Collaboration delivers better results when it comes to delivering infrastructure, write Guy Turner and Le Tilahun.

The Grattan Institute’s latest report provides an explanation of why mega-projects in Australia are ultimately failing taxpayers. The Megabang for megabucks: driving a harder bargain on megaprojects report says there’s inefficiency within the industry is because of an imbalance between what the government wants and the contractors that are actually able to deliver it, leaving contractors in a position of power that leads to governments ‘caving in’ to demands after signing contracts.

This leads in one direction: a focus on lower costs instead of value for money and an inherently adversarial relationship between governments and contractors – a recipe for ongoing failure.

Success through collaboration

State and federal governments across Australia are currently having to deliver significant and unprecedented infrastructure programs to support regional and national economic growth and meet changing demands of residents.

This should be a win-win both for sides, and it can be by taking a more positive attitude to shared improvement and success. That requires changes in project structures, project management and supply chain collaboration – all of which can be met without upholding an ongoing confrontational contracting environment.

Terms such as, ‘driving hard bargains’, ‘contractor demands’, ‘competition’, ‘finding new contracting partners’, ‘long remote supply chains’ and ‘enforcement’ are associated with a confrontational past shown to deliver poor project outcomes. Further, low margins can lead contractors to pursue compensation in courts or exit unattractive markets altogether.

The most successful project owners are not looking to transfer risk to contractors or blaming them for poor performance. Instead, they are working to develop the most valuable projects more efficiently, using the scale of their project portfolio to collaborate with their suppliers more effectively – delivering both successful projects for the owner and suitable profit for contractors.

We see eight key requirements for realising this opportunity:

• Focus on improving outcomes

Focus on capital effectiveness and delivering improved outcomes with lower capital investment. We see a need to shift towards rapid, needs-based project selection and prioritisation.

The business case process must be streamlined to enable the timely selection of projects that maximise socio-economic impact for optimal capital allocation based on the best possible supporting evidence.

• Establish excellent project performance management

Mega-projects are run by temporary teams often working together for the first time under significant pressure to perform from the start.

Establishing excellent project performance management will help create a high performing joint team.

• Embed collaboration

Project challenges are too often attempted to be solved in silos without the right expertise or are raised to a wider group too late.

Bringing expertise together early and solving challenges collaboratively, with the right incentives and without blame, builds a working environment that delivers success for all.

• Ensure performance transparency

Simple systems must be put in place in contracts to ensure all project teams are using the same fact base, enabling them to see and resolve emerging issues together early.

Escalate performance issues early based on a single source of truth, through automated dashboards that are updated in real-time.

• Incentivise continuous excellence

Projects need contractors that deliver excellent performance and collaboration from day one; however, they do not typically incentivise for it.

Projects must implement contract incentives that reward monthly and quarterly project management excellence against a shared view of best practice.

• Commit to projects that can be successful

Too often projects go through final approval with unnecessary risk or believing risk will be transferred to the contractors.

It is best practice to remove foreseeable risks before approval and demand suitable quality of project readiness at final approval. Key risk always returns to owners or, at best, the owner overpays for being ill-equipped to manage and mitigate its risk.

• Avoid risky innovation

Innovation and technology are key enablers to driving productivity on capital projects. However, mega-projects should not be the testbed for unproven technologies as the cost of getting it wrong is too high. Most organisations just want their big new build projects to simply work well and be brought in on time and on budget.

Pilot innovations on smaller and less complex new projects, or upgrades to existing assets where the impact of risk is substantially lower. Then scale up the innovations for the mega-projects once their technology is validated, their processes are understood, and suitable execution capabilities are in place.

• Leverage the benefit of digital tools

From five dimensional building information modeling (BIM 5D) to AI-driven scheduling, drone quantity trackers, human safety trackers, or AR-assisted wearables, the future is here, or at least within our reach. Yet to capture its benefits, project teams have to get integrated and change their behaviours.

Owners must lead the cultural changes and pursue a rolling digital collaboration program with their supply chains to develop, implement and capture the increasing benefit of digital across their project portfolio.

Excellence over bargains

It is imperative to address the needs of taxpayers and the price of value; however, payers should not have to expect a ‘bargain’ but rather a project that delivers excellence and value that derived from a fair, honest and collaborative relationship between governments and contractors.

This outcome is not just achievable, it is essential. The key requirements set out above provide an opportunity for both sides to start on the right footing, with a recognition of what has not worked to date and what improvements will deliver high performance for all.

Guy Turner is global lead of capital projects practice at Partners in Performance and Le Tilahun leads capital work in Australia and New Zealand