Over the past fifteen years, Australians have paid $28 billion more than they budgeted for on transport infrastructure because of government reliance on outsourced advice.
The Grattan Institute’s report, Cost overruns in transport infrastructure, reviewed 836 infrastructure projects valued at over $20 million and concluded that infrastructure decisions based on politics instead of public good lead to extreme levels of waste.
Professionals Australia commends the Institute on its report, adding that this level of waste is also the result of substantial outsourcing that has diminished governments’ ability to make smart and informed decisions.
“Taking the politics out of infrastructure decision-making isn’t rocket-science, it’s engineering,” said Professionals Australia CEO Chris Walton.
“Governments can win votes and build critical infrastructure without waste, but they must rely on long-term planning and comprehensive analyses by experts including professional engineers.
“By cutting engineering capacity over the last 20 years and relying more and more on contractors, Governments have effectively outsourced their purchasing capacity without retaining enough expert knowledge to know what they are paying for. Now we’re seeing the consequences to the tune of $28 billion.”
The report shows that over the past 15 years, 74 per cent of the total value of cost overruns is explained by the 32 per cent of projects announced early.
“Politicians need to stop turning to ribbon-cutting to save their skins. They’re listening to accountants who provide a budget figure and they’re running with it, but accountants aren’t experts in scoping infrastructure. That takes technical knowledge and experience. They should be listening to professional engineers.”
“This kind of margin, $28 billion, is more than the total cost of the first stage of WestConnex, the Sydney Light Rail, and the NSW M1 & M2 link combined. It’s money that could be going toward schools and hospitals.”
Professionals Australia’s 2016 report examining waste in the infrastructure lifecycle, Better Infrastructure, identifies the average cost-blow out for all infrastructure projects is 6.5 per cent, but increases to 21.2 per cent when the number of projects increases. The report also notes the Productivity Commission’s estimate that a lack of engineering capacity in the workforce is costing governments $6.2 billion per annum.
The report will be updated to include the Grattan Institute’s new figures.