The cost and scale of infrastructure development projects have gone up significantly in recent years even as many mega projects, particularly of INR 10,000 crores and above, are being announced with consistent regularity. 

Clearly, it is an imperative for any developing economy to have many such mega projects. Moreover, it is definitely the right time to do these projects. Though a welcome step for the economy, there are many aspects of infrastructural development projects that need a closer look. 

At the core of the matter, one finds three aspects that are relevant and important. 

1. Lack of accountability: 

One never sees any accountability for any of the claims made on these projects. A simple way of checking this would be as follows. These are just examples, but they are meant to demonstrate the concept of accountability: 

(a) In a situation where a particular business case projection falls short of objectives, is the consultant claiming that as a basis for the feasibility penalized? 

(b) Are the performance appraisals of officials supervising the projects directly linked to their fruition or qualitative completion? In other words, does a cost overrun result in financial implications for the supervising officials or project leaders? 

(c) Are false claims of the political leaderships ever held to any forms of public accountability? In other words, will leaders take blame for failures as much as they vie for credit of completed projects? 

2. Responsibility is a myth: 

There seems to be a continuous debate on who is responsible for specific things. There seems to be a push-push game between bureaucrats, contractors and political figures when it comes to owning up to the responsibility. One hardly sees a political figure resigning from his position by taking moral responsibility for mishaps or untoward incidents that happens under their watch. This also means that people are being taken for a ride, a free ride, in the name of responsibility.

3. Ignoring the shortfalls in results: 

Cost overruns and time overruns continue to plague infrastructure projects in the country. However, despite having an active monitoring cell at the leadership levels (Prime Minister’s Office and Chief Minister Offices), little seems to have been the impact at the ground level. Somewhere, it appears to be, the monitoring and control mechanisms are not delivering enough. 

The following three factors – improper monitoring and control, responsibility by convenience and absence of accountability – are a dangerous combination. They force us to question the strategies used in infrastructure projects. 

Infrastructure projects have been made much larger packages in recent times. The idea has been to accelerate the projects and deliver the best quality output, thereby, benefitting the country. To cope with the pace, the government restricted itself to work in certain areas only. However, certain issues continue to plague the projects. 

1. Land acquisition: This role has been retained by the government in many projects. And rightfully so. However, this exercise has had multiple fallouts. Despite being in the ambit of the government, land acquisition is among the main reasons for project delays today. And unfortunately, there are vested interests at play in most projects. For example, the high-speed Bullet Train project between Mumbai and Ahmedabad has been delayed due to land acquisition (among other things). 

2. Permits and clearances: The approvals required for large projects are often at high stakes. While larger project sizes make it possible for contractors to engage with supervisors at low marginal costs, the larger project sizes are more complex when it comes to permits and clearances. Certain clearances are open to public scrutiny. 

Therefore, even after a project is technically cleared, the clearance could be reconsidered at a later date. This is particularly relevant when the issue is fought between opposing political parties, the shifting of the Aarey Car Shed to Kanjurmarg and back being a recent example. 

3. Loss of scope elements: With multiple contractors, it is assumed that scopes that revolve around handovers are often difficult to fix in the contract. Also, project managers often feel relieved when they do not have to detail every little specification on the scope of the project. Thus, scope elements and their smooth execution is an important criterion. 

However, this does not absolve the fundamental aspect of scoping the project. In fact, this is one of the reasons why cost escalations are rampant in most projects. Municipal contracts for roads are a classic example as much as cases where there are multiple agencies like municipal corporations, industrial development corporations, highway authorities, etc. 

4. Insufficient management bandwidth: Most officials believe that a solution to ‘reduce’ their own workloads is to give projects to a single large entity. However, it is a known fact that the size of the entity or the project is not a good parameter to reduce their efforts. On the contrary, large projects with a single entity often become effective tools to camouflage inefficiencies on both sides. Hence, the notion is misplaced and incorrect. For example, one sees many road contracts where they are often required to be retendered because of performance issues.

5. Credit and speed money: Corruption when underwritten by political elements become a dangerous combination. Projects are often executed on borrowed money and this credit starts getting affected if there is a laxity, from the government side, to release payments or give clearances on time. Speed money, therefore, kicks in and this increases the costs and the risks of the project. 

These are some of the typical phenomena, issues and occurrences that one sees in large projects. 

