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
Codes and Standards | Oct 6, 2016
New York City files criminal charges on owner for deadly building façade accident
The owner allegedly did not heed warning about danger of the crumbling exterior.
Codes and Standards | Oct 5, 2016
New York becomes the first city to adopt a target for energy storage
Mayor de Blasio also announces increased solar generation goals
Codes and Standards | Oct 4, 2016
New global residential floor space measurement standard unveiled
The new standards will produce better transparency and are said to benefit investors.
Codes and Standards | Sep 29, 2016
Dept. of Energy forecasts big jump in LED use, resulting energy savings
Big gains are expected in both commercial and residential markets.
Codes and Standards | Sep 28, 2016
San Francisco commercial, multifamily regulations aim to reduce traffic volume
City planners will require design features to cut miles driven.
Codes and Standards | Sep 28, 2016
Society of Landscape Architects releases guide to resilient design
The goal is to retrofit communities to better withstand extreme weather events.
Codes and Standards | Sep 26, 2016
Washington State Energy Code updates include dedicated outdoor air system requirements
The updates will change design approach to HVAC.
Codes and Standards | Sep 22, 2016
Construction firms pulling back from federal market due to new reporting rules
‘Subjective, very vague’ policies are said to create too much risk.
Codes and Standards | Sep 21, 2016
Airbnb presents legal liability for multifamily owners
How building owners can reduce risks.
Codes and Standards | Sep 21, 2016
Healthy buildings becoming a key design priority for both architects and building owners
Nationwide survey finds nearly three of four architects cite health impacts influencing design decisions
