How Infrastructure Construction Companies Work
Infrastructure construction and civil engineering companies build large buildings, bridges, dams, pipelines, road networks, ports, railways, and aqueducts. There are a number of segments within the infrastructure and construction industry, ranging from homebuilders to companies who support massive government-funded projects. This overview is focused on the companies involved in the largest projects, which take years to build and can remain in service for decades.
Infrastructure takes a long time and a lot of money to design and build. Projects are generally built to support a fixed maximum use or population and have a finite lifespan. This results in a challenge for public and private sector planners to accurately predict population density and infrastructure usage on a forward-looking basis, to ensure that they build systems to support populations 10-30+ years in the future.
Public-Private Partnerships
Large infrastructure projects are generally public-private partnerships to some extent, as their duration and capital requirements often require government sponsorship. These projects also tend to involve public property or public goods such as water, power, and transportation networks. In the United States, we are seeing more private infrastructure in the form of toll roads and power plants, but the large infrastructure sector is still predominantly government sponsored.
Public-private partnerships are often necessary, but they are structurally flawed because they separate the buyer (government) from the user (citizens), which can distort pricing mechanisms and result in excess capacity – or the inverse. This challenge occurs in several sectors, including healthcare, A&D, education, and some areas of public administration. Managing public-private partnership programs in such a fashion to minimize these distortions requires training and skill on both sides of the partnership.
Private Development
Although most large infrastructure is developed via public-private partnerships, there are private companies who undertake large development projects without government sponsorship. For example, large commercial and residential complexes are typically private projects. In big cities and megacities, these can be multibillion-dollar projects that incur many of the same risks as large infrastructure projects.
Privately funded projects are higher risk than public-private projects, as the company incurs all the risk of underdevelopment or overdevelopment. This is why the largest of these projects are typically found only in the heart of major cities, where companies can be confident in stable long-term demand projections.
Technology
The infrastructure and construction industry is constantly innovating from a technology perspective. In some cases these technologies are new materials; in other cases they are process- and technique-based innovations. Companies have to balance innovation with safety and risk, which is why this can be one of the slower industries to adopt higher-risk new technologies.
Testing, systems integration, and program management software is another category of technology that is very important to infrastructure and construction. Tools such as building information modeling (BIM) allow more efficient planning, design, and model-based testing that help builders optimize space and decrease mistakes.