Date: 2016-08-12

World Infrastructure Demands Increasing

Taylor Hill

Infrastructure is the foundation of economic and social well-being anywhere in the world. Currently, all across the globe, there is a gap widening between infrastructure in place and what is truly needed. It is estimated by EY, a multinational professional services firm, that to close this gap by 2030 it will require upwards of $50 trillion U.S. dollars. It is now more important than ever to get this infrastructure procurement right through project financing and public-private partnerships (PPPs).

There are five key trends that will help the infrastructure financing process become a successful one. First, there needs to be incentives. The world's most flourishing PPP markets are those where projects are sustained and advanced through incentives. Second, is that a pattern needs to be obvious in the adoption of risk, contacts, and documentation. Considering these variables makes contract negotiations easier, enables the development of shorter procurement time frames, and lowers bidding costs. Third, there is a strong need for intervention during the process. After the harm from the global financial crisis, it will take a great deal of intervention from governments and outside parties to keep these projects operating efficiently. Fourth, it is all about value. PPP's model of value-for-money relative to customary procurement approaches remains a matter of much question. However, in this and other areas of procurement, the opportunity cost and the broader impact of the economy are too often overlooked. The fifth and final trend is in evaluation. There needs to be a midpoint examination of the project to keep performance up and ensure transparency throughout the project.

When it comes to the PPP model specifically, the core tenets of risk allocation, long-term outcomes, output basis, and alignment incentives prove to be as applicable today as ever. As infrastructure demand increases and economic restrictions grow, the PPP model continues to develop to help meet these escalating infrastructure challenges.

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