Flawed risk management practices, contract complexity, and fragmented procurement processes are causing Australia’s major infrastructure projects to run over time and over budget, according to a new paper from the Committee for Economic Development (CEDA).
A new directions paper titled Building what Australia needs: lifting productivity in major infrastructure highlights key structural drivers behind a 7 per cent decline in construction productivity over the past three decades.
The report reveals that projects are frequently committed to before their true scope is fully understood. While premature announcements affect only a third of megaprojects, these ventures account for more than three-quarters of overall cost overruns. Contractors are forced to price risk with insufficient data, leading to costly disputes and settlements that ultimately burden taxpayers.
Excessive administrative complexity is compounding the problem. In Queensland alone, the construction procurement framework spans more than 15 documents and 1,000 pages. Additionally, only 14 per cent of Australian engineers now work in the public sector, weakening government capacity to act as informed buyers.
CEDA Economist Jonathon Mahon warned that governments are paying high premiums for risks contractors cannot absorb.
“That cycle is draining resources from delivery and leaving industry without the margin or certainty to invest in better ways of building,” Mahon said, pointing to Victoria’s Level Crossing Removal Project as a successful model of programmatic procurement and standardised design.
To address these systemic bottlenecks, the paper recommends early collaboration to share risk fairly, programmatic procurement packaging similar projects into steady pipelines, nationally consistent contracts, and standardised, repeatable component designs.
WSP Australia President and Managing Director Greg Kane said pushing the industry harder is not the solution.
“We need to simplify where we can, create greater certainty earlier and be clearer about the trade-offs we’re willing to make,” Kane said.
“If we get those settings right, we give industry a better chance to invest, innovate and ultimately deliver more from the capital and capability Australia has available.”
