Opinion: increase upfront infrastructure funding to kick start our economy

By Tomas Nohel

Wednesday June 24, 2020

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Prior to the COVID-19 pandemic, Australia was in the midst of an infrastructure boom with an impressive pipeline of projects, many of which came to a grinding halt. Traditionally, construction has played a pivotal role in reviving economic health, and with nearly one in 10 people employed in the construction sector, it will be no different this time around. The prime minister’s recent announcement of an $1.5 billion infrastructure injection to fast-track 15 major projects supports this view and is important for supporting over 66,000 jobs.

While a sustained medium-to-longer-term pipeline is important to maintain buoyancy in the construction sector, the key in the immediate term is in having funding allocated and shovel-ready projects moved through construction delivery as swiftly and efficiently as possible. So how do we accelerate the activation of infrastructure stimulus packages and get the right investment in infrastructure to the market fast?

Historically, governments evaluate projects through detailed business cases which focus on analysing the strategic merit for a proposed project, including defining the fundamental issue, to formulate the optimal response before exploring project options. However, these unprecedented times have resulted in a consensus on the need for rapid infrastructure investment while providing risk identification and management, appropriate project governance, procurement strategies and where relevant exit strategies.

There are a few options we can consider, individually or in combination, to accelerate projects from planning to construction while upholding required due diligence such as:

  • Picking the ‘low hanging fruit’ — activating projects that were previously ‘merited’ but did not eventuate, with due diligence emphasis on the implementation strategy
  • Removing bottle necks — scaling up the capacity with teams to process and review new initiatives with shorter time frames and a stronger emphasis on resourcing in the project planning stages
  • Packaging — developing programs of work with a single merit test that can be applied to multiple implementation strategies
  • Maximising economic impact — where appropriate prioritise maintenance investment (near instant economic impact with new jobs), particularly useful to sustain regional economies during slow down
  • Tailoring — understand the level of risk and tailor due diligence accordingly (this comes with experience and industry knowledge) and apply short-form business case for smaller investments (e.g. scale the level of due diligence to the size of the project).

There is no better time than now to streamline and scale up investment decision-making to get funding allocated and construction underway as soon as possible. Increased upfront investment in project development capacity will enable faster processing without impacting the quality of assessment. While this process doesn’t exclude any risk, it enables an intelligent assessment of a project while measuring the impact of delayed decision-making or inaction. Recent major transport initiatives delivered in Melbourne recognised the need to scale up, and managed to withstand unprecedented pace in a complex operating environment, sustaining the social license in the process.

Focusing on the following areas will help to change the emphasis of the investment argument for a project:

This is particularly beneficial in the case of smaller-scale projects which present the opportunity to get some quick wins with smaller scale projects that are ready to go to kick start our economy, while working on the implementation strategies for the larger longer-term investment opportunities. Tailoring the level of complexity to the task is also important. This was demonstrated with the recent Rosebud Aquatic Centre that was successfully developed and funded and is now being delivered without a hick-up during COVID disruption.

While larger projects are important for long-term economic benefit, they take longer to ‘get off the ground’ and our regional economies aren’t likely to reap the same benefits from them as major cities. Additionally, smaller projects in regional economies are a viable focus area because most councils already have a suite of infrastructure projects, mainly in the maintenance space that could provide locals with much needed jobs at this uncertain time.

In the current climate, implementation plans will be the key to success because in recent years an estimated $30 billion in infrastructure investment has been lost due to project delays, cancellations, or mothballing caused partly by community opposition. According to Elizabeth Foley, Australian Institute of Project Management CEO, “While money needs to be spent on projects that will boost the economy, at the same time we want to ensure that the money is spent efficiently”.

To avoid unintended impacts, focus areas for these business cases should be around de-risking projects and assessing environmental impacts to minimise any adverse impacts in delivery, in particular time delays due to unforeseen approvals or worse still, re-design. Short form business cases address these aspects by focusing on the implementation strategy and risks, governance and project management strategy.

Tomas Nohel is an experienced infrastructure development practitioner with over 20 years functional experience in strategy, infrastructure planning, options assessment and economic evaluation, policy development, business case development and commercial assessment.

 

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