Rebuilding the economy

When you’re in a hole, they say, stop digging. But to get out of one, you need to build. As we recover from COVID-19, there’s hope infrastructure projects will boost the economy. But many project managers counsel caution. To find out why, Richard Young listened in to a government briefing on pandemic-era major projects and spoke to the experts responsible for delivering them.

“Build back better” is the kind of slogan that is catnip to politicians. It’s three words, it’s alliterative and it’s relentlessly positive. No wonder it’s been adopted so widely – from US presidential candidate Joe Biden and Prime Minister Boris Johnson to the UN and the London School of Economics. More than anything, its allure lies in the promise of an enhanced future – not just returning to old ways. And that makes it the perfect clarion call for getting infrastructure projects going in the wake of the COVID-19 pandemic. We’re not just going to get people working, the slogan says, we’re going to address a whole clutch of long-standing issues to boot.

Playing catch-up

That’s important, because many existing programmes were put on hold during lockdown. “We had to pause work on sites in March to reflect on how safe working practices could be implemented,” says Amy Morley, PMO director at HS2. Even for more established projects, such as 5G roll-out, the period has proved challenging. “It has at times been impossible to deliver infrastructure in a safe way to some locations,” says Pete Newth, portfolio director, consumer and enterprise, at EE. “But our operation has been constantly thinking out of the box and always looking for alternatives.”

The problem has also been acute for the government – the client behind many big infrastructure projects. Not only have individual programmes been affected, but also the broader strategic push for renewal. The National Infrastructure Strategy (NIS) was due to launch with the March budget, but was delayed as attention focused on pandemic response. In June, the Infrastructure and Projects Authority (IPA) sought to maintain momentum in major projects by publishing its procurement pipeline report. “In response to COVID-19 and subsequent requests from industry to provide short- to medium-term certainty, this pipeline [sets] out contracts planned to be brought to market throughout 2020/21,” explained IPA CEO Nick Smallwood. The 340 contracts, worth up to £37bn, are designed to steady nerves and boost activity.

It’s good news for an economy that saw GDP drop a staggering 20 per cent in April alone. The bad news? The NIS was delayed again in the summer – “although I’m optimistic that with the support of the prime minister and chancellor, we will see it published in the autumn”, says Sir John Armitt, chair of the National Infrastructure Commission (NIC). So what’s happening on major projects in the meantime? And what’s their role in the recovery of jobs, the economy and the nation’s capabilities?

Jump-start existing projects

The most obvious opportunity lies in getting existing programmes back on track. Take HS2: Phase 1, the Birmingham-to-London route, secured ‘notice to proceed’ at the start of the pandemic. For Morley, that meant getting into gear even under the strictures of lockdown. “We were quick to get clarity on working safely from Public Health England and the Construction Leadership Council – and in some cases the pause lasted less than a week,” she says. “By the end of June, we were back open on 92 per cent of the main works civils for Phase 1. So while we had a window of impact, and put various measures in place to restart safely, we’re carrying on.”

Ditto the 5G roll-out, where maintaining momentum isn’t just about safeguarding jobs, but also developing foundations for enhanced economic activity. “Working and schooling from home has obviously driven changes to society’s needs,” says Newth. “And who can predict what the new normal will be when we return?” (The recent political decision to remove Huawei equipment from the 5G network by 2027 adds further work for skilled technicians in the telecoms sector.)

Even the government’s new £900m Getting Building Fund is being pumped into “shovel-ready projects” – code for infrastructure that was about to happen anyway before the pandemic kicked in. For example, the biggest project mentioned at the fund’s launch in August was £23m for Phase 1 of Mayfield Park in Greater Manchester, “expected to deliver 3,200 jobs and attract over one million visitors a year”. But the site got final planning consent in February, and the £1.4bn project will take up to 15 years to hit those impressive economic indicators.

And where a project wasn’t already primed? “If you go too quickly, without the necessary up-front work, you’ll have gaps in design that need revisiting,” says Smallwood. “The better job you do at front-loading a project, the more likely you are to deliver to time scale.” Even if planning is expedited, just securing materials for new works will take time.

A flexible approach

“There are also challenges around the workforce – not just in terms of location, but also prioritisation for different programmes and projects,” says Stella Okeahialam, deputy director at the Department for International Trade (a role she previously held at the IPA). But she’s a little more optimistic about the possibilities, too. “There are a lot of unknowns right now, so we need to keep on learning,” she adds. “But as a civil service – and a project profession – we can learn to be more creative, looking at how projects can adapt, taking a more flexible approach, rather than a fixed and rigid view.”

