Public Infrastructure Report

17 July 2014

The Productivity Commission’s report on Public Infrastructure provides very detailed analysis and identifies way to improve procurement and outcomes.

ACA welcomes the release of the final inquiry report of the Productivity Commission into Public Infrastructure. The report reinforces ACA’s view that there is significant scope for improvement in the procurement of public infrastructure.

A series of findings in the report are highly relevant to the architectural profession:

  • It emphasises the need for specialist expertise within government coupled with sensible risk allocation and ways to encourage innovation.
  • It shows how architectural and engineering services are leading export of their services overseas.
  • It strongly recommends more time and money be spent at the design phase of a project to achieve the best value for money outcome
  • It recommends the implementation of Building Information Modelling (BIM) on projects and discusses ways governments can assist in an orderly implementation of BIM through standardisation and cooperation across the different sectors of the construction industry.
  • It encourages collaboration and early contractor involvement while at the same time discusses ways of reducing bid costs.

The report challenges architects to articulate the value of their services throughout the construction process, but in particular at the early stages of design. Architects must work to be leaders in the uptake of BIM and in collaborative models of working to ensure we achieve the best public and social infrastructure possible in Australia.

Key points from the full report

The very detailed full version of the report is found on the Productivity Commission website. This makes the following key points:

  • There is an urgent need to comprehensively overhaul processes for assessing and developing public infrastructure projects.
    – There are numerous examples of poor value for money arising from inadequate project selection, potentially costing Australia billions of dollars.
    – Additional spending under the status quo will simply increase the cost to users, taxpayers, the community generally, and lead to more wasteful infrastructure.
    – Reliance on the notion of an infrastructure deficit, too, could encourage poor investment choices.
  • It is essential to reform governance and institutional arrangements for public infrastructure to promote better decision making in project selection, funding, financing and the delivery of services from new and existing infrastructure.
  • Well-designed user charges should be used to the fullest extent that can be economically justified. However, governments will have to continue to fully or partly fund some infrastructure projects and address equity issues.
  • Significant institutional and longer-term road pricing arrangements will create more direct links to road users, taking advantage of advances in vehicle technology.
  • Private sector involvement in infrastructure provision and/or financing delivers efficiency gains only if well designed and well implemented.
    – Private financing is not a ‘magic pudding’ — ultimately users and/or taxpayers must foot the bill.
    – Government guarantees and tax concessions are not costless and often involve poorly understood risks.
  • Governments will have some capacity to fund more projects than under current fiscal and debt management practices, provided the reform package in this report is implemented to ensure the selection of projects with strong net benefits.
  • Data problems limit analysis and benchmarking. A coordinated and coherent data collection process will address this and improve future project selection decisions.
  • Nevertheless, there is evidence of recent significant increases in the costs of constructing major public infrastructure in Australia. Elevated labour costs due to the mining construction boom has been one factor, but no single input has played a decisive role in cost increases.
  • Until recently, labour productivity growth in the construction sector generally has been sluggish. There is no conclusive evidence that Australian levels of productivity in construction are significantly different from other developed countries.
  • The industrial relations environment in the construction industry remains problematic, mainly in general rather than civil construction, with the problems much greater for some sites, unions and states. Governments can use their procurement policies to drive reform, and penalties for unlawful conduct should rise.
  • Despite significant concentration in the market for large public infrastructure projects, the market appears to be workably competitive today, though a few simple measures would make it more so and would reduce the cost pressures facing procurers.
  • There is significant scope to improve public sector procurement practices and lower bid costs for tenderers, with potentially large benefits for project costs and timing.