits are commonly shared among the population and among different locations. For example, according to a recent report funded by the European Commission, the realization of the core TEN-T networks in the European Union will create additional 800.000 jobs and an additional GDP growth of 1,6% by 2030.

For this, a thoughtful planning of infrastructure development is essential. The long-lasting nature and significant cost structure of infrastructure require a comprehensive and long-term vision at both national and regional level. Infrastructure should anticipate social and demographic changes and should be forward-looking enough to capitalize the advantages of technological progress. At the same time, uncertainties on external conditions in a long-term horizon – in particular due to the rapidly changing technological framework and the continuous social evolution – require a certain degree of flexibility in both planning and delivery phases.

In this context, a sound and credible institutional framework is a fundamental factor. Independent and transparent planning, together with political audacity and commitment, represent fundamental enablers for a successful infrastructure planning and development. Infrastructure spending should be anchored to a long-term vision and funding commitment which is independent from the political/election cycle. Such stable framework can be achieved through the establishment of independent national bodies that advise over the entire investment planning process. This kind of institutional setting should have the benefit of enhancing transparency and reducing the impact of political exigency. Most importantly, it should help increase the longevity of infrastructure plans and ultimately reduce the cost of projects. The ultimate aim of an independent planning body is not to remove the decision-making capacity from politicians, as that would also remove the necessary leadership and commitment; but to provide politicians and other stakeholders with the full range of information to take the right decisions and shorten the decision-making process.

Such principles are at the basis of the establishment of independent infrastructure advisory bodies in several developed countries (e.g. Infrastructure Australia, Infrastructure Canada, Infrastructure and Projects Authority in UK, etc.). These are institutions that advise and assist all levels of governments, as well as investors and owners of infrastructure, in identifying and prioritizing the delivery of infrastructure. In developed countries in particular, the focus will increasingly be on brownfield investments (i.e. upgrade of existing projects), since there might be limited capacity to introduce new infrastructures (i.e. greenfield projects). Construction of new roads, railroads and ports in developed countries may result more difficult, due to the high urbanization and the resulting environmental impact, as well as risks to create overlapping with already existing infrastructure. Independent advisory bodies are thus essential to assess the pros and cons of infrastructure projects, evaluating the long-term economic performance and social wellbeing triggered by an infrastructure investment.

They are also fundamental to address inconsistent approaches to planning infrastructure investments which focused at the level of individual projects, without an adequate evaluation of need or defining the problem from an integrated national perspective. Key responsibilities of these bodies include, among others:

  • Definition of national-wide long-term infrastructure strategies;
  • Advisory on policies to favor infrastructure development;
  • Individual project evaluation and prioritization, on both existing and new infrastructure;
  • Elaboration of “post-mortem” analyses on past projects, to identify insights/best practices to be applied to future projects;
  • Support in finding access to funding and resources, both private and public;
  • Guarantee on timely delivery, measurement of performance and definition of improvement actions for existing projects.
  • Provide advisory support to regional and local governments to enhance their capacity to identify and prioritize their infrastructure needs
  • Increase the quality of infrastructure procurement and delivery

Experts convened that the creation of such independent advisory bodies had several positive impacts on infrastructure planning. They are usually welcomed by all stakeholders to secure a more bi-partisan support for project priorities. Decisions taken by an independent body help to develop a broad consensus on long-term strategy, enabling coordination of infrastructure planning and providing advice and best practice support to inform infrastructure decision-making. They also add greater transparency and visibility to the process of project selection and prioritization. Independence from national governments is a key element to enhance the effectiveness and credibility of such institutions, in particular when engaging with the private sector and local governments.

The dossier will focus on six key dimensions that are essential to evaluate the functioning of existing advisory bodies. First, the designated authority shall consider the geographical scope (e.g. national and/or local level, etc.) and time-span of the plans developed (e.g. 5-10 years, etc.). The scope of these agencies and their mission may be very different and ranges from the formulation of new investment projects to the assessment of projects proposed by other entities. The assessment involves some main variables such as effectiveness, cost for taxpayers, environmental impact and territory balance. At the end of the assessment process, the institution releases an output that often includes a list of admitted projects, a ranking of selected infrastructures or the provision of a direct feedback to the proponent. The effects of the output relies on the legal force of the institution’s assessment on government decision, which can be binding or non-binding. Finally, the independence and transparency of the advisory institution must be evaluated considering the institution’s governance, decision-making process and accountability.

Independent advisory bodies in infrastructure are increasingly deemed as essential to ensure a responsible use of public funds and a correct prioritization of infrastructure needs, especially in countries where public finances are constrained. In a long-term strategy, the independent advisory bodies should be entrusted – alongside their national governments – to elaborate long-term national infrastructure development plans, in order to ensure the planning and realization of infrastructure in a cross-sectoral and systematic way.