The Productivity Commission has taken a keen interest in the evidence Professionals Australia members provided recently on the challenges facing infrastructure delivery.
Professionals Australia CEO Chris Walton said, “It was extremely pleasing to see the Productivity Commission recognise the specialist nature and wealth of knowledge that our members possess on all aspects of infrastructure delivery.
“The evidence our members provided to the Commission was rare in that it was significant, first-hand and careful. The Commission respected it as such, and took diligent note of what members had told us.
“I would encourage all members to read the member evidence that Professionals Australia provided to the Productivity Commission. It provides insight into the type and scale of challenges that members face in their daily work, and it provides a blue print for what needs to be fixed.
The evidence was given as part of Professionals Australia’s response to a request for information from the Productivity Commission’s Inquiry into Public Infrastructure focussing on two areas: The skills of public sector clients to manage contracts for major infrastructure projects; and the potential benefits of creating special-purpose agencies to conduct infrastructure procurement on behalf of government.
Appearing before the Commission, Professionals Australia argued that industry; government and stakeholders are now in agreement that governments have become uninformed purchasers of infrastructure. Further, stating that a lack of engineering knowledge and expertise in government agencies was now driving waste, disputation with the private sector and project delays.
Chris Walton said, “We commend the Productivity Commission for a number of its recommendations, including those which aim to reduce risk for the private sector and encourage movement towards early contractor involvement.
“We believe that private sector involvement is vital in maximizing the use of limited taxpayer funds and also in driving innovation. Both innovation and cost effectiveness is maximized when the private sector deals with a resourced, informed purchaser in government, and when both government and contractor work together, to agreed scope and delivery frameworks, as a team.
The transcript from the Public Hearing has now been published. To see what Professionals Australia had to say, click here.
It is not just us saying this
Professionals Australia submitted further case study evidence to support there being a lack of public sector capacity in Australia, with the following:
Infrastructure Co-ordinator, Infrastructure Australia
The Infrastructure Coordinator, the statutory office holder that supports Infrastructure Australia, has reported that, “on average, 48 per cent of projects failed to meet their baseline time, cost and quality objectives.”
The same report “estimated that based on: public and private infrastructure investment of $215 billion; the best case project success rate of 52 per cent; and with a conservative average cost overrun of 40 per cent the potential wastage of capital is in the order of $30 billion per annum”…
“There are deficiencies evident at all parts of the ‘infrastructure chain’ – planning, problem identification, policy development, option identification, modelling, project identification, approvals and contracting” and that “Attracting and retaining staff qualified to manage probity processes and monitor projects will reduce the cost of projects”.
The Australian National Audit Office (2014)
In writing to the Senate Committee examining the Commonwealth’s procurement of infrastructure the ANAO stated that “In some cases, procurement processes examined by the ANAO were not adequately supported by a planning process which was appropriate to the scale and risk profile of the procurement. Insufficient planning and scoping for major capital works projects has resulted in unreliable estimates and delivery timeframes”.
The Senate Inquiry, ‘The shortage of engineering and related employment skills’ (2012)
Stated that between 1984 and 2005 “the percentage of electricity, gas and water supply industry employees that are in the public sector dropped from 95.9 per cent to 54.7 per cent. In the construction sector this dropped from 12.2 per cent to 0.5 per cent”… “(G)overnment departments, having shed their engineering staff, now lack any real in-house engineering expertise”. “The committee received evidence suggesting that a number of infrastructure projects across Australia experience delays and cost blow outs”.
In evidence to that same Senate Inquiry stated “that $6billion a year is ‘wasted on disputation in projects across Australia’” and noted “that much of this expense is borne by taxpayers, as many, if not all, large projects are commissioned by governments”. And that a lack of public sector expertise meant “(c)ost blow outs are inevitable because of extensions in project delivery time and thus wages, the cost of re-engineering, changes to hardware requirements, not to mention the loss of public reputation due to late delivery of essential services”.
The Australian Constructors Association (2012)
Gave evidence that “professional engineers employed by public sector departments and agencies are responsible for bringing infrastructure projects to market” and quoted research they commissioned by Blake Dawson, which noted “the inexperience and insufficient levels of competence of those preparing scope documents are clearly identified… as the most significant contributors to inadequate scoping”. This same research found “52 per cent of respondents (drawn from across sectors, public and private) to Blake Dawson in 2008, “felt their project was not sufficiently and accurately scoped prior to going to market”, an increase of ten per cent from the same survey in 2006. This caused “cost overruns (61%), delayed completion (58%) and disputes (30%)”, with “26% of the $1 billion+ projects surveyed being more than $200 million over budget”.
The Building the Education Revolution Implementation Taskforce Final Report
Stated that “there is a correlation between states capacity to leverage existing public works capacity and their overall value for money outcomes”, specifically outline a decline in engineering capacity in the public sector and identify that the “rebuilding of capacity in several roads agencies may represent a cautionary tale… and may therefore be an indication that a significant level of in-house expertise is beneficial in ensuring that governments get value for money over the life of an asset”.