Re-examining parameters 

The biggest justification that works as a ‘trump card’ each time is on the management bandwidth. To put it into perspective, there is always an argument about management bandwidth. It is believed that government establishments cannot be agile in scaling up or down. 

This is a misnomer. The rule books of government organizations are very similar to those of private organizations. Therefore, this stance is misplaced. One needs to debunk the theory that government machinery is relaxed and is intrinsically designed for less agile environments. 

There is no substance in this. If the rule books are pretty similar, it is only a matter of execution. However, the lead official who is crystal clear about everything that needs to be done suddenly turns shy – saying that he too is dependent on someone else for the outcome and has to take orders. The buck never stops here! 

Making the system a ‘scapegoat’ has become a trend. In fact, so much so that, even common citizens look at the government machinery with reduced expectations. It is unfortunate – and more importantly – totally misplaced and incorrect. A government that is dedicated to national interests can and does have the ability to be agile when it comes to ramping up or down from a project. In other words, agility is certainly not impossible and can be achieved if there is bureaucratic and political will. 

It is often argued that the supervision cost diminishes with the contract size. This is correct. The supervision effort of officials reduces drastically. He has lesser coordination meetings to hold with contractors and it makes his life easier. Unfortunately, his supervision effort is only a minuscule component of the overall supervision effort. And the overall supervision effort does not monotonically decrease with the contract size. 

On the contrary, it increases beyond a specific contract size. For instance, labour productivity drops when the scale of recruitment is high. Moreover, once contract labour requirement increases beyond a point, a lot of training and supervision is required to ensure a good level of quality. Moreover, surges in contract labour are not always easy to manage as, beyond a point, the labour force isn’t locally available. 

Hence, in all these scenarios, the overall project cost goes up. The only plus is that the official concerned has reduced his supervision effort though this is done at the cost of the project. 

The next parameter is probably the most self-contradicting one. Even if one chooses to agree to the concept of single-agency coordination as a gain for the bureaucrat, the current trend of mega projects shows a different picture. 

In many of the mega projects, one finds that the project value is too big for any single entity. Hence, most of these projects are bid using a consortium model. This has multiple negative fallouts. 

1. Single agency concept: The single agency concept goes for a toss in such cases. What began supposedly as a concept that meant to leverage scale for the contractor as well as the official is no longer so. In other words, there are few players to compete and bid for in such projects. Such a scenario is growth agnostic for an economy in multiple ways.

2. Consortiums mask individual performance issues: Many consortiums have agencies that may not performed well as individual entities. Just by the virtue of being in consortiums, these agencies seem to mask their performance issues and continue to stay on critical projects. 

3. Open invitation to foreign bidders: Large-value projects are open invitations for foreign bidders to take over projects. While the justification is that these are done for ensuring technical transfer and technology transfer, and so on, the fallout is often that the foreign player siphons out the profits at the cost of the local economy. 

4. Distancing the local SMEs:While large projects and large contract strategies are certainly not favouring local SMEs, the mega projects further distance these local SMEs from participating in the development of the country and economy. 

Therefore, mega projects contradict the supervision efforts argument and various other justifications made. This reeks of vested interests in most cases. The expectation from the government is to get SME involvement through the large enterprises working on projects. In other words, they believe that the larger enterprises and consortia would subcontract work to smaller players and fulfill the ‘quotas’. 

However, in doing so, one ends up creating additional middlemen. If a job was more suitable for an SME, the introduction of an intermediate entity through sub-contracting a large enterprise means that a lot of middleman expense is unnecessarily being added to the project cost. Further, SMEs often struggle in such cases due to ‘rate issues’.

Fundamentally, this happens because the larger enterprises keep squeezing the margins and the SMEs lose most of their profits in the process. 

In short, the trickle-down expected in the economy is abysmal. 

To put everything in a nutshell, the current philosophy of procurement is causing more damage to the economy than good. While it goes without debate that one needs these large projects and programmes for nation-building, the secondary objectives often raise concerns due to the mode in which these projects are getting executed. 

Accordingly, those arguing about the need and success of large-value contracting needs to justify the steep rise in parametric costs and the continued reports of project delays and cost overruns. Until these are statistically proven with real project data, the second opinion presented here holds a strong worth.

(Views expressed are of the author)