Infrastructure investment could create employment boom in US

01 June 2017 Consultancy.uk

Investment into US infrastructure projects is touted to increase significantly in the years ahead, in part to meet basic standards, a new report claims. The investment of potentially more than a trillion, is capable of creating considerable employment opportunities across the US. Focus on critical projects will generate upwards of 1.6 million new jobs, although it misses out on the job creation potential from various non-critical investments.

The United States' controversial leader Donald Trump has made investment into US infrastructure a key priority over his first term in the White House, following years of neglect have left it in a state of disrepair. Recently this led to Trump's administration courting Saudi Arabia, who amid efforts to diversify the Kingdom's oil-dependent economy are reportedly planning a $40 billion loan to finance the required maintenance and replacement. In spite of this, projects are currently thought unlikely to garner the funds required to meet passing standards, as private investors are unlikely to vie for contracts in the projects that while beneficial to the public and economy broadly, would see little in the way of financial return.

To better understand the infrastructure opportunities, as well as the potential job creation associated with investment, management consulting firm The Boston Consulting Group (BCG) analysed current conditions as well as the effects of investment in a new report, titled ‘A Jobs-Centric Approach to Infrastructure Investment’.

Job creation, quality and longevity vary greatly by sector

The infrastructure ‘baseline’ in BCG's analysis was positioned to represent the current trends of investment within the sector, which, according to the study, is considerably less, as a % of GDP then in the 1960s, at 2.4% and 3% respectively. The paper also suggests that there is a $1.4 trillion funding gap to 2025, which, when adding in operations and maintenance, almost doubles in value. In terms of employment the sector remains one of the largest in the US, with approximately 15.5 million jobs representing around 12% of the working population.

According to a related ASCE report into the current status of much of the infrastructure in the US – most of the infrastructure scores a D on average, with no segment of infrastructure above a C+ on average. Highlighting considerable need for improvement.

The investment required in various infrastructure projects is considerable. However, the different levels of investment create different levels of job quality and job sustainability. In terms of job quality, here measured in pay, hospitals, rail, and seaports, among others, rank highest. Highways, bridges and waste water rank the lowest. In terms of job sustainability, Seaports, hospitals and airports rank very high, while rail and mass transit are rated medium.

Short- and long-term job creation by segment

In terms of long-term job creation, seaports and hospitals are found to be particularly effective – hospitals tend to require considerable high-level permanent jobs to function in the long-term, in a similar vain to seaports. Inland waterways too tend to create relatively long-term job value, before tapering off at around 140 months.

In terms of short-term job creation, highways, T&D, airports and rural broadband are key, and are predicted to create a considerable spike up to between 40 – 60 months following the commencement of a project.

Investing $1 trillion delivers different job outcomes

According to the study, there are different ways in which the $1 trillion in needed investment can be spent, with consequently different outcomes in terms of job creation. As noted previously, different sectors are in more or less dire need for investment. Investment in sectors with high levels of criticality, with D+ or below grades, could see approximately 1.6 million jobs created – with the largest investments in inland waterways.

Investment in primarily job-creating sectors, but still covering critical gaps where needed in infrastructure, would see around 3 million new jobs created. Focus in placed on investing in areas with high potential for jobs per $1 billion invested, including hospitals, seaports and airports.

According to the firm’s Jeff Hill, Senior Partner, “Maximising job creation, with a heavy emphasis on long-term jobs generating tax revenues that will help offset the up-front costs to taxpayers, should be a key objective of an infrastructure investment program.”

Hill, who leads BCG’s infrastructure topic in North America continued, “Strategic project selection is the only way to ensure the creation of millions of infrastructure jobs that offer high-quality, long-term employment across the US.”

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”