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How to make government infrastructure projects smarter, quicker and cheaper
In this episode of Innovation Unfolded, Jonas Groes and Chris Lewis from EY join Mikkel Hemmingsen, CEO of Sund & Bælt, and host Tim Smith to discuss improving government infrastructure delivery.
Innovation Unfolded is a Leading into Tomorrow miniseries exploring how innovation is sparked and embedded, and how focusing on a few key areas can unlock value across the public sector.
In this episode, we look at how innovation can help governments tackle the high demand for, and cost of, infrastructure projects. Joining our host Tim Smith are Jonas Groes, Partner and Government and Public Sector Leader for EY Nordics; Chris Lewis, EY Global Infrastructure Leader, Government & Public Sector, and Mikkel Hemmingsen, CEO of the Danish state-owned company Sund & Bælt.
Listen in to discover why innovation sometimes means standardization, what we can learn from current wind, nuclear and tunnel projects, and much more.
Key takeaways
- Generative AI (GenAI) will help governments define and design for the outcome they want. The right innovations will help them to deliver it.
- Using what’s worked before to modularize and scale, and standardizing before innovating, will save time and money.
- Incentivizing suppliers to innovate, not only share the risks, will lead to smarter, quicker and cheaper delivery.
The podcast is available to listen to on Spotify, iTunes, Amazon Music and Podbean.
If you’d like to read more, a full text transcript of this podcast is also available.
Tim Smith
Hello and welcome to Innovation Unfolded, part of the Leading into Tomorrow podcast series from EY. We're coming to you from Innovation 2024, where government leaders from across the globe have been brought together to discuss the transformation of the public sector and its services.Smith
Now this is a two-day summit at ExCel in London, featuring engaging keynote speeches and in-depth panel discussions from a range of professions and functions, all aiming to foster the collaboration that innovation demands.Smith
In this podcast series, we'll be joined by government and business leaders to hear how innovation is sparked and embedded, and how to unlock value across the public sector by focusing on a few key areas.Smith
Now, in this episode, we're asking how innovation can close the infrastructure gap and keep projects affordable. Joining me to talk about that is Jonas Groes, EY Partner and Market Segment Lead of Government in the Nordics. Jonas, hello, welcome to you.Jonas Groes
Hello. Thank you.Smith
Also, Chris Lewis, EY Global Infrastructure Leader, Government & Public Sector. Chris, welcome to the podcast.Chris Lewis
Thanks, Tim.Smith
And hello to Mikkel Hemmingsen, CEO of the Danish state-owned company Sund & Bælt, which builds and operates large transport construction projects. Mikkel, welcome to the podcast.Mikkel Hemmingsen
Thank you very much.Smith
Right, Chris, let me start with you. Set the scene for us if you will please, Chris, around the pace of change. I mean, are we now in a sweet spot in terms of innovation for infrastructure compared to say previous years, especially with the adoption of generative AI [GenAI]?Lewis
The first point is we need a lot of infrastructure. You know, we're still seeing emissions rise and there's a massive push towards decarbonization. So, we did a report that estimated 139 trillion will be spent between 2020 and 2050 on infrastructure projects, to decarbonize. So huge demand.Lewis
There's also huge supply, a massive amount of ideas in new areas, be that in energy, in renewable generation, solar, wind, offshore; be it in transport and electric vehicles, autonomous vehicles. So all kinds of areas, massive innovation.Lewis
And I think the key thing though is there's also a high level of dissatisfaction with the costs of projects today. You know, we're seeing big, complex infrastructure projects overrun again and again and again. So that, I think, is the scene: huge demand, a massive amount of projects will come through, lots of different ideas and everyone looking for kind of what works and what are the different ways to do things to make things better than they are today.Smith
Jonas, what's your view on how infrastructure projects can innovate to be more efficient, coordinated and, something that Chris mentioned there, finish on time?Groes
Yeah, I think that's a super good question. It's also clear if we look at mega projects, so projects that are a billion pounds, only 0.5% deliver on time, on budget and on quality. So there's a huge issue and we need to work with that.Groes
I think, as Chris was saying, there's a lot of things we can do. We see lots of innovation around utilizing AI, utilizing drones. You see a lot of new technology that really makes a difference. On the other hand, you also see that we should reuse some of the approaches; instead of building new architectural monuments, we need to think about what have we done before that was succeeding and how can we utilize that knowledge in order to build in a way where we can modularize and scale in order to be on time and on budget and on quality?Smith
