Insight - Major Infrastructure Program Delivery Capacity
Today, the Victorian Attorney General’s Office published a Report “Major Infrastructure Program Delivery Capacity”.
The report answers the question: “Are relevant public sector agencies strategically planning the material and human resources needed to deliver Victoria’s major infrastructure projects?” The importance of this question is underscored by the “dramatically” expanded project pipeline that has occurred since 2016 which is leading to intense competition for workers and material resources.
The report’s conclusion is that [my emphasis]:
The audited agencies are not sufficiently strategic in planning for the material and human resources they need to deliver major government infrastructure projects. The consequence of this is that the risk of cost overruns and delays will be higher than it needs to be.
The agencies have identified potentially critical resource shortages and risks. However, there are significant gaps in the information they use to assess and address these shortages and how they coordinate this work.
As a result, no agency fully understands the construction industry and public sector's ability to deliver the government’s pipeline, or how effective their work to mitigate resource shortages is. The agencies' advice to government does not consistently disclose the extent of these knowledge gaps. This reduces the reliability of their advice to the government about these risks.
And to get to some of the more specific nuggets in the report:
On page 3, it is recognised that in 2020 the DoT “does not have enough re-use, treatment or landfill sites available to manage the rapidly increasing volumes of contaminates spoil that the government pipeline is generating”.
Page 8 and 9 discuss the lack of coordination between agencies of the pipeline to assist with understanding the delivery risks this will create or how to mitigate those risks.
There is no understanding if any of the actions taken to date are in fact addressing capability shortages in the agencies.
And to quote this from page 15, again my emphasis:
DoT does not have consolidated information about all aspects of delivery capability and capacity across the transport pipeline. DoT advised us that it is not funded to produce or consolidate this information, and its focus is on individual projects’ scopes and costs. It instead relies on construction firms to secure the necessary resources required to deliver the projects.
And my initial thoughts on the immediate implications for those looking to deliver upcoming projects:
Analysis of risk on a standard project by project basis will not account for the systemic market wide risks that this report has exposed.
The risk of being able to deal with contaminated soil is typically transferred down the supply chain, yet we now know that their actual ability to deal with contaminated spoil is constrained with limited options for mitigation.
A focus on individual projects and the reliance on industry to provide the resources needed to deliver projects omits a fundamental and underlying risk to project outcomes - being the owner’s capacity and skills. To quote the report “Transport agencies do not have the experience and skills needed to develop, procure and oversee the projects.”
This report is hard and confronting reading. It perhaps has shone a light on what many of us suspected.
Whilst it is good to see that the recommendations from the report have been accepted by the relevant government departments, I also hope it triggers a different approach to how we deliver projects and manage and allocate risks. A continuation of current practices to use very risk adverse, hard dollar contracts will not lead us to better industry outcomes.