Victoria’s major projects are under scrutiny as cost overruns, construction company collapses, and missed delivery deadlines continue to plague the state’s infrastructure developments.
The issues highlight systemic inefficiencies in project delivery, according to Dr Dominic Ahiaga-Dagbui, Associate Head of School (Research) in the School of Architecture and Built Environment at Deakin University.
Dr Ahiaga-Dagbui noted: “We regularly see news headlines about major projects facing cost and schedule challenges. Frankly, this should surprise no one — they are just signs of an industry structured to perform both inefficiently and poorly.”
The Victorian Auditor-General’s report in November 2023 revealed troubling statistics.
The report detailed 101 major projects with a total estimated investment (TEI) of $123 billion across 10 state government departments.
It also noted an 11 per cent increase in the TEI of 89 existing and completed major projects, amounting to an additional $11 billion.
One of the most concerning cases is the West Gate Tunnel project, initially estimated at $5.5 billion but now expected to cost over $10 billion.
Similarly, the Suburban Rail Loop project, initially announced at $50 billion, could exceed $96 billion in construction costs alone, according to 2024 estimates from the Victorian Parliamentary Budget Office.
Dr Ahiaga-Dagbui attributed these issues to poor project scope definition, premature announcements, political influence, and inefficient risk transfer mechanisms.
He highlighted that research indicates the odds of delivering capital-intensive projects within agreed budgets and timelines are no better than a coin toss, a problem not unique to Victoria but seen across Australia.
To address these challenges, Major Road Projects Victoria adopted the Program Delivery Approach (PDA) in 2020, combining relationship procurement principles with design-build contracting.
The PDA, which has delivered nearly $5 billion worth of projects, aims to enhance cost and schedule certainty, foster collaboration, and focus on early problem identification and resolution.
Deakin Major Infrastructure researchers, in their Optimising Major Project Delivery: Maximising Value Through Outcome-Based Procurement report, found that the PDA creates an environment to improve project delivery performance.
Dr Ahiaga-Dagbui stated: “It allocates project risk in a fairer, more reasonable, and smarter manner, enhancing cost and schedule certainty.
“By rethinking the way major projects are procured, we have one of the most significant opportunities to maximise the benefits of infrastructure spending and deliver improved value for money for taxpayers.”
The report underscores the need for a shift in procurement practices to ensure major projects are delivered efficiently and effectively, ultimately benefitting the taxpayers and the community.