Okay, Mikkel, let me bring you into the conversation. Still looking ahead to the future, what do you see — this is a big question, by the way — what do you see as the great innovation in the future of infrastructure? Is there just one?Hemmingsen
Well, I think we have to find some way to actually manage the cost overrun and the time overruns in the project, which has been taking place forever. Every big project has been years delayed and run billions of pounds over. I think that one of the big issues is that we see each project as being unique. So we kind of like start reinventing the wheel every time we have to reuse it.Hemmingsen
I think that we'll have to have some kind of industrialization of infrastructure, just like you've had it in the wind sector, and because otherwise, if government infrastructure were run as companies, they would all be bankrupt.Smith
That wouldn't be a good thing, would it?Hemmingsen
I think the good thing about companies going bankrupt is that then somebody who are more efficient comes.Lewis
Learns how to do it better.Smith
And makes the industry address the issues. I mean, Chris and Jonas, you're nodding in agreement with all of those points that Mikkel was making.Groes
Exactly. And it's also clear to drive that innovation, what are the incentives that will make sure that we have incentives to deliver above quality? We see a lot of risks and a lot of issues around risk, that's in a publicly owned company. Sometimes you only focus on the risk because that's what you get. So how do you incentivize that you do things in an innovative way in order to be smarter, quicker and cheaper in your delivery?Smith
Well, how do you? That was my next question.Smith
You know, we've heard about the issues; what are the solutions? I mean, can you give us an example of innovation in infrastructure that's delivering a project on time, within budget, sustainably?Groes
There are examples. Where I've seen the most are the smaller projects. It's easier to look ahead on the innovative part and how can you foster a community? How can you make sure you give room for mistakes as long as you flag them? How can you foster such a more inclusive environment, also with the political level? That's a super difficult situation. I think we've seen some examples, but I haven't seen it large scale yet.Lewis
Mikkel mentioned earlier, the offshore wind, that's a really good example. We've had seven rounds, I think, of repeated “How can we do it cheaper?”Lewis
The first were 150 and then the price came down, and then we've been pushing to more certainty of delivery. So that's something that we've done again and again and again, and complex problems like: How do you deal with the seabed? How do you get the unit there? How do you deal with the logistics? They’ve all been solved and improved.Smith
Are there any projects that any of you could highlight that illustrates best practice when it comes to the application of technology in infrastructure development? I mean, you touched on it there, presumably, Chris?Hemmingsen
Well, I could perhaps chip in with what we're currently doing, which is an 18-kilometer tunnel between Denmark and Germany. It's a submerged tunnel. So you would say, like building an 18-kilometer tunnel, like how can that be a project where you can increase your productivity during the project? Well it can, because it actually consists of 89 elements, which each consists of nine sections. In each section, you're actually learning something. So in the next section, you can be a little bit more productive than you were in your last section.Hemmingsen
So once you're building your last section here, your 900th section, you're actually more than twice as productive as you were when you were doing your first section. And that's kind of like taking the learnings from the car industry or from the shipbuilding industry and applying it into infrastructure, is that you have to keep repeating and you have to actually learn how to handle your processes to increase your productivity.Lewis
Defining the outcomes — you know, we talk a lot about outcome-orientated infrastructure — be really clear what the outcome is. And actually, the ability to look at all the different data from around the world and find out what's the best way to solve the outcome, be it a transport outcome from one area to another, energy production outcome. You know, what is the outcome we're trying to enable? Because actually, it's innovation in, you know, there are probably 20,000 ways in which you can deliver that same outcome and some of them will be large, complex and bespoke, and some of them will be repeat, modular and proven.Groes
I think it's clear that you need to modularize where you can, and it's also clear that the frame you get are different, there are lots of different projects. And some automotive owners want to have this bridge because it's also something that they can showcase. But then you just have to be clear about that outcome and make sure that you describe that in the risks that you mention, in order to say, this is probably not going to be within budget, because we have this other objective than moving people from A to B or whatever it would be.Smith
