Sound long-term strategic planning is indispensable for the successful delivery of infrastructure projects. It requires alignment with a country’s development aims and economic conditions across sectors. Weak or insufficient planning disrupts infrastructure delivery, impeding resource optimisation, co-ordination, implementation and operation. To design a clear and coherent long-term strategic plan, it is helpful to align it with other policy objectives, undertake needs assessment, link it with budget allocations and sources of funding, and ensure robust co-ordination mechanisms across sectors and levels of government.
Infrastructure governance
High-quality infrastructure is one of the backbones for achieving long-term inclusive development. nevertheless, infrastructure projects can sometimes fail to meet their time frame, budget and service delivery objectives. this is often due to shortcomings in the country’s governance framework for infrastructure. Good governance of infrastructure not only promotes value for money and affordability, but also helps to make the right projects happen in a manner that is trusted by users and citizens.
Key messages
In achieving specific policy goals, selecting projects among the many identified investment possibilities presents countries with a major challenge. Embedding evidence-based project selection and prioritisation processes in government decision-making ensures value for money, affordability for the public budget and users, and minimal sustainability risks. These methodologies are indispensable to improve the investment decision-making process to ensure accountability, clarity and transparency.
Threats to integrity often stifle infrastructure projects. Integrity risks can arise at every step of the project and result in higher economic and social costs. Corruption, disinformation and citizens’ disengagement can result in poor targeting of infrastructure investments and negatively impact trust and shared ownership of infrastructure planning and delivery. Good governance of decision-making processes, including systematic stakeholder participation and transparency, is indispensable for ensuring the efficient use of resources. Moreover, procurement processes for infrastructure should be open, neutral, competitive and transparent.
Unlike the procurement of off-the-shelf goods or services, the procurement of customized products such as infrastructure is subject to many more complexities that go well beyond deciding the contracting model and the tendering process. Choosing a delivery model based on project objectives can lead to one-size-fits-all risk allocation resulting in a multitude of project implementation issues. To address this, the OECD has adopted an evidence-based STEPS methodology. The methodology helps inform trade-offs between different procurement strategy options. As a first step in choosing the most suitable procurement strategy, the STEPS methodology breaks down a project into work packages, which are then used to inform the analysis. Once the preparatory information about the project, the market, and the capabilities of the project owner have been collected, it seeks to answer the following questions:
- Make-or-buy question: What should that entity buy from the market (outsource) and which capabilities should it retain in house?
- Contract scoping question (packaging): Once it was determined what should be bought, should the project be procured through a single contract or through several contracts? If there are several contracts, which work packages should go into which contract?
- Delivery model assignment (risk allocation): Which delivery model and payment mechanism would fit best to a particular package?
The main objective of STEPS is to help its user make informed choices on how to meet their objectives in a most efficient way. Alternatively, if this is a more suitable solution, the STEPS methodology can also inform the adjustment of the objectives. STEPS has been trialled in Norway and is currently being deployed in Germany on a major infrastructure asset for the public sector (a report will be available in April 2024).
When used appropriately, private investment in infrastructure can deliver superior Value for Money to other infrastructure governance or project delivery alternatives. A key precondition for ensuring the value for money objective is the maintenance of fiscal discipline and transparency, so that private investment models are not used to push related liabilities off the public sector’s balance sheet. The OECD Principles for Public Governance of Public-Private Partnerships (2012) maintain that the decision to choose the delivery mode should be separate from how to procure and finance the project to avoid institutional, procedural or accounting bias, either in favour or against PPPs.
The private supply chains require governments to be competent and reliable partners and to promote a stable business climate and regulatory environment for the investment to manifest. The effective use of private participation in infrastructure calls for strong public sector capabilities from the needs assessment, project section, down to permitting and procurement strategy, including to cross-cutting topics such as stakeholder management or competent incentive-based regulation.
Context
Infrastructure Governance to support the implementation of G20 Principles for Quality Infrastructure Investment
Infrastructure governance can be understood as the policies, frameworks, norms, processes and tools used by public bodies to plan, make decisions, implement and monitor the entire life cycle of public infrastructure. Governance has a key role to play in delivering well-articulated and whole-of-government infrastructure responses and ensuring infrastructure projects are well-targeted. While there has been an increasing focus on infrastructure governance in recent years, the crisis has sharpened the need to accelerate reform efforts in this area.
Different strategies and tools have been used to promote alignment of strategic long-term infrastructure visions with environmental policy objectives.
69% of the surveyed countries invest in key projects enabling the implementation of broader sustainability initiatives (e.g. circular economy systems, sustainable mobility, net-zero carbon emissions, climate change mitigation and adaptation), 59% focus on identifying cross-sector synergies to reduce negative environmental impacts, and 56% on adapting existing infrastructure to improve environmental performance. Fewer have adopted resource efficiency targets in the construction and operation of infrastructure (41%) or research and development to promote environmentally friendly infrastructure (34%).
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