Infrastructure spend represents a significant portion of all levels of Government expenditure. This ranges from building roads through to development stormwater infrastructure, facilities, and open space. Quality of life for our communities is significantly impacted by the places we create and the infrastructure we provide. It impacts on almost every aspect of livability including access to employment, health, environment and community participation.
One of the challenges for all levels of Government is there is not enough money to deliver all the infrastructure as well as deliver all the community services and programs that the community desires. The community needs us to find creative ways to deliver a greater bang for our buck around our overall infrastructure investment. This can be found through the way we educate our public sector decision makers on how they drive public value in all that they do.
For many years, the focus on commercial acumen and major projects procurement has been on delivering infrastructure at the lowest possible whole of life cost. This view was that if we can deliver infrastructure more efficiently and effectively it frees up resources for community services and programs. This ignored the fact that we can use infrastructure expenditure to address social inequity and other community-based needs that don’t sit within the traditional business case realisation analysis.
For example, how can we use infrastructure expenditure to:
- Address the gender pay gap (as infrastructure is a relatively high paying industry compared with other industries)
- Provide jobs for people of disadvantage (i.e. lower social economic groups, people of disability, indigenous groups)
- Address reconciliation with indigenous groups recognising the damage we cause to the land and environment
- Improving place and environmental outcomes such as biodiversity, green space and urban design
- Reducing carbon both in the construction and usage of infrastructure (i.e alternative materials, construction methods or modal shift towards active and public transport)
- Address mental health through improved working conditions for people and organisational cultures that simultaneously promote high performance, wellbeing and reduced stress on people
The initial response is these above-mentioned areas is that it will drive higher costs. However, in my experience with smart commercial models the cost increase can be minimal and often the focus on innovation to achieve these initiatives can reduce cost. For example, a construction method or design which drives lower carbon could actually reduce cost by focusing on reduced waste and inefficiency.
To drive change in these areas requires commercial models which incentivise the private sector such as designers, consultants and constructors to embed these outcomes into their core business practices as business as usual as well as drive innovation through procurement, design and delivery.
Traditionally this has been achieved by adding a weighted criteria to the procurement process which incentivises the supply chain to focus on broader outcomes as part of their tender submissions. The challenge here is that every department and jurisdiction is driving a different focus and therefore suppliers are not able to “tool up” there business for the long term but rather respond transactionally for each procurement or tender. Some jurisdictions focus on local employment, others on decarbonisation and others on indigenous reconciliation. This doesn’t allow suppliers to restructure their business for the long term but rather they localise their efforts to individual projects which don’t always translate to industry wide reform. The challenge with this is that businesses are not going to commit long term to these initiatives unless there is a critical mass across a range of their clients which justify the resources required to do these areas the justice they deserve.
The other challenge is that the weighted criteria largely doesn’t impact on the selection process that significantly as the scoring gets normalised and most tenderers are still selected based on lowest confirming cost.
There is a significant opportunity for all levels of Government to deliver on broader outcomes through innovation around the business case process and design of the procurement model to drive better public value and industry transformation. Some of these examples may include:
- Treating carbon and cost as equals in the tender evaluation process
- Embedding carbon into the benefits cost calculation in business cases and embedding carbon and environment into the whole of life asset management process
- Involving indigenous leaders in the business case stage to help shape the project and involving them in the design process to ensure cultural heritage is embedding in the urban design
- Developing delivery frameworks which have indigenous reconciliation central to project governance, and providing indigenous elders with genuine commercial skin in the game over projects
- Incentivising innovation through the design development process by adopting an affordability or value for money approach to procurement rather than lowest cost
- Working in partnership with industry to address mental health and well being of the workforce. Move beyond safety and look at triggers of anxiety, wellbeing and stress
- Factoring stress and anxiety into planning for projects ensuring procurement and compliance processes are low impact on people and program timeframes are realistic
- Excluding urban design, biodiversity, green space, indigenous artwork, apprenticeships etc from the fixed price so that contractors don’t raid these budgets and contingency arrangements to cover cost overruns on the physical works
- Getting the risk allocation balance right and not transferring excessive risk on broader outcomes to the contractors that are outside their control. If the Government owns the risk then contractors are more likely to collaborate with a view to them taking over this responsibility as it becomes more embedded in to our projects
- Establishing Key Result Area (KRA) frameworks which incentives broader outcomes for the community such as decarbonisation, workforce diversity, employment and business opportunities for people of disadvantage
- Working with disability providers to identify roles and employment opportunities for their people, and providing business opportunities for disability providers to provide them with funding opportunities beyond disability insurance schemes
These are only some examples but hopefully highlight the opportunity to bring commercial acumen education to deliver broader outcomes for the community and increase public value beyond lowest confirming cost. It also allows us to leave a legacy as an industry broader than just the here and now.