Okay, let's leave that there for the moment. Just moving on slightly, Mikkel mentioned there the tunnel project that he's involved in. Jonas, Chris, do you have any projects close to your own hearts that you're involved in at the moment that you'd like to talk about, that can actually help look forward?Groes
I think we see a lot of projects that are actually taking these discussions early in order to make sure what is the outcome. They have been in dialogue with a lot of their vendors from a very early point, making sure that you divide the risk, that you get the vendors into the discussion and also make sure what are the risks here, so that you share the risk taking together with your vendors, making sure that you get a better price and a better chance to deliver on budget.Smith
Chris, anything you'd like to mention?Lewis
One of the big challenges today is, how do you have always available power? And we still rely heavily on coal, gas, fossil fuel power. The nuclear industry — we did a report back in 2016 for the UK government that actually looked at learning rates in the nuclear industry, which were traditionally very low because people change things and did plants very large. So there is now this emergence of a small modular reactor industry, now there's 40, 50 plus technologies. That is a new set of technologies that I’ve looked at, redesigning the way in which nuclear power gets delivered both to make it easier to build, quicker to deliver and also fitting the network needs of the future.Lewis
So that, I think, is a really interesting example that we're going to see again and again and again. Over 50% of the demand could come from China. I think India's got a huge bit. So it's a global market and it's moving in a way from, you know, perhaps, you know, that traditional, large bespoke site into that production line mentality.Smith
Alright. Well, Jonas and Mikkel, you've both been speakers here at the session, at this event at ExCel, and talking about how to innovate when delivering major government projects. And we've touched on some of that already. Can you each though just give us one key learning point you've taken away from that session?Hemmingsen
This discussion we had at the session also, like we had this discussion in the end about, like, how can you innovate in IT projects?Hemmingsen
I think my experience is that you should really standardize. I think one of the greatest examples we have from Denmark is that we have one digital signature for everything. So it's the same for banks, for government, for local government, for everything, which means that all Danish people have it.Hemmingsen
So we have been able to innovate in making most of our government services 100% digital. So, as boring as it might sound, I think the foundation for innovation is very often standardization. And with infrastructure, it can be about data models, it can be about risk management models, but you have to have some standardization at the bottom and then you can innovate on the top of it. But you can't do it vice versa.Groes
Yeah, maybe building on that: I think for me it was interesting to hear IPA talking about there, because you need that platform, and they provide a platform on a risk model towards all the big infrastructure projects here in the UK.Groes
It's for me interesting that we have chosen in this country to have an agency that covers all projects. In a smaller country like Denmark, we have different models from different resort ministries.Lewis
I think the other theme is generative AI. The impact of data and what does that mean for the infrastructure world?Lewis
So there was a bit of a discussion earlier about, you know, is agile appropriate for infrastructure? And actually, I think it was you, Mikkel, saying it's quite complicated.Hemmingsen
Yeah, complex enough.Lewis
Yeah, and actually projects, infrastructure projects need to do, you know, a design and then deliver the design. And if you can do that in a shorter period of time, so much the better.Lewis
So where then does the generative AI impact come into the industry? And I think it will come in at the start, defining the outcome at that design stage, getting to more specification in design — we often start projects too early, and we haven't been through the detail — as well as in the efficiency. So I'd say, the technology of generative AI is going to come to the industry.Lewis
You've got, in infrastructure, an industry that hasn't actually driven much productivity improvement over the past 30, 40 years — hasn't actually adopted much technology. I think generative AI will change that.Smith
Jonas, Chris, Mikkel, it's a fascinating subject. I suspect we could actually sit here and talk about it for several hours, but time has beaten us. Thank you very much indeed, guys.Smith
That's it for this episode. Thanks to my guests for such an interesting conversation, and don't miss the rest of Innovation Unfolded, where we'll continue to unravel the art, and science, of innovating in the public sector.Smith
From me, Tim Smith, for now, thanks for listening.End of podcast.
Podcast
Episode 04
Duration
0h 13m 3s
