Collaboration delivers better results when it comes to providing infrastructure, write Guy Turner and Le Tilahun.
The latest report from the Grattan Institute explains why megaprojects in Australia ultimately fail taxpayers. the Megabang for megabucks: making it harder to negotiate megaprojects The report says inefficiency within the industry is due to an imbalance between what the government wants and the contractors who are actually able to deliver it, leaving the contractors in a position of power which leads governments to ” yield ”to demands after the contracts have been signed.
This leads in one direction: a focus on lower costs instead of value for money and an inherently adversarial relationship between governments and entrepreneurs – a recipe for continued failure.
Success through collaboration
State and federal governments across Australia are currently facing significant and unprecedented infrastructure programs to support regional and national economic growth and meet the changing demands of residents.
This should be a win-win for both parties, and it can be by adopting a more positive attitude towards shared improvement and success. This requires changes in project structures, project management, and supply chain collaboration – all of which can be met without keeping an ongoing conflicting contractual environment.
Terms such as ‘doing good business’, ‘demands from entrepreneurs’, ‘competition’, ‘finding new contractual partners’, ‘long distance supply chains’ and ‘law enforcement’ are associated with a past. conflicting conflict that turned out to produce poor project results. Additionally, low margins can cause entrepreneurs to seek compensation in court or exit unattractive markets altogether.
The most successful owners do not seek to transfer risks to contractors or to blame them for poor performance. Instead, they strive to develop the most valuable projects more effectively, using the scale of their project portfolio to collaborate more effectively with their suppliers – achieving both successful projects for the owner and successful projects. appropriate benefits for entrepreneurs.
We see eight key requirements to seize this opportunity:
- Focus on improving results
Focus on capital efficiency and get better results with lower capital investment. We see the need to evolve towards rapid selection and prioritization of projects based on need.
The business case process needs to be streamlined to allow for the timely selection of projects that maximize socio-economic impact for optimal allocation of capital based on the best possible evidence.
- Establish excellent project performance management
Mega-projects are managed by temporary teams often working together for the first time under great pressure to perform from the start.
Establishing excellent project performance management will help create a high performing joint team.
Project challenges are too often tempted to be solved in silos without the right expertise or are presented too late to a larger group.
Gathering expertise early on and solving challenges collaboratively, with the right incentives and without blame, creates a work environment that delivers success for everyone.
- Ensure transparency of performance
Simple systems should be put in place in contracts to ensure that all project teams use the same fact base, allowing them to see and solve emerging issues together from the start.
Quickly escalate performance issues based on a single source of truth, through automated dashboards updated in real time.
- Encourage continuous excellence
Projects need entrepreneurs who deliver great performance and collaboration from day one; however, they generally do not encourage this.
Projects must implement contractual incentives that reward project management excellence on a monthly and quarterly basis against a shared vision of best practices.
- Engage in projects that can be successful
Too often, projects go through final approval with unnecessary risk or with the belief that the risk will be transferred to contractors.
It is recommended to eliminate foreseeable risks before approval and to demand an appropriate quality of project preparation during final approval. The key risk always rests with the owners or at best the owner is paying too much to be ill-equipped to manage and mitigate their risks.
Innovation and technology are key catalysts for boosting the productivity of capital projects. However, megaprojects should not be the testing ground for unproven technologies, because the cost of a mistake is too high. Most organizations just want their large new construction projects to run smoothly and be delivered on time and on budget.
Drive innovations on new, smaller and less complex projects, or upgrades to existing assets where the impact of risk is significantly lower. Then scale up innovations for mega-projects once their technology is validated, their processes are understood, and the appropriate execution capabilities are in place.
- Leverage the benefits of digital tools
From five-dimensional building information modeling (BIM 5D) to AI-based planning, drone quantity trackers, human security trackers or AR-assisted wearables, the future is here , or at least within our reach. However, to capture the benefits, project teams must integrate and change their behavior.
Owners must lead cultural change and pursue an ongoing digital collaboration program with their supply chains to develop, implement and capture the growing benefits of digital across their portfolio of projects.
Excellence at the expense of good business
It is imperative to meet the needs of taxpayers and at the cost of value; however, payers should not have to expect a “good deal”, but rather a project that delivers excellence and value derived from a fair, honest and collaborative relationship between governments and contractors.
This result is not only achievable, it is essential. The key requirements set out above give both parties an opportunity to start on the right foot, recognizing what has gone wrong so far and the improvements that will lead to high performance for all.
Guy Turner is Global Head of Investment Project Practice at Partners in Performance and Le Tilahun leads investment work in Australia and New Zealand
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