Collaboration is key to Infrastructure Australia's roadmap to improve industry productivity, says new Infrastructure Australia report

Describing itself as an "ambitious, yet achievable reform roadmap", Infrastructure Australia's (IA) "Delivering Outcomes" report, released for public comment on 21 March 2022, challenges Australia's infrastructure owners, agencies and industry participants to adopt a long-term approach to the way infrastructure is planned, procured, delivered and managed. The impetus for the report is the worsening constraint on the sector, which is seeking to deliver a record pipeline of investment, compounded by the impacts of the COVID-19 pandemic on global supply chains; it seeks to provide a reform pathway for government and industry to transform how infrastructure is planned and delivered in Australia. 

Four main themes in "Delivering outcomes"

The following themes (among others) emerge from among the report's recommendations:

Focus on outcomes

IA describes the core purpose of infrastructure is to improve outcomes for people and places, which involves recognising that the use of the infrastructure is of primary importance. Favouring retrofitting existing infrastructure where possible, IA seeks to shift the focus from creating infrastructure to improving the outcomes enabled by infrastructure. Australians care less about how long a project took to build or how much it cost than the quality of the service the infrastructure enables. This theme extends to implementing outcome-focused delivery models that facilitate greater delivery partner and supplier collaboration.

Digital capability

IA proposes a national information framework across all infrastructure assets will improve data quality and information sharing. As the value of data increases exponentially as it is aggregated and shared, IA proposes that having access to more information will enable better decision making and the delivery of better outcomes. The current state involves disparate IT systems across organisations and jurisdictions, with little opportunity for information sharing. The quality of data provided at asset handover should be considered as important as the physical asset itself. Contracting models should contain commercial incentives to ensure effective data handover to underpin its importance.

Collaboration

Perhaps of most significance is IA's recommendation that infrastructure owners and delivery agencies should abandon traditional delivery models and the transactional nature of their relationships. These models seek to transfer undue risk to industry, resulting in an unbalanced model, an adversarial culture and a financially unsustainable industry. Collaborative contracting models are not new, however IA contends that decision-making for infrastructure projects is falling short of best practice as the relationships only endure for the duration of the relevant project. Industry should pivot towards long-term, collaborative relationships with a focus on outcomes. This involves embedding collaborative approaches in all contract forms and moving away from the current adversarial culture.

Maximise financial success

To ensure the ongoing viability of the sector, IA contends that contracts should be profitable and mutually beneficial, supporting a financially sustainable industry:

• Ineffective payment terms, terms and conditions and low pricing of tenders drive a bias towards poor quality and can ultimately lead to increased probability of contract failure. Outcome-based pricing (rather than price-based outcomes) should be profitable and reward innovation.
• IA encourages the transition to "Should Cost Models" (a model for estimating cost based on historical benchmarks of previous actual costs) to set cost benchmarks and enable owners to focus on outcome-based selection criteria such as innovation and performance.
• Lower tier suppliers should be supported to receive a transparent and fair return, consistent with the principles of the security of payment legislation.

Companies get the results their governance systems demand

Many of IA's recommendations may be achieved through effective governance of the parties' relationship. The elements of this model include:

• Statement of intent: IA encourages parties to develop a "statement of intent" at the outset of the project to frame the parties' relationship. Similar to the governance principles of an alliance delivery model, such statements (ideally introduced at project inception) can be agreed at any time during the lifecycle of a project to set appropriate behaviours and resolve issues. We've seen this work in practice with a number of infrastructure owners who have retrofitted governance structures to existing projects to reset the relationship and engender trust between the parties.
• Integrated teams: The traditional contracting model tends to place barriers between the parties, making collaboration difficult. Integrated project teams, operating within common information structures and processes, enables the team to focus on the outcomes rather than shifting blame. To be effective, this requires the parties' executive sponsorship and co-location of project teams. While a collaborative contract may be in place, in the absence of effective leadership, its benefits may not be realised. This is a model we've witnessed employed on a number of national infrastructure projects.
• Allocation (not transfer) of risk: The default approach is to transfer risk to the private sector, which IA contends is due to focus on price, not outcomes, and an expectation that the private sector will price risk up-front with limited information. This risk-transfer approach often leads to increased cost. The NSW Government in its commitment to the construction sector in 2018 has sought to adopt partnership-based approaches to risk allocation, in an effort to address this issue. IA recommends early, equitable and transparent allocation in risk in the project contract will provide greater certainty that desired outcomes will be achieved.

Getting to grips with Infrastructure Australia's reform agenda

IA's "Delivering Outcomes" is a wide-ranging report that sets a reform agenda to address the constraints in Australia's infrastructure sector and encourages the industry to adopt a long-term view of infrastructure development. The report addresses various other issues not covered in this article, including the use of standard form contracts, delivery innovation and people's wellbeing.

IA invites owners and agencies to embed its framework in their internal structures from governance through to individual project delivery. IA has identified various sponsors across Commonwealth and State Governments and industry to drive its reform agenda within their jurisdictions.