Speech delivered by Infrastructure Australia acting Chief Executive, Adam Copp—check against delivery
Wednesday, 14 June 2023
Gold Coast, Queensland
Good afternoon, everyone.
First, I’d like to begin by acknowledging the traditional owners of the land on which we are all gathered.
In doing so, I wish to pay my respects to their Elders—past, present, and emerging.
I would also like to extend that respect to all Aboriginal and Torres Strait Islander people here today.
It is great to be here for IPWEA’s International Asset Management Conference and thank you, David, for that introduction.
I certainly look forward to our panel discussion later this afternoon.
It is no secret that the infrastructure sector has endured a range of challenges over the past few years.
And, as we look ahead, it would seem they aren’t going to go away anytime soon.
Yet, despite these challenges, we are seeing governments from the east coast to the west, and from the north to the south, all eager to invest into projects.
Projects that will define their cities and support their communities and future generations.
This begs the question—with so many challenges, how can governments and companies protect their investments in these projects?
Better yet, how can they plan and deliver for their communities with minimal risk?
The first and most immediate step that can be taken is to reassess project priorities.
In fact, we are seeing governments take this approach right now.
As you may be aware, the Federal Government has commissioned an independent strategic review of its Infrastructure Investment Program.
This review’s intent is to advise the Government on whether federally funded projects are meeting government policy objectives with the goal of creating a more sustainable nation-building pipeline.
Naturally, it is always a difficult decision to make on whether a project will go ahead or not.
On the one hand, when a project is delayed it means communities are needing to wait longer.
Those communities then grow and evolve and then the question becomes is a project that was planned still fit for purpose?
On the other hand, deciding to press ahead with a project under the current market conditions could lead to budget blowouts and delays.
While reviewing projects is an approach that can be taken, governments will still be left with significant investments in their pipelines one way or another.
Building won’t simply stop in the face of these challenges.
Billions of taxpayer dollars will be invested into projects.
So again, how can governments better protect the investment of taxpayer dollars into projects?
The answer is twofold—the first is through taking more strategic and holistic approaches to infrastructure planning and decision making.
That is, we need to take a far more comprehensive view of planning for new infrastructure.
We need to look at the whole system and not just individual assets to create high-quality, financially sustainable, and long-term outcomes for communities.
And plan for how a project will fit into a system and align with new and existing economic and social infrastructure and the environment.
Similarly, we should also look at the infrastructure pipeline itself as a portfolio of investments, and not just a series of individual contracts.
This is because most of the time projects draw on the same workforce, organisations and resources.
The second element is to transition away from just thinking about projects in the short-term.
We need to shift the focus away from delivering infrastructure projects with a project-to-project and contract-by-contract mentality, to more mature and holistic practices that focus on whole-of-life value for money.
Currently, for the vast majority across the sector, infrastructure projects are looked at as individual contracts and assets.
They are seldom looked at from a whole-of-system perspective, as long-term investments that require ongoing maintenance and upgrading.
The reason being there is a frequent desire for significant capital investments, with more of a focus on short-term delivery times and capital investment goals rather than fully accounting for the long-term.
Once projects are built, those assets have to serve the needs of communities for decades to come.
Today, I want to explore how we can take this holistic approach to infrastructure projects and the pipeline itself.
As I explore this, I will share one way that taking this more holistic and longer-term approach can be achieved.
Before I do though, I want to share a bit about the current landscape of the infrastructure