SUNBIZ

Total Cost Of Infrastructure Projects

I have received plenty of feedback on the recent articles that focused on costs-related to roading projects. Last week I talked about how the capital (up front) cost of building
20 Sep 2014 12:22
Total Cost Of Infrastructure Projects
Prime Mnister Voreqe Bainimarama with his delegation, officials and stakeholders during the commissioning of the Raviravi Village eco-seawall in Macuata on September 30, 2020. Photo: Shratika Naidu

I have received plenty of feedback on the recent articles that focused on costs-related to roading projects.

Last week I talked about how the capital (up front) cost of building a road, or any other asset for that matter, may be only a small part of what it will cost over its lifetime.

Understandably, there is a lot of interest in where money is being spent so I will continue the ‘where does the money go’ theme with a look at what makes up the capital cost for an infrastructure project.

I will use the example of building a new bridge to provide access for a community across a river.

What are some of the factors that affect the cost of the bridge and what other costs might we incur over and above the cost of building the bridge?

Cost of construction

There are numerous factors that affect the cost of construction.

If we take the example of a bridge the location of the bridge can have a very large bearing on the final cost. Here in Fiji we have many bridges in very remote locations.

A bridge that requires carting materials and equipment into the highlands will cost considerably more than if that same bridge were built on the outskirts of Suva.

Consider that it may take six months to build a bridge in a remote location.

We may have a lot of extra cost associated with accommodating our construction crews – where if the project is in the city they can go home at night.

Location is not just about geographical remoteness either. A bridge that we build in a coastal environment will have a different design to one built inland.

Why? Because the harsh salt-laden air in our coastal environments attacks concrete and steel so the design must take this into account with stronger, thicker concrete and perhaps stainless steel fixtures.

Other costs we might incur

A very common cost that is incurred as part of building infrastructure is the purchase of land.

This is again very dependent on location simply because land values vary from place to place.

Acquiring land to build a bridge in Nadi is likely to cost us far more than the same area of land in Bua.

Associated with land acquisition is the cost to have a valuation done, to have the legal titles prepared, and so on.

Also very common and often very expensive is the need to replace or relocate other utility services such as water pipes or electricity lines.

In these more enlightened times we are also very conscious of our natural environment and we have rules and regulations to protect the environment.

For most infrastructure projects that means that before construction commences we must have an environmental management plan in place and during construction we must do what is necessary to manage the effects.

For instance this might mean we need measures to stop silt entering waterways.

Technical expertise

I highlighted above some of the reasons a bridge in one location may cost more than the same bridge built in a more forgiving environment.

How do we know what is the appropriate design?

Of course we engage people with the skills and qualifications to undertake the design.

Typical design fees are in the order of five per cent of the value of the construction works but we can again understand that this may increase or decrease depending on a range of factors.

If we need to send a survey team and designer to an outer island for example there can be significant cost incurred that wouldn’t be incurred for the same project being undertaken in Suva.

Construction monitoring or ‘supervision’ is another area that requires technical expertise and a general rule of thumb is again around five per cent of the project cost.

But again there are factors that can increase or decrease this proportion. Location of the site is noted as one factor.

The capability of the contractor may be another factor.

To manage the risk of poor construction, it may be necessary to have full time supervision of a project if the contractor does not have a lot of experience.

Whereas, a more experienced contractor with an excellent history of delivering quality products may not require such extensive oversight.

In totality

As can be seen there are many factors that affect total cost of delivering infrastructure projects over and above the cost of construction.

It is very important that these external costs are considered early on in project development because they can be a significant proportion of total cost.

At Fiji Roads Authority, our mission is to give the decision makers the best information available.

In the case of project cost estimating, we always try to include as much information about total cost of the project as we can to ensure there are no surprises further down the track.

–  Neil Cook is the CEO of the Fiji Roads Authority. This is his regular column be published by the Fiji Sun on Saturdays.

 




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