Australia’s infrastructure productivity problem is being locked in from the start, CEDA warns

A new CEDA directions paper, produced in partnership with WSP, finds that poor risk management practices, contract complexity and fragmented procurement processes have contributed to infrastructure projects running over time and over budget. 

Building what Australia needs: lifting productivity in major infrastructure draws on roundtables with senior leaders from industry, government and investment across the water, energy, resources and public infrastructure sectors.

The directions paper identifies several drivers that have contributed to construction productivity falling 7 per cent below where it was over three decades ago.  

It finds projects are often committed to before they are well understood. While only a third of mega projects are announced prematurely, they account for more than three-quarters of total cost overruns. Contractors are then asked to price risk with too little information, and when risks land the cost returns to government through settlements and disputes.

Complexity is compounding the problem. For example, Queensland's construction procurement framework alone spans more than 15 documents and 1,000 pages. Meanwhile only around 14 per cent of engineers now work in the public sector, leaving governments less able to act as informed buyers.

The paper calls for:

• Earlier collaboration between government and contractors to map and fairly share risk, including the upside;
• Programmatic procurement that packages similar projects into a sustained pipeline;
• Simpler, nationally consistent contracts and procurement processes;
• Standardised, repeatable designs and mutual recognition of components across states and territories.

"Australia's prosperity depends on building the energy, transport and housing infrastructure we need quickly and cost-effectively, but too many major projects are costing more, taking longer and delivering less than promised," Jonathon Mahon, Economist, from CEDA.

"Right now governments are paying contractors a premium to carry risks they can't absorb, and then paying again when those risks land. That cycle is draining resources from delivery and leaving industry without the margin or certainty to invest in better ways of building.

"We need a genuine partnership between government and industry, with risks mapped early and shared fairly, and a steady pipeline of similar projects so each one can learn from the last. Victoria's Level Crossing Removal Project shows what's possible when we get this right," Jonathon added.

The project packaged similar crossing removals together and encouraged standardisation. It met its target of 85 removals by 2025 ahead of schedule and has since been expanded to 100 crossings by 2030, with the average cost per crossing falling from $191.8 million to $180 million.

“Australia doesn’t have an infrastructure ambition problem. The challenge is creating the conditions to deliver it productively and efficiently,” Greg Kane, President and Managing Director, WSP Australia said.

“Major projects today are being delivered in an increasingly complex environment, with more requirements, interfaces and competing objectives to manage. Simply pushing industry harder isn’t the answer. We need to simplify where we can, create greater certainty earlier and be clearer about the trade-offs we’re willing to make.

“If we get those settings right, we give industry a better chance to invest, innovate and ultimately deliver more from the capital and capability Australia has available.” 

The paper complements CEDA's existing work on approvals reform and workforce supply. It is available at here. 

ENDS

Jonathon Mahon and Greg Kane are available for further comment and interviews.

CEDA Media contact: 
Lisa Harmer, Director of Communications and Advocacy
Mobile: 0436 379 688 | Email: lisa.harmer@ceda.com.au

WSP Media contact: 
Josh Berry, Head of External Communications
Mobile: 0439 237 308 | Email: Joshua.Berry@wsp.com