Australia must improve the way in which major construction projects are planned and delivered throughout the nation, an industry forum has heard.

During an online panel discussion that was hosted by the John Grill Institute for Project Leadership at the University of Sydney, leading industry figures argued that change is needed across several areas of Australia’s current project development practices.

These include greater modularisation and standardisation as well as improved collaboration and communication (see below).

The session was held as part of the online launch of the Major Projects Reform Roadmap.

The roadmap was published by the John Grill Institute at the University of Sydney in collaboration with Australian Constructors Association and Consult Australia.

It recommends action in nine areas across three themes.

These include:

• Improving outcomes by developing best practise strategies to improve project risk; quantifying, measuring and valuing intangible project outcomes across a range of ecological, social and governance metrics (in addition to economic benefits and carbon footprint); and shifting project ‘post-mortems’ to understand reasons behind decision making and to measure social value against potential social costs.
• Improving productivity by expanding the focus beyond simple on-site productivity considerations to instead incorporate the efficiency of service provision and value for money; providing a clear project pipleline to enable resources to be suitably targeted and allocated; and expanding procurement policies to achieve broader industry health and sustainability outcomes in addition to those outcomes which are specific to projects.
• Generating greater collaboration by improving culture and building trust; tailoring project leader training to include collaboration skills and refining project operating models as well as contract frameworks to improve transparency and accountability for all parties.

The session was moderated by Institute director Professor Jennifer Whyte.

Panellists included: Graeme Newton, CEO of the Cross River Rail Delivery Authority, which is delivering the Cross River Rail project in Brisbane; Tim Parker, CEO of the High Speed Rail Authority which is charged with developing high speed rail across Australia’s east coast; and David Watt, Executive General Manager, Commercial at Queensland Hydro, which is delivering two large pumped hydro projects in Queensland.

Several themes emerged during the discussion.

Australia’s construction industry is failing on productivity

Among each of the panellists, there is a common refrain about the construction industry’s ongoing poor productivity performance.

Indeed, data from the Australian Bureau of Statistics indicates that the multi-factor productivity of Australia’s construction industry is lower today than it was twenty years ago.

Newton says the industry has ongoing problems in this area.

“If you look at the data, it’s basically showing that productivity hasn’t improved in the sector for quite a few years,” he said.

“In fact, it’s probably going backwards at the moment and costs are going up and hours of work and productive output is less …”

Parker agrees, saying that the industry has been reluctant to embrace change.

“There’s a great expression from Albert Einstein – ‘insanity is doing the same thing again and again and expecting a different result,’” he said.

“I think that’s where the construction industry is at. We are reluctant to change. So there is plenty of advice from various learning places like yourself (John Grill Institute) and others about how to increase productivity.

“And we talk about it, but we don’t do it.”

Several Problems and Challenges

According to Newton, productivity is an ongoing challenge and involves several aspects. These include labour, procurement, efficient construction planning and practices and project assurance regarding quality and safety.

Speaking about Cross River Rail, Newton says that the project is now at the validation and assurance stage. Speaking with colleagues in Melbourne (where the Melbourne Metro is being constructed) and in London who have been involved with Crossrail, he says the amount of time that is required for this stage when constructing an underground railway is ‘next level’ on account of the safety features that are needed for this type of project.

Another challenge at the moment is that subcontractors are apprehensive about the level of risk that they are assuming on account of potential insolvency concerns and are seeking to build additional conservatism into their margins and pricing.

Parker says there are several industry weaknesses when it comes to productivity.

These include:

• A lack of modularity and an entrenched culture within the rail sector at least in which the industry operates on the basis of ‘pouring concrete in the rain with a torch’ rather than embracing offsite construction despite this approach being ‘not overly productive or safe’.
• A lack of national standardisation in contracts. Whilst the GC21 documents provide a standard form contract for large construction procurement, Parker says that the addition of special clauses to these contracts often means that the actual agreement can be three or four times the size of the original standard contract. Meanwhile, across different states, varying specifications will mean that contracts for similar projects will in fact be vastly different.
• Dramatic underinvestment in research and development – a phenomenon which Parker attributes to narrow margins which provide limited opportunity for R&D investment.

(The Borumba project is being delivered by Queensland Hydro. Source: Queensland Hydro)

Clients, Culture, Collaboration and Communication

In terms of solutions, panellists agree that it is important to establish a culture of communication, collaboration and cooperation.

A key part of this is clients.

Speaking from his point of view as a client at Queensland Hydro, Watt says that it is important to be willing to lean in and adopt a more collaborative means of working.

Traditionally, Watt says, there has been a tendency for clients to simply transfer risk onto contractors and to rely on liquidated damages when delays are encountered and targets are missed.

Instead, it is important to embed different behaviour upfront where parties work together to address concerns as they arise.

One way in which this is being addressed at Queensland Hydro is through use of NEC 4 contracts. This provides an early warning regime through which both contractors and clients are required to notify each other about potential concerns which could impact project timeframes, cost or quality as soon as they become aware of these. Once this happens, the contract provides for a process through which these can be discussed and outcomes can be documented.

Also important is to unite project team members around a common vision and clear understanding about overall project objectives.

Newton says that doing this will help to generate alignment among major project delivery partners (clients, contractors, subcontractors) about the ultimate outcomes which are expected to be achieved. Once this occurs, there will be greater willingness on behalf of contracting parties to recognise the commercial position of each party and to work through challenges in a way that delivers mutually viable outcomes.

In the case of Cross River Rail, Newton says that a complicating factor is that the project involves three separate main infrastructure contracts. These involve the underground tunnelling, stations and development; rail, integration and systems; and the train control systems. Potentially, these contracts could be in tension with each other.

To help overcome this, Cross River Rail has adopted an integrated project schedule and is aiming to have transparency around common goals across the three projects which are supported by incentives.

The aim is to encourage behaviours that deliver positive outcomes across the entire project including all three contracts.

Watt says that it is critical to establish the right culture from the beginning,

This is not just about clients delivering on their own promises but also engaging with contractors and other stakeholders to genuinely understand their drivers and concerns.

That collaboration is a two-way journey, with delivery partners expected to go on a journey and help clients to formulate their procurement.

Such an expectation needs to be established at the beginning so as to set a solid project foundation from the outset.

Speaking of Queensland Hydro’s own experience, Watt says that the organisation is on the beginning of the journey and is about a year into engaging with the market in relation to its two main projects.

Significant Opportunity

Parker says that opportunities to delivery better outcomes are significant.

“I think the reality is there’s a lot of opportunity,” he said.

“But unless we want to completely be insane, we actually will start changing what we do and how we do it.

“And it probably starts with the client, not just the contractors.”