Observations on an Inquiry

In March 2022 the House of representatives Standing Committee on Infrastructure, Transport and Cities published the outcomes of its inquiry into procurement practices for government funded infrastructure, “Government Procurement: A sovereign security imperative”. In its opening foreword, the chair of the committee, John Alexander OAM MP, says:

“This inquiry became much more significant and timelier than first thought and therefore vitally important to the governing of Australia now and well into the future.”

The foreword leads with clear observations that:

·       That the predominance of men in the industry (88% of the workforce) is an opportunity cost which risks the long-term sustainability and capacity to scale up.

·       That the expediency of choosing lowest price has led to “real and possibly devastating consequences” including “diminished our capacity to deliver fit-for-purpose infrastructure, which now is presenting as a danger to our sovereign security”.

·       Risks associated with a lack of long -term planning for major infrastructure projects is leading to inefficiency and lack of industry capacity, especially to deliver billion-dollar projects.

The inquiry’s findings are not surprising.  Indeed, Chapter 1 contains an extensive listing of previous reviews and inquiries, their recommendations and subsequent general inaction by government.  

And the 8 specific recommendations in the report focus on the following well-trodden themes:

1.       Better planning and coordination of the infrastructure pipeline, with a 20-to-50-year strategic outlook.

2.       Adopt a more sophisticated approach to assessing value for money, considering factors other than price.  Specific recommendations are made to rewarding organisations who can show commitments to modern workplace standards and cultural reform.

3.       Establish mechanisms for monitoring and rating funding recipient’s performance and verification of whether projects are delivering value for money.

4.       Explore opportunities for standardisations on like projects.

5.       Explore ways to build local capacity, especially local tier two and three companies and SMEs

6.       Adoption of digital approaches, especially BIM.

So what really does stand out about this report then? 

The high level of consensus and cooperation between market participants.  It is noteworthy to see a joint submission by “Australian Constructors Association, Ai Group, Australasian Railway Association, Australian Institute of Quantity Surveyors, Australian Owned Contractors, Building SMART Australasia, Consult Australia, Engineers Australia, Infrastructure Partnerships Australia, Infrastructure Sustainability Council of Australia, Lean Construction Australia and New Zealand, National Association of Women in Construction National Board, Queensland Major Contractors Association and Roads Australia.” 

The report does provide insight into how the industry works as a system, holding participants in a range of practices and poor outcomes that we see repeated over and over again.  It is not illogical that the market’s response to disjointed pipeline, focus on price over value and significant risk transfer are adversarial practices to recover profit and underinvestment in people, technology and relationships.  One of the unstated barriers to change is the fact that the industry has built the skills and capacity to work in this system.

The report highlights a range of projects where owners have stepped up to lead change, including Sydney Water’s Project 13 enterprise model, Partnering for Success, and the Victorian Level Crossing alliance project.   What is powerful about these examples is that they show that there is a pathway for reform, that consistently features owner led, localised and uses collaborative practices and tools. 

And lastly, it is worth observing that the pressures in the industry are rising with the volume of $1bn plus projects coming to market.  The seemingly unrelenting attraction and preference for projects of this scale, whether for political, financial, and other reasons, is leading to a range of unintended consequences – including a significant shift in market shape, dominated by a small group of overseas owned participants, and increase in disputes.

The committee observe that “there is more work to be done”.  This language does not set the challenge or motivation for the reform called for, but as you look deeper into this report you can find the bad news that should motivate you to action together with some useful pathways for reform.