A recent CEDA conference in Sydney headlined “Is Australia’s Big Infrastructure Build Delivering Value?” coincided with the 21 March 2022 release of Infrastructure Australia’s report on “A roadmap to a more productive and resilient future”
A fair amount of the discussion was high-level, identifying well-known challenges facing the industry including win/lose rather than collaborative behaviour, challenges in harnessing innovation to improve industry productivity, and slow progress regarding cultural reform with respect to diversity and inclusion. Of particular note, the war for resources – with the Australian Constructors Association referring to a shortfall of 105,000 construction workers by 2023 – has morphed from East Coast transport infrastructure versus Western Australia mining industry challenge to an international competition for labour. I can’t help thinking the issues I’ve just touched upon are inextricably linked.
Amidst the various interviews, round table discussions and workshops were a few gems I’d like to share.
Collaboration in theory involves project owners and contractors working together for the greater good of the project and the industry in general. The broad consensus was that collaboration from an industry perspective, currently sounds like project owners appropriating good ideas from contractors and reflecting these back to the market in competitive tenders.
Similarly, innovation should be about contractors raising opportunities with project owners to achieve better project outcomes. What this sounds like in current practice is “it’s too late and in any case too hard to change the design/environmental approvals etc”.
In these circumstances then, who needs to make the first move in shifting current industry behaviour?
It seems obvious to me that the onus is on project owners – largely Government buyers in the infrastructure engineering and construction game – to take the initiative in leading change.
What should be tackled first?
One refreshingly plain-speaking interviewee proposed a range of key success factors for major projects based on international best practice. Two of these stood out.
The first success factor concerned clients demonstrating an up-front commitment to collaboration. This starts well before the development phase of individual projects and involves clients making longer term commitments to a smaller number of key contractors, rather than considering the industry as an endless source of new options. This approach enables trust-based relationships to be built over multiple projects. Trust in turn creates the environment for transparency between the parties, a critical behaviour enabling the inevitable problems on a given project to be identified early and solved in an equitable manner.
The second key success factor concerned alignment of incentives. Contextually, this looks like an owner achieving a project outcome on time and under budget at the agreed level of quality. What this should look like for the contractor, is maximum profit as the result of achieving the client’s desired outcome. My takeaway from this is that much of the current industry focus on debating the prevailing contract models – fixed price, Public Private Partnership based project frameworks versus more alliance-based regimes – risks missing the point. The intent of the parties needs to drive the selection of an appropriate contract model for a given project, not the other way around.
The final point of interest concerned industry productivity, which previous readers may recognise as a key topic of one of my earlier articles
In the article I quoted a NSW Treasury green paper titled “Productivity drives Prosperity” as follows:
“Productivity is the most powerful tool we have for improving our economic wellbeing. It represents the organisation, capital and technology we apply in the production of the things we need and want…” and
“Our future prosperity depends upon how well we do at growing more productive – how smart we are in organising ourselves, investing in people and technology, getting more out of both our physical and human potential.”
Productivity as currently measured, concerns the extent to which labour and capital investments are efficiently utilised in generating economic growth as measured by Gross Domestic Product (GDP). What labour and multi-factor productivity indices do not capture however, is the social or environmental impacts associated with improved efficiency.
As the engineering and construction industry embarks upon a massive infrastructure investment quest to achieve net zero emissions, this question regarding the effectiveness of infrastructure investments will be a key measure to capture and manage. Why? Because what cannot be measured is likely to prove difficult to manage…