Is Your Country Serious about Using Digital Technologies in PPPs?

The Technology is Ready! It’s the Time to Improve Your Readiness.

Hossein Nourzad, PhD, CP3P Accredited Trainer

Digital technologies change the way we live rapidly and tremendously. When it comes to infrastructure and PPPs, these technologies have significant influences on the nature of assets, as well as their key elements and approach to the management of these projects. 

On the one hand, new technologies may change the nature of the assets by the developments on the supply side (i.e., the infrastructure itself) or the demand side (i.e., the consumers). On the supply side, technologies can speed up and diversify infrastructure delivery options. For example, in Africa, countries are turning to renewables-based microgrids for remote areas. On the demand side, new technologies change user behavior, and many decisions or more power passed to the consumer. For example, telemedicine allows consumers to avoid long travel to see a doctor resulting in less use of both physical hospitals and transport. As another example, digital navigation platforms enable people to make more-informed travel plans in terms of routing and modes of transport. Also, the carpool apps affect the way people travel resulting in increasing high occupancy vehicles.

On the other hand, digital technologies can change in some key elements of PPP, such as the nature of the contracts. For example, contract requirements need to be more flexible in terms of accommodating or even encouraging technological change and innovation since it happens more frequently and often can have major impact. In addition, digital technologies may change the PPP management process. The increasing need for additional resources at different stages of PPP projects necessitates using digital tools and technologies to complement the traditional ones. The 2020 G20 Presidency mandated the Infrastructure Working Group (IWG) to develop an agenda to accelerate the adoption and application of technology-enabled infrastructure (i.e., InfraTech). The agenda supports two IWG initiatives: the Roadmap to Infrastructure as an Asset Class and the G20 Principles for Quality Infrastructure Investment (QII). More details are provided in figure 1 [1].

Figure 1: The Ways Technology Supports the IWG Initiatives

InfraTech helps governments realize significant economic, social, and environmental values across the asset lifecycle. Improvements in the collection, collation, and curation of asset data support a new level of data decision making. This ability can deliver financial cost reductions and improve efficiency across the asset lifecycle. Advanced analytical systems are capable of processing large amounts of diverse data to support more effective infrastructure management, which will enhance the safety, efficiency, and effectiveness of greenfield and brownfield assets. For example, augmented reality can increase the efficiency of utilities by 15-20 percent. In addition, positive externalities from broadening access to infrastructure services and progressing toward the Sustainable Development Goals (SDGs) will have a larger impact on SDGs than cost savings. For example, 5G could unlock $4.3 trillion in economic value across a range of industries [1].

There are many reports and studies about digitalization and the use of digital tools for infrastructure projects. However, as of today, international institutions and governments have released a few guidelines and best practices about digitalization. As a starting point, countries need to build their foundational knowledge about various technologies, their potential benefits and applications for infrastructure projects, the level of readiness of countries in implementing these technologies, as well as the risks and challenges involved in technology deployment. As the trends show, the use of technologies is essential for delivering efficient infrastructures in the future. Successful deployment of technologies depends on the technologies’ readiness as well as the country’s readiness for implementing such technologies. Therefore, countries should take appropriate measures to get prepared for the effective implementation of state-of-the-art technologies in their practices. To do so, they should be aware of factors related to technology and country readiness. 

Technology Readiness

The first important prerequisite of successful implementation of technologies is technology readiness, which depends on three main factors shown in figure 2. Governments should carefully consider these factors when selecting technologies to be implemented in their countries.

Figure 2: Factors that Describe Technology Readiness

Upfront and whole lifecycle costs: The deployment of InfraTech solutions typically has significant upfront or recurring costs. Because of these costs, many technologies (e.g., renewable energies or 5G), especially at the early stages of maturity before they achieve a certain level of scale, will not be economically or financially viable. If not prepared to manage these high costs, countries may wait for a cost structure to decline before implementing a certain technology (as in the case of sensors or drones). Therefore, the countries need to evaluate the whole lifecycle costs, especially for novel technologies such as 5G. Along with tangible costs, it is also important to consider intangible costs of the new technology implementation, such as project disruptions, time to master new skills, employee’s resistance to changes, and additional trainings to project staff. Additionally, countries should also avoid poor implementation of these technologies, which could result in significant cost overruns or underutilized capacity.

Technology maturity: Different technologies may be at varying levels of technological maturity from proof of concept to being proven in an operational environment at acceptable performance and operational standards. For instance, NASA’s Technology Readiness Levels is a kind of technology maturity level rating system. Technologies at lower maturity levels are more at operational and performance risks and often impose almost higher per-unit costs. Therefore, developing countries may tend to wait for technologies to get to a higher level of maturity to lower their risks and costs. For example, the costs of solar and wind technologies, as well as cloud computing and sensors, are becoming low enough that most countries and sectors are now able to benefit from these technologies.

Ease of implementation: The implementation challenges associated with a specific technology depend on local skills and technology’s level of maturity. For example, using drones for maintenance now has low-complexity challenges, while developing an integrated data platform that crosses industry sectors has various technical, organizational, and regulatory challenges. In addition to local skills and technology’s level of maturity, a strong enabling environment will boost the ease of implementation. For instance, the development of autonomous vehicles will enhance the full value of implementing 5G.

Figure 3: Factors that Impact Technology’s Ease of Implementation

Country Readiness

In addition to considering technology readiness, countries should also be sufficiently prepared to adopt different technologies. Such country readiness depends on several factors listed in figure 4. These factors include strong foundational technologies, well-established legislation and regulation, proper procurement and contract management, efficient funding and financing, sufficient institutional capacity, and digital skills.

Figure 4: Factors that Describe Country Readiness

Careful and realistic consideration of technology and country readiness is the first step toward digitalization in the public sector. Once sufficient related measures are taken by the governments, they can plan to use digital technologies for infrastructure development in general and PPP projects in particular [1].

1 The World Bank, “Infratech Value Drivers,” World Bank Publications, 2020.