Constructing and justifying the cost of physical assets such as a manufacturing plant is much more difficult than it was decades ago, according to a report by Steffen Fuchs, senior partner with McKinsey & Company.
Inflation, rigorous sustainability requirements, and rapid changes in technology and regulations all complicate investment in new construction projects, the report says. “Adding to the complexity, the next generation of assets needs to be “set and forget”: the high cost of building them must be offset by lower operating costs,” Fuchs writes.
Improvements in construction processes and project delivery are especially necessary given that a new wave of “once-in-a-lifetime” capital spending on physical assets will take place between now and 2027. Roughly $130 trillion will pour into projects to decarbonize and renew critical infrastructure, Fuchs writes.
Project leaders typically rely on practices that aim to optimize individual investments, such as a nuclear power plant, an oil refinery, or a pipeline. Cost overruns are typical and costly using this approach. New decarbonization and sustainability investments where groups of similar projects (such as wind farms and solar parks) are delivered repeatedly over a long period of time require much better performance, Fuchs says.
Related Stories
| Aug 20, 2013
Code amendment in Dallas would limit building exterior reflectivity
The Dallas City Council is expected to vote soon on a proposed code amendment that would limit a building’s exterior reflectivity of “visible light” to 15%.
| Aug 20, 2013
Developers of Hollywood skyscraper will dig to see if earthquake fault is on site
New York-based Millennium Partners have agreed to dig a trench on a Hollywood, Calif., property to help determine whether an earthquake fault runs under it.
| Aug 20, 2013
Chinese-made resilient flooring products achieve FloorScore Indoor Air Quality certification
Five of China's leading manufacturers of resilient flooring recently received FloorScore Indoor Air Quality certification from SCS Global Services for their luxury vinyl tile (LVT) products.
| Aug 20, 2013
Florida to get $1 million federal grant to study sinkhole vulnerability
The Florida Geological Survey and the state’s emergency department will receive a $1.08 million federal grant to study sinkhole vulnerability.
| Aug 20, 2013
L.A. City Council approves plan for new $1 billion Watts development
Los Angeles city officials have voted to revitalize a notorious Watts housing project with shops, town homes, and green spaces.
| Aug 19, 2013
Baltimore City Council committee OKs taxpayer assistance for $1.8 billion Harbor Point mixed-use project
A Baltimore City Council committee approved a plan to give millions in taxpayer assistance to the $1.8 billion Harbor Point development.
| Aug 19, 2013
Philadelphia to enforce building energy benchmarking in October
The City of Philadelphia has begun to send out compliance notices regarding its Building Energy Benchmarking Law.
| Aug 19, 2013
Eliminating Fannie Mae, Freddie Mac part of Obama’s housing proposal
President Barack Obama this month outlined a series of policies he said would continue to boost the housing market, including a long-ignored legislative proposal that would allow more Americans to refinance at current low mortgage rates.
| Aug 19, 2013
HUD, New York City collaborate on research center to boost storm resilience
The U.S. Housing and Urban Development Department and New York City will collaborate on a project to create a new research institute and a city-federal park at Jamaica Bay, Queens.
| Aug 16, 2013
Dept. of Homeland Security offers tool to analyze building risk and resilience
The Integrated Rapid Visual Screening tool is designed to determine initial or relative risk and resilience for buildings based on visual inspection only.