Developing Smart Cities

Dr Rupert Booth
Developing and delivering smart city projects will hinge on the ability to create robust business cases.

The concept of smart cities has emerged as a focus of global research and debate in recent years, engaging governments, city authorities and businesses in the quest for improved city living. Whatever their level of maturity or priorities for development, cities face common challenges around maintaining economic growth, and meeting the needs of increasing and/or aging populations while reducing use of resources.

Although there’s no universal definition, the ‘smart’ city has become the recognised term for the future city, displacing the sustainable city and the digital city. It describes ICT-led urban innovation, and new modes of governance and urban citizenship. Typical themes include integrated urban planning, diversifying the urban economy away from climate sensitive sectors, sustainable transport, management of water and waste, alternative energy and new building design.

...the ‘smart’ city has become the recognised term for the future city...

The challenge is to turn these aspirations into robust plans, and this typically means collaboration between government, city authorities, businesses, academia, users and other stakeholders. The funding of smart city initiatives, products and services requires new ways of working and new financial and governance models. Funding is needed to test new products and initiatives, but determining who pays is problematic.

Cities will have to devise strategies for attracting capital to their smart projects, with most investment likely to combine private and public funds. Successful initiatives will depend on creating shared goals between all stakeholders.

The appraisal of investments in smart cities is unusually complex, however, as the public and private sectors evaluate proposed schemes differently. In the private sector, the preferred approach is based on discounted cash flow; in the public sector, cost benefit analysis is used to consider a wide range of factors, including social, environmental and many other non-monetary effects.

The smart city model hinges on cross-functionality and the development of new collaborative operating models...

The traditional operating model for a city has been based around functionally-oriented service providers working within unconnected vertical silos. The smart city model hinges on cross-functionality and the development of new collaborative operating models, with joint working between departments and across boundaries. This requires strategic planning and a culture change, and both should be explicitly addressed through a change management programme. Quantification of success is essential and key performance indicators have been published both in international standards, e.g. ISO37120, and in dashboards for individual future city programmes, e.g. Abu Dhabi 2021 Vision.

Financial appraisal is an important part of any change programme and this must also account for the wide array of implementation risks, which include those associated with public IT implementation, the social and behavioural changes needed and the misalignment of multiple stakeholders. The appraisal must therefore explore, evaluate and account for the risks of these uncertainties and their potential impact on costs, benefits and revenues.

Faithful+Gould leads business case appraisals on a variety of smart and sustainable city initiatives, including energy, transport and assisted living. We advise finance and planning ministries across the globe on the most appropriate infrastructure investments to support the growth of knowledge based economies.

We additionally advise on innovative financial solutions for capital projects based on Public Private Partnerships. Our technical expertise is also relevant, in the development of Building Information Modelling (BIM) systems that support clients with lifecycle analyses of investments, looking at both carbon and cost performance, and the subsequent optimal management of the facilities.

At project level, we are advising on the effective operations and maintenance of infrastructure networks, based on whole life costing and value based contracting principles. Our property sector portfolio includes building control systems commissions, ensuring that buildings respond to a changing environment and user requirements.