Even if you embrace flexibility, it’s still important to set expectations on big projects. “Develop a range of cost and schedule projections,” says Morley. “When you’re working across a 10-year programme, you simply can’t give precise numbers. A range helps build understanding with stakeholders and, in our case, the public. Specific dates and budgets are a hostage to fortune.” You can’t bank on short-term job creation in 2020 to win your project brownie points in five or 10 years.

Smallwood agrees. As major projects get back into their groove, he says, the principles of good project leadership must not be forgotten. These include consistent cost estimation, quality in the origination and development phases and a better understanding of risk.

“My rule on infrastructure is to under-promise and over-deliver, which might not make me a very good politician,” says Armitt. “People do need to be motivated, but delivery to a clear plan is critical. You need a credible strategy that the private sector can buy into for the next 15 years.” That way, you’re more likely to see them invest in skills and planning that will help today’s economy.

More haste, less speed?

That more considered view might seem at odds with Boris Johnson’s enthusiasm for ‘Project Speed,’ a new infrastructure delivery task force, helmed by Chancellor Rishi Sunak, put together to “bring forward proposals to deliver government’s public investment projects”. (A figure of £250bn was bandied about at launch; it’s looking more like £5.6bn of planned infrastructure spending being accelerated.)

“There is a real interest in projects that have an immediate economic impact – and we’ve seen a couple like that brought forward,” says Alex Chisholm, chief operating officer for the civil service, and permanent secretary for the Cabinet Office. “The prime minster wants to do things faster – changing methods where necessary, looking for opportunities to lift the regulatory burden or finding other ways to accelerate projects.”

And while rushing major infrastructure is not advisable, chief secretary to the Treasury Steve Barclay said about Project Speed: “Our maxim should be measure twice and cut once.” On smaller projects, it could be ideal. “In some cases, the objective is creating jobs as well as infrastructure,” says Armitt. “Improving all the walkways in National Parks, for example, would be labour intensive; it could get going quickly and it gets money into the community across the country. Without jobs, money doesn’t flow in the economy, and whole sectors can’t get going.”

But some remain nervous about acting too quickly. “I was once asked what percentage of the design should be complete before you go to the field,” says Smallwood. “A wise old project manager told me, ‘Wait until people are screaming – at about 75 per cent ready, they’ll want you to go to the field.’ ‘And then what do you do?’ I asked. ‘Wait another month.’” If you can feed a construction project with all the design deliverables and materials it needs to build, it will be productive. If crews wait around for design tweaks or equipment, it won’t. And given that skills and labour are critical bottlenecks in the short term, the productivity gains from properly considered planning might be vital to economic recovery.

Look to the future

Infrastructure is a long game. “So, in the medium term, we need to grow the project profession across the UK and invest in all those involved in bringing projects to life,” says Smallwood. “There’s a huge opportunity in the younger generation. By 2025, we need to have a bigger population involved in major projects.” Armitt agrees: “The really big challenge is getting a steady workflow of projects that the industry can see coming for 10 or 15 years, not stop-start every three years. That requires clear policy direction and allocation of funds – and hopefully we’ll see more of that in the NIS in the autumn.”

And if ‘build back better’ is to be meaningful, its focus perhaps shouldn’t be a bounce-back in GDP at all. Infrastructure investments need to target the other, pre-existing priorities. The NIC has been very clear on these: building a digital society, addressing the ‘net zero’ climate change target, revolutionising road transport and reinvigorating the regions. If anything, ‘levelling up’ becomes more important in the wake of COVID-19, not less.

Recalibrate to the new reality

Equally, a new spirit of project creativity doesn’t mean adopting methodologies and new technology without careful consideration. “On major projects, it’s very dangerous – it’s a great way to introduce uncertainty into your final accounts or programme schedule,” says Armitt. “If you want acceleration and certainty of delivery, you’ve got to use existing technology.”

True, modern construction methods using off-site production and other innovations will be essential for increased productivity (another long-standing goal). The tactical use of new technology also helped get HS2 back on track. “One of our people on the ground developed headsets that beep when you get close to other individuals, so we can ensure social distancing on-site,” says Morley. “The bigger strategic piece, however, is about continuous improvement and innovation.”

And even if we need to be cautious about innovation, we should all be ready to recalibrate projects and methodologies to the post-COVID-19 reality. “We don’t think we’re going back to the old status quo,” says Chisholm. “People are much more likely to be working online, and collaboratively, and inventiveness will go up. Working in big offices turns out to have been largely habit. So look for examples of where people can work more productively and creatively on projects.”

No wonder EE’s Newth sees the 5G programme as a no-brainer for the recovery: “The build of this network is critical to the digital future of the UK,” he says. “It will enable us all to bounce back from the lockdown – and if we take the opportunities it offers, we will truly accelerate our progress in so many new technologies across the entire UK economy.

“The capacity, low latency and reliability of our 5G network will underpin the realisation of almost every exciting future technology in the UK,” he continues. “There’s a vast array of opportunities for connected cities in areas such as traffic management, tourism, energy management, drones and driverless cars. The list is endless – we have trials working today in a number of these areas.”

Building back better, as fast as possible, can salve a dented economy. But it’s important we never sacrifice professionalism, precision and productivity in projects – nor lose focus on the fact that infrastructure investment is all about delivering a better future, not just a boost to investment today.

New Deal or no deal?

It’s natural to reach for the history books during an era-defining crisis. How did people cope during wars or depressions? What projects can we emulate in support of our own recovery? That’s why Franklin D Roosevelt’s 1930s New Deal has been getting so much airtime. But comparisons are only partly justified. For example, FDR’s programme cost about $42bn in 1930s money – around 40 per cent of pre-crash GDP. That would be £800bn for the UK in the 2020s, rather than “up to £30bn” in the Plan for Jobs and £5.6bn in infrastructure spending.

One similarity is that the UK’s £5.6bn is mainly accelerating previously planned investments, not fresh projects. Back in the 1930s, most banner New Deal projects, such as the Boulder (later Hoover) Dam, had been in development for a decade or more, too. In both cases, jobs and welfare are the key to economic recovery, not infrastructure. The New Deal’s Public Works Administration only spent around $6bn of that $42bn. Social care, welfare and structural reforms were a bigger part of the budget. In the UK, the construction industry has already bounced back rapidly compared to, say, hospitality.

One big difference today is that we’re enhancing – not establishing – infrastructure, which means less economic benefit. For example, the New Deal built a network of small airports in the US for the first time. The World Economic Forum says low- and middle-income countries, “could see a net benefit of $4.2trn from investing in infrastructure – a $4 return for every $1 spent”. But today’s upgrade projects in the UK have a more modest economic impact. As Armitt puts it: “Adding capacity on trains into London improves the performance of the economy to a degree – but it’s not a radical change.” So while the New Deal is an inspiration, it’s far from being a blueprint for rebuilding a mature 21st-century economy.

What are other countries doing?

Every country is weighing up options to invest for a recovery. The EU’s COVID-19 recovery fund, often compared to the Marshall Plan after the Second World War, is a €750bn boost to EU spending agreed in the summer. While there’s a requirement to focus on digitisation and environmental projects, the bulk of funds seem destined for softer areas, such as health, skills and ‘social cohesion’, rather than infrastructure. Sustainability hurdles might also bar, for example, fresh investment in nuclear capacity.

And it’s not clear what’s new money. The InvestEU programme, for example, devotes €20bn to post-COVID ‘sustainable infrastructure’ (against €55bn on projects in skills and support). But the COVID-19 response and recovery plan itself commits only around €15bn to InvestEU overall.

What about individual countries? France, for example, might get around €39bn from the fund. In July, French Prime Minister Jean Castex also announced a domestic €100bn recovery plan. But even the €20bn earmarked for investment in tackling climate change includes renovating older buildings and electric bikes – hardly major infrastructure projects.

The picture in the US is mixed. In Missouri, for example, several infrastructure projects have been mothballed thanks to lower tax revenues. The parlous state of US infrastructure means President Donald Trump’s $1trn investment plan seems sensible with or without the requirement to recover from COVID-19; and June’s Executive Order on COVID-19 recovery lists transport infrastructure projects and civil works as priorities. But by July, Congress had passed three separate COVID-19 relief packages worth $2trn with no funding designated for capital projects.

In Singapore, authorities took the collapse in air travel as an opportunity to accelerate the rebuild of Changi Airport’s Terminal 2 – another project scheduled before the pandemic. But in four stimulus packages worth S$100bn (around 20 per cent of the country’s GDP) to shore up wages, smaller businesses and R&D to bolster the state’s long-term position, infrastructure doesn’t feature prominently. Big projects there and elsewhere might need to wait until public finances become more stable and reliable projects with the right skilled workers are on the table.