An Infrastructure Led Economic Revival

The COVID-19 pandemic has rocked the world in the way we live our lives. Anxiety for our personal and collective health, jobs, and our future security is widespread. Economies around the globe impacted by the pandemic are experiencing sharp recessions that we have not seen for many years.

But, with every negative there is a positive. History tells us that every crisis allows us to stop, review, re-evaluate, and implement positive changes to realise the opportunity that we would never have foreseen otherwise.

Fortunately, within the infrastructure industry, we are blessed with a current work pipeline that is healthy and continuing. However, in the context of a financial recession, it is incumbent upon Industry to improve project outcomes. We need to create even more jobs. Job creation will arise from expanding our infrastructure program, retaining current jobs, and creating new. We need to be able to afford the additional investment and step-change current project financial performance. Economists understand the correlation of infrastructure investment to stimulate the economy.

The vexed question is, where is the money coming from to fund the required investment?

The challenges ahead are many, and Industry engineers, construction and maintenance professionals must collaborate to find better ways of delivering projects. Governments must also work together and listen to Industry professionals and private funders to provide surety of an infrastructure program to stimulate the economy, enhance sustainability, and avoid disruption through politicisation. We should view this crisis as an opportunity, not only to create new jobs but to also provide a higher return on investment for government and private funders.

In Australia, we were experiencing an infrastructure boom before the pandemic. The Industry was struggling to catch up with a back-log of projects due to underinvestment in infrastructure for many years. Some of the megaprojects have been under stress with time and cost pressures. The opportunity now exists to recast how we develop and deliver our infrastructure program, spreading the industry load to cope with demand pressures while delivering projects more efficiently.

Agonis Group, through our unique background in construction and infrastructure renewals, working for both contractors and government clients, would like to offer our perspective in realising some of this opportunity.

Budgets And Project Efficiency

Continue the planning, development, procurement, and delivery of the massive megaproject pipeline across Australia. Governments and Industry have responded marvellously to the megaproject build across Australia, in a very compressed period. The learnings gained from this accelerated investment are gold and should be shared across Industry as we continue to drive down cost, maintain public confidence, and raise the return on investment.

Governments must continue to invest in long term infrastructure builds, beyond the current committed pipeline. Stalling the planning and development of new megaprojects will undo all the investment we have collectively made to date and will continue the economic mistakes of past boom and bust cycles. Underpinning improvement in project efficiency and public confidence will be through enhanced risk identification and management. The various procurement forms of design and construction (D&C), alliances, early contractor involvement, construct only, managing contractor contracts etc. are just that – procurement mechanisms. They do not necessarily reduce project risk outcomes. Due to short planning and development timeframes there is often insufficient risk identification, mitigation, and knowledge sharing prior to procurement. We have also experienced that private investment through mechanisms like PPP’s does not reduce government risk on linear infrastructure projects.

Megaprojects require significant development periods before procurement to identify linear risks from vital utilities, geotechnical, environmental, and third-party stakeholders. Greater focus on constructability, maintainability, and operability during the design development phases is required. The lessons learned from other megaprojects, incorporating people with actual construction and maintenance knowledge with estimators, designers, and planners, will ultimately identify and mitigate more risk on these megaprojects before the procurement phase. The subsequent residual commercial risk will become easier to manage, enabling projects to be completed on time and within budget. Operating within a collaborative framework of continuous risk improvement across intergovernmental delivery entities will continue to enhance the development phase – resulting in reduced project costs – a fundamental priority for our economy.
In summary, future megaprojects should have more extended development periods and incorporate the people who have experienced “first-hand” construction and maintenance knowledge to share the lessons learned.

Of course, longer planning and development periods will aid in future budget confidence, and project efficiency, however, will not provide the economic stimulus required now.

Job Creation And Economic Stimulus

Aside from continuing with the current roll-out of megaprojects across Australia, we also need to invest in additional “shovel-ready” projects to get immediate new job creation. Extending the pipeline investment to tier 2 and 3 contractors on smaller bite-sized projects will open new job opportunities. Interface risk between projects and supporting these contractors could be managed by people with actual construction and maintenance knowledge to reduce risk.

Where we invest is also critical; upgrading and renewing our existing rail and road infrastructure will give immediate stimulus to local supply chains. Simplifying and streamlining business cases and projects where there are minimal environment and stakeholder approvals, no land acquisition, and shorter procurement processes, will accelerate new job creation. It will also provide greater assurance for customers and users and the security of assets for generations to come.

Pipeline Consistency And Depoliticisation

Government and private funding for future megaprojects are essential for realising the hidden investment we have already made in better understanding risk allocation, the training of our people, and in the development of new systems and promoting innovation. Surety in a consistent pipeline of work will result in significant reductions in project cost; the keywords for Industry being consistency and confidence.

The development of new megaprojects will be crucial for the future sustainability of the infrastructure Industry. However, we must achieve even better returns of investment. We cannot just keep spending money and increasing budget deficits or accessing the pool of superannuation funds without assuring a more significant investment return.

The recognition of adopting infrastructure reform is the opportunity now for future megaproject planning and investment. Integral to infrastructure planning is the depoliticisation of project priorities. The national interest amid financial debt, job creation, and future long-term Industry sustainability priorities will be aided by intergovernmental cooperation.

During the COVID-19 crisis, governments of all political persuasions have heeded the advice of health professionals. Australia’s coordinated health response has been the envy of the world. A similar opportunity exists to rebuild our impacted economy by being guided by our engineers, economists, and transport planners. We must depoliticise critical infrastructure priority decision-making. Our industry experts should lead long-term land use planning, development priorities and investment sources. Perhaps extending the National Cabinet to coordinate an infrastructure-led economic recovery is a good idea?

Our Commitment

Agonis Group will work in collaboration with government departments, private funders, contractors, designers, operators, maintainers, and other consultants in sharing our “hands-on” construction and maintenance knowledge to:

  1. Assist in the development of future megaprojects to identify and mitigate risk before the procurement allocation phase. We will do this by sharing our commercial, constructability and asset knowledge with all Industry participants.
  2. Lead the project interface management to advance the tier 2 and 3 Industry in developing capability and risk management.
  3. Work enthusiastically with operators and maintainers on managing the emerging renewals pipeline.

Agonis Group looks forward to working with all Industry participants in bridging the capability and knowledge gap, and in rebuilding the Australian economy.

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