As we move forward into 2023, the infrastructure sector faces continuing challenges that have worsened in the post-COVID era. There is broad consensus on the solutions, but the pace of reform has been almost glacial. Martin Locke first introduced this UTS course in 2021, but as we approach Season 6, the need for reform is critical as we face the headwinds of the 2023 infrastructure landscape.
“Whilst there has been some progress at the project level, particularly around growing recognition of the need for a more collaborative approach, there has been no substantive overhaul of national guidance”. – Martin Locke (Adjunct Professor, Industry, UTS)
In this blog, we’ll explore the key questions surrounding infrastructure delivery and the pressing issues that demand attention and action. From project prioritisation to sustainability, investor preferences, risk management, and governance, we identify the crucial problems impacting the future of Australia's infrastructure development.
Are we prioritising the right projects?
Much has been discussed about prioritising projects with a good business case. So what needs to be demonstrated in that business case? Is it all about the benefit-cost ratio? Does the BCR consider all the social and environmental factors in addition to traditional economic analysis? Does the business case account for broader impacts around placemaking? And is the project clearly deliverable in the current heated infrastructure market? How will the current infrastructure pipeline stack up under the current reviews undertaken at the Federal level by Mike Mrdak and at the NSW level by Ken Kanofski? These critical questions necessitate a comprehensive understanding of the tools and processes designed to improve decision-making in the infrastructure sector.
How do we make the construction sector sustainable?
The Australian Constructors Association has been vocal about the pressing need for change. Contractors continue to fall into financial difficulty, with Perth builder Clough being the latest major casualty, falling into Voluntary Administration in late 2022. Continued challenges relate to low productivity and insufficient return to enable investment. How can industry culture be improved to attract the required workforce? And what initiatives can be accelerated to shift from adversarial to collaborative contracting? Jon Davies, CEO of ACA, has adopted the mantra, “Disrupt or Die” emphasising the imperative for the industry to embrace innovation and transformative measures to thrive in the face of these challenges. It is crucial for the construction sector to take a good hard look at itself, foster a collaborative spirit, and adopt forward-thinking strategies to ensure its long-term viability and success.
What do investors want?
Given the fiscal pressure on Government post-COVID, opportunities to leverage private finance are universally encouraged. But what do investors want? We need to look beyond narrow financial returns and assess the broader impact that an investment in infrastructure can make. How important is sustainability, and how is it measured? Is the infrastructure pipeline providing sufficient certainty of opportunities for investors? And how comfortable are investors with assessing project risks? Brian McGlynn, an experienced director of infrastructure SPVs says “rather than being fixated on financial returns, investors want to do something that is worthwhile with investment aligned with ESG criteria, integrity and a happy client”. This perspective underscores the importance of considering the social value of infrastructure investments and aligning them with sustainable principles, thereby enabling access to sustainable finance.
How well are risks being managed?
Media headlines continue to highlight cost blowouts. According to the Kerry Schott review, the cost of Inland Rail increased to more than $31 billion, compared with the last estimate two years ago of about $16 billion and well above initial estimates of about $9 billion. Sydney Metro and Western Harbour Tunnel are also subject to scrutiny. What have been the learnings from previous projects such as Sydney Light Rail? Are cost outcomes simply due to difficult unknown risks such as utilities relocations, Geotech, or unidentified contamination? Is there scope for improvement in early works, site investigations, and stakeholder consultation? These questions prompt a comprehensive assessment of project planning and implementation processes to identify areas where adjustments need to be made to enhance cost control and mitigate unforeseen risks. By learning from past experiences and implementing improvements in various aspects of project management, the infrastructure sector can increase the level of confidence in cost estimates and achieve better project outcomes.
Why is poor governance a perennial issue?
Infrastructure NSW has indicated that a third of Gateway review recommendations relate to governance. The Inland Rail review highlighted governance failings with a lack of adequate skills to oversee the project. The Sydney Trains review proposed governance reforms. If governance is an internal project organisational issue, why can’t proper governance structures be implemented up front? What does good governance look like? Chris Lock, an experienced infrastructure professional, highlights the importance of governance as the task of managing infrastructure becomes ever more complex, demanding a wider range of people skills. This emphasises the importance of not only technical expertise but also strong interpersonal and management capabilities.
Learn more:
Designed from a practitioner's perspective, UTS Open offers a comprehensive course, "Infrastructure Delivery: Time for a Reset," that offers an insightful and thought-provoking discussion of the challenges surrounding infrastructure delivery. This course encourages participants to adopt a curious mindset in forging effective solutions across the entire project lifecycle. Delve into the diverse perspectives of government, contractors and investors as you equip yourself with the tools needed to shape the future of infrastructure delivery.
Conclusion:
Infrastructure Delivery 2023 presents significant challenges that demand thoughtful consideration and effective solutions. Prioritising the right projects, ensuring sustainability, meeting investor expectations, improving risk management practices, and establishing robust governance structures are key factors shaping infrastructure initiatives' success. Addressing these themes head-on and fostering collaboration and innovation can pave the way for a resilient and prosperous future in Australian infrastructure.
Enrol now in UTS Open's course, "Infrastructure Delivery: Time for a Reset," to gain comprehensive insights, practical skills, and diverse perspectives for shaping the future of infrastructure delivery.
