Building and maintaining civil and social infrastructure is a massive and complicated task. Yet it is an essential responsibility of any society. Developing countries strain to build enough new infrastructure to improve the living standards of their burgeoning urban populations, whereas developed ones struggle to maintain and expand existing infrastructure assets. These projects require cross-national and cross-sectoral coordination due to their scale, their impact on population and environment as well as their complexity of financing and governance. Since its inception in 2002, the Stanford Global Projects Center has conducted interdisciplinary research to improve financing, development and governance of infrastructure worldwide and collaborated with partners in over 40 countries. Professor Raymond E. Levitt, Director of The Global Projects Center (GPC), shares how the center has contributed to managing large-scale global projects by bringing together insights from diverse disciplines.
Q: How has the Global Projects Center evolved in the last 15 years to position itself as the nexus of academia, government and industry on managing global infrastructure projects?
RL: Basically, we aim to bring light, instead of heat, to enhancing the financing, governance and sustainability of global infrastructure, and our focus has been readjusted based on our evolving mission. In the beginning, my research primarily focused on cross-cultural challenges in managing global projects. To develop infrastructure is much more complicated than the construction process itself. It involves various issues around geopolitics, cultural and institutional difference between global participants, technology, and finance. To bring about a more holistic approach, we worked with a group of scholars from different disciplines including engineering, sociology, psychology, and economics.
To name a few key contributors, Professor Richard Scott from the Department of Sociology introduced frameworks of institutions and institutional difference and Professor Douglas McAdam in the same department provided insights on the rise of social movements and how to ease tension around global projects. The late institutional economist and Nobel Laureate, Professor Douglass North, brought his insights about transaction costs economics to our early work. Following the initial five year focus on cross-national institutional challenges, GPC became focused on the cross-sectoral nexus of finance and governance and how to line up multiple players such as engineers, institutional investors and infrastructure operators, along the value chain. The center’s main current focus is to tackle the very daunting financing and governance challenges related to the growing use of “Public-Private Partnerships (P3)” for delivering infrastructure as a privately financed and managed long term service concession, rather than as a series of infrastructure assets to be financed, procured and managed by governments.
GPC aims to bring light, instead of heat, to global infrastructure management.
Q. How do Public-Private Partnerships (P3) work and what are some of the benefits of introducing P3 to a large-scale project?
RL:At the GPC, we define a P3 as a contract between a government and a private sector company, in which the private sector company provides financing to develop and/or maintain public infrastructure as a long term service. Because the public and private sectors have very different institutional logics and motivations, P3s require a great deal of coordination and an integrated approach across their life cycles to deliver maximum value.
A parallel thrust is our research on Integrated Project Delivery (IPD), a form of alliance contracting with shared risks and rewards for all participants for delivering complex projects like airports and hospitals that are complex and may require significant scope changes as they are being built. As opposed to a traditional “design-bid-build (DBB)” that breaks down a large-scale, complex project part by part, IPD takes into account all disciplines' perspectives over the entire life cycle of the project including its maintenance. It not only enables people to work together with a shared vision, but has also been shown to be highly cost-effective on large projects that must cope with significant changes in scope as they proceed.
P3s can help solve two problems during the current global economic recession. During a significant decrease in infrastructure investment from public financing, P3s can be a valuable tool to develop and maintain infrastructure. Because a private party finances a 30-year design, construct, operate and maintain concession, P3s naturally incentivize a thorough analysis and carefully designed process throughout the life cycle of the project. Pensions can also invest in these projects to earn relatively high risk-adjusted returns with attractive cash flows that increase with inflation over terms of 30 years or more. This matches very well their pension obligations and can also help them to raise their currently lagging investment returns and resultant funding gaps that taxpayers increasingly have to fill.
Q. Who have you collaborated with globally to collect data and cases of P3?
RL:Our focus has moved from cross-national to cross-sectoral research over the past years. However, there are some key partners in different parts of the world that we have worked with. For instance, we collaborated with Indian Institute of Technology Madras in India to resolve institutional conflicts on Indian metro railway projects. Global companies in Finland including KONE Corporation, Nokia Networks, and shipbuilders and ports in the Baltic Sea, have also been our long-term corporate affiliates. For instance, we work together on designing the most cost-effective process for shipping cargoes through the ports of the Baltic Sea. We are also part of a global team of researchers that is collecting standard data sets on hundreds of large global infrastructure projects from 14 countries including U.K., Australia, Chile, and China to conduct comparative analysis on case studies from around the world.
The center has also engaged our undergraduate students in some of the international projects via summer research grants from the Vice Provost for Undergraduate Education. Graduate students also conducted research on water delivery and waste treatment projects in Jordan and Latin America to enhance the understanding and practice of delivering water infrastructure in developing countries.
Q. The center works with scholars and students from different disciplines and industries, many of whom have international background. How do they make the center to be more dynamic and open to different subjects?
RL: A key component of our research program involves analyzing international projects to distill global best practices for infrastructure development, investment, and management. We definitely have a multinational group of people with different expertise residing at the center. Half of our visiting scholars are from abroad and most of them have collaborated with international partners. For instance, Dr. Ashby Monk, our executive director received his advanced degrees in Oxford and Université de Paris I - Pantheon Sorbonne. He worked with the United Nations Environmental Program on universal energy access.
Among many of our scholars who have received global recognition, Emeritus Professor Richard Scott was awarded Eminent Scholar of the Year by the Academy of International Business in Bengaluru, India. Dr. Julie Kim, our P3 FLIPS Program Director, presented on the urban infrastructure development challenges of tomorrow at the New Cities Summit in Jakarta, Indonesia in 2015. All of their collaboration and recognition at the global level help center access more data and cases as well as network with scholars around the world.
Learn more about Global Projects Center.