- 28 Mar
Let’s have a conversation about Infrastructure….
What you will learn:
With NSW leading Australia in undergoing an almost unprecedented transformation of urban centres via transport infrastructure development and regeneration, it’s hard not to be bullish about the industry. So in the interests of stimulating debate by offering a somewhat controversial viewpoint, I’d love to have a conversation about the question: “What will the future of Infrastructure Projects Look Like in terms of Delivery Contracts?”
New Sam Wilko Advisory Blog by Peter Wilkinson
I was recently offered an opportunity to address the Swiss Chamber of Commerce over (a particularly nice) lunch. My role in this forum of senior finance and industry participants was to start a conversation about the future of Infrastructure in NSW. With NSW leading Australia in undergoing an almost unprecedented transformation of urban centres via transport infrastructure development and regeneration, it’s hard not to be bullish about the industry. So in the interests of stimulating debate by offering a somewhat controversial viewpoint, I put forward the following thoughts in the context of “What will the future of Infrastructure Projects Look Like in terms of Delivery Contracts?”
Over the last thirty years the transport and construction industry has seen a wide range of delivery methodologies applied, from Alliancing to hard-dollar design and construction contracting and almost everything in between. Increasingly, major transport projects are being delivered with significant private sector investment. Accordingly, we’ve seen a rise in popularity of the use of Public Private Partnerships for increasingly complex projects including lately:
- An extension of an existing “brownfields” Light Rail system, which will deal with significant services relocation in creating an extended service through a regenerated CBD in Sydney;
- A driverless heavy rail extension across urbanised areas of Sydney, integrated (from a customer perspective) with the existing rail network in Sydney;
- A major road expansion requiring significant construction in the existing environment across Western and Southern Sydney and – equally importantly – appropriate integration with the existing urban environment; and
- In Melbourne, a significant order for new trainsets for the burgeoning Melbourne rail network with a mandated “step-change” in content from local suppliers.
The financial discipline associated with Public Private Partnerships, the model currently preferred by Government in delivering major projects of this nature, is acknowledged by many to bring significant time and cost related benefits through efficient delivery. It is less clear however, the extent to which this model provides an effective mechanism in delivering best-practice ongoing infrastructure outcomes in terms of amenity, useability, customer and community satisfaction.
So to the lunch-time discussion points:
- Implications of the Public Private Partnership (PPP) delivery model for current / future projects:
PPP projects are long-term contracts with defined objectives to be met by the proponents that are subject to abatement-based payment mechanisms. The infrastructure associated with these projects will have significant effects on the immediate built environment as well as the broader transport network. These effects are:
a) difficult to forecast with precision over the medium to long term as they in turn are affected by changes to the surrounding network, associated land use changes etc and therefore
b) more problematic to include in performance incentivisation mechanisms and accordingly, unexpected negative outcomes are more difficult to mitigate within a PPP framework.
This gives rise to questions regarding how successfully these projects will ultimately meet the expectations of all stakeholders as well as the broader community over the medium to longer term.
- Industry capability development and implications for International suppliers:
The liberalisation and internationalisation of “bespoke” standards to which transport infrastructure must comply has been a welcome change for most industry participants. The resultant opportunities for increasing local participation in major projects by international contractors and consultants has provided a “wake-up call” to local players who now must face the challenge of increased competition.
The extent to which the industry settles to a new norm comprising participants fundamentally committed to delivering great infrastructure outcomes for the Australian cities they serve, will determine how well these changes serve the wider community.
- Status of key NSW Government Infrastructure Agencies:
Government Agencies perform a key role as the community’s representative in all phases of the lifecycle of major infrastructure projects.
With project complexity increasing at a rapid rate, Agency representatives are challenged in maintaining control over a nexus of political imperatives, stakeholder interests and private sector expectations. This provides real challenges for Agencies in attracting, retaining and nurturing scarce talent as a key source of capability for the industry.
SO what do you think the implications of all this might be?
I’d love to have a conversation about these thoughts, either in person or via cyberspace – your choice!
About the Author
Peter Wilkinson is a Director of SamWilko Advisory, a company that provides specialist consulting and coaching services to businesses in the transportation, construction and technical services industries. Peter believes that “business, like many of life’s challenges, is all about luck. The best business people work hard and smart and are well prepared for when the luck comes along”. Peter brings 25 years’ plus experience to helping entrepreneurs, business leaders and senior managers who wish to "get lucky" by implementing smart, effective and innovative strategies to better manage time, increase revenue and improve return on equity. Peter's expertise is in developing, implementing and managing transportation and construction businesses and major projects. He specialises in outsourced services and has extensive experience in both private and Government funded infrastructure involving procurement across the full spectrum of contracting methodologies. Peter has applied his asset and systems development and management expertise in the mining, transportation, defence, utilities, property and infrastructure industries both locally and overseas. Peter has refined his project development skills both locally and internationally. Peter has held Executive Management positions within Transfield Services, GHD Pty Ltd and Serco Asia Pacific and has previously held positions with UGL and in the Public Sector with NSW State Rail Authority (now Sydney Trains).