In response to Australia’s contracting economy, Treasurer Josh Frydenberg and the Morrison Government confirmed an allocation of more than $20 billion in the 2020-2021 Federal Budget to expedite infrastructure projects and road safety upgrades. This spend is anticipated to create 40,000 jobs across the country and play a critical role in the Federal Government’s plan to boost the economy, as it recovers from the COVID-19 pandemic.
Ensuring this public infrastructure investment is applied swiftly, yet wisely and delivered with a commercial mindset is of utmost importance.
Why is this important?
Capital investment in Australia’s infrastructure is a welcome boost for the economy, but a challenge emerges when taxpayers rightly demand value for money. BDO has worked on some of Australia's largest infrastructure programs during the past decade and our teams have identified recurring themes which, when addressed proactively, can assist in mitigating project delivery risk, avoid reputational damage and maximise project value.
This infrastructure commitment includes the introduction and acceleration of road safety upgrades, shovel-ready projects, and vital water and recycling infrastructure. This will support job retention and growth, while simultaneously assisting the economy in an effort to suppress the impacts of the COVID-19 pandemic.
The Federal Government’s infrastructure spend includes:
- $14 billion towards new and accelerated infrastructure projects to build more roads, rail and bridges across Australia
- $2 billion investment in road safety upgrades for shovel-ready projects on a use-it or lose-it basis to states
- $2 billion in new funding for vital water infrastructure, as part of the national water grid to increase water security
- $1.3 billion towards the modern manufacturing plan targeting six national manufacturing priorities
- $1 billion towards the local community infrastructure program for roads, footpaths and street lighting
- $250 million to modernise recycling infrastructure.
There are also several infrastructure investment partnerships planned between state and territory governments to help generate more jobs and rebuild the national economy.
When it comes to transport projects, most states will get a boost. Key projects include:
- $750 million towards stage one of the Coomera Connector between Loganholme and Nerang, in Queensland
- $560 million investment in the Singleton Bypass on the New England Highway, in New South Wales
- $528 million in upgrades to the Shepparton and Warrnambool rail lines, in Victoria
- $490 million towards the Coffs Harbour Bypass, in New South Wales
- $112 million investment in Jindalee’s Centenary Bridge widening, in Queensland
- $100 million for Strzelecki Track upgrades, in South Australia
- $95.2 million towards the Bruce Highway on the Sunshine Coast, in Queensland
- $80 million in additional investment for the Wheatbelt Secondary Freight Network, in Western Australia.
- $76 million towards Riverway Drive stage two in Townsville, in Queensland
- $65 million in upgrades to the Tasman Bridge, in Tasmania
- $46 million for national highway upgrades, in the Northern Territory.
What can be done?
Ensuring these key contracts deliver value requires a detailed understanding of their inherent risks and proactive risk management by all involved in their delivery. The adoption of effective governance structures, internal controls and ongoing value assessment will be essential for the benefits of the Government’s infrastructure spend to be maximised.
When engaging construction companies and contractors for the delivery of major infrastructure projects, governments should ensure:
- Procurement practices are transparent, ethical and aligned to government policy
- Project delivery risk is proportionately shared between the project owner and construction entities
- Collaboration between project owners and construction entities is optimised to maximise innovation, consider risks and align project delivery activities to project objectives
- Commercial terms are clarified and confirmed upfront to reduce the risk of disputes and project delays
- Project costs are independently verified so all parties receive value for money and tax payer funds are effectively applied.
Where to from here?
The infrastructure investments announced in the 2020-2021 Federal Budget represent opportunities for job creation and a significant contribution towards economic recovery, particularly when considering the current economic climate and the impacts Australia is facing following the COVID-19 pandemic.
Taking action to help government entities, construction companies and contractors collaborate will assist in maximising the value achieved from infrastructure investments.
If you would like to discuss further any matters related to the topic of this article, please contact your local BDO adviser.