In this 2nd post in a series on Market Tensions, Our expert practitioner Paul Hepworth looks at how trends and forces in the Infrastructure Services marketplace are creating a need for more focus on efficiency and productivity. View the 1st post in this series.
The demand from infrastructure maintenance, repair and replacement is always there. This has helped to shelter the sector from the worst of the recession. However, the market still has a number of tensions; demonstrated by political & regulatory risk and larger projects introducing more complexity. These are overshadowed by progressively increasing contractor expectations of lower cost and higher quality. This is especially true in the arena of customer satisfaction. Contractors are also seeking to outsource the end-to-end process, whereas typically they may have retained control of key aspects such as design, governance and resource mapping.
The good news is that the recession-induced restraint witnessed in Public Sector infrastructure project investment appears to be thawing. A key driver of which is the 2014 National Infrastructure Plan, which proposes the following investment:
- £2.3BN Flood Defences
- £15Bn Road developments.
- Topped up to £466Bn with further investment in Housing, Rail and Energy.
Regulation is also creating impetus for positive change. Underpinning the pursuit of efficiency are new financial models, such as RIIO in the Energy sector and focus on ‘TOTEX in the water sector. These models impose well-defined expectations and focus on the end customer. Also consider the introduction of new technology and its additional complexity, including 3D printing, commercial drones, smart-monitoring & control systems, communications, driverless vehicles, cloud computing and increased digitisation all offer huge opportunities. However these new technologies are testing existing business models and also come with up-front and longer-term investment costs.
Traditional risks also remain, and these include the strength of the European Economy closely aligned to issues around the Euro, the varying price of oil and other energy sources and the availability of skilled manpower and materials. These risks, impacting upon investment decisions, are expected to continue for the short and medium terms.
Increasingly we are seeing a market where there is a growing need to do more with less - but can that be a viable approach that won't damage the long-term health of the organisation? To prevent cutting back on investment that will grow the business in the future, organisations must look at how they can become more productive and deliver ever higher levels of efficiency.