An infrastructure expert from Deakin University has warned that governments must do more to prevent cost blowouts before any new major public infrastructure projects commence in Australia.
Dr Dominic Ahiaga-Dagbui, who specialises in capital expenditure and cost overruns associated with delivering major infrastructure projects, says that history shows a large number of infrastructure projects routinely end up costing a lot more than predicted.
His caution comes shortly after the release of Infrastructure Australia’s latest report which suggests that in order for the nation to cope with a forecast population of 31.4 million people in 15 years’ time, governments must spend $600 billion on major infrastructure projects during the coming decade and a half.
According to Dr Ahiaga-Dagbui, research indicates that pressure to start projects quickly often results in too much residual risk being carried through to the project finishing stage.
“Capital-intensive projects are notorious for being delivered late and over budget. In fact, the odds of successfully completing these projects to their predicted cost and time targets are only slightly better than a coin toss,” he said.
“Transport infrastructure projects, for example, routinely exceed their initial cost estimates leaving asset owners, financiers, contractors and taxpayers dissatisfied. The ongoing Sydney Light Rail project is a perfect example.”
Despite the prevalence of cost overrun on mega projects, predicting and preventing these costs remains exceedingly challenging.
“In fact, a lot of the research in this area is superficial and largely ineffective in dealing with risks and uncertainty involved in major projects,” Dr Ahiaga-Dagbui adds.
Dr Ahiaga-Dagbui researches within Deakin’s School of Architecture and Built Environment and is currently modelling transport infrastructure cost performance, as well as the impact of delivering mega-projects in Australia simultaneously.
He hopes the results of this study will help government and policymakers provide assurance that projects that are funded are economically feasible and deliver value for money.
While it is welcome news that state and federal governments are investing in the critical infrastructure needed to support economic growth, connectivity, livability and safety of Australia, Dr Ahiaga-Dagbui further states that there are some major questions which must be answered in order to deliver value-for-money for taxpayers.
“Empirical research is needed to address the possible impact of concurrently delivered large infrastructure on the resource-constrained Australian construction sector,” he said.
“Concurrently delivered high-value projects may have the tendency to outstrip the capacity of the supply chain to meet the demand for materials and labour.”
Further research is also required to explore the interventions available to delivery agencies and funding entities to sequence projects so that the demand for scarce inputs, such as finance and labour, does not negatively exceed supply.
“The ability to reliably estimate the total financial investment needed for each project is critical for ensuring the adequate planning and resourcing of other projects. This would also help in alleviating the financial burden often placed on taxpayers and transport users,” Dr Ahiaga-Dagbui concluded.
