How IT Can Help Avoid Cost And Time Overrun In Infra Projects

According to the latest data from Ministry of Statistics and Program Implementation, Government of India, out of the 564 infrastructure projects with an anticipated completion cost of Rs. 8,75,158.50 crore, a whopping 251 projects were delayed as on 1st June, 2012. Further the report estimates 192 projects overrunning the original approved cost. Pre-supposing that the factors beyond IT’s control like funding, government clearances, environmental issues, etc. are in place, the delay and cost overrun in many of these projects could have been controlled with an integrated IT system. This is not only a matter of saving thousands of crores of national spending from going waste, but also of ensuring that infrastructure of national importance doesn’t go awry.

According to Thiru Vengadam, Managing Director, IFS Solutions, if a project is properly conceived and funded with all the right approvals in place, then the execution can be done 100 percent in time and 100 percent on budget with the use of IT.

While cost and timelines adherence are the key to any infrastructure project, these are the very factors on which most projects also falter. Hence, keeping them on track and delivering on time and within the budget becomes of paramount importance. Vengadam opines that adhering to budgets and schedules become all the more critical in large and capital intensive projects as the money involved is huge.

Citing example from IFS’ own customers, he explains that in some cases setting up one power plant of approximately 600-700 Megawatt could mean investments to the tune of Rs. 5,000 crore. The slightest delay can set the project back by a few hundred crores. As a result, the highest level requirement for infrastructure companies is project control, adds Vengadam. IT can go a long way in keeping these projects on track through a strict control on the various project parameters.

Infrastructure projects, ranging from construction, Engineering Procurement Construction (EPC), power generation to ports, roadways, railways, etc. have certain aspects in common, which is - putting up large infrastructure, with a heavy investment, on a long lead time with multiple agencies involved. The IT strategy needs to be aligned to these nuances and specific requirements that infrastructure projects demand.

Here is a lowdown on Vengadam’s advice for infrastructure companies on what they should be looking out for in their IT systems in order to ensure that they streamline processes and tighten controls during the various phases of a project.

First Phase: Pre-Construction

The pre-construction phase involves aspects like acquiring land, conducting feasibility study, developing detailed project reports, lot of follow-ups and approvals between multiple agencies besides the promoter and the turnkey contractor. As a result, a key requirement during this phase is a whole lot of documentation. The IT system needs to cover all these activities involved in the pre-construction phase.

Second Phase: Construction

Considering these are long-haul projects it is imperative to have multiple agencies involved during the various stages of construction. Usually in a project, there is a turnkey contractor, who in turn would have multiple sub-contractors involved in electrical, mechanical, civil work, etc. But, overall, the promoter who is releasing the funds to them needs to have visibility across this entire chain.

Further, there are assets under construction, and have a financial angle with aspects like depreciation, tax benefits, etc. to be taken into account. So, it is important to track these assets during the various stages of their construction. Missing out on any of the links in between can not only have a huge financial implication but also delay the project further.

Hence, the IT system should be able to provide complete visibility and allow for real-time tracking of the assets under construction.

Third Phase: Operational Maintenance

This is the phase when the construction is complete and the assets are put to use and become operational. For instance, in case of a highway project when the road is opened up to use. When you start operating the asset you need to maintain and start raising some bills for the products and services that are being delivered. The multiple operators that are getting involved - right from the promoter to the turnkey contractor to the sub-contractors to the agency running the asset - all need to have a single view of the truth. Therefore, what is required is a single integrated system shared by all, in the absence of which by design the project is setting itself up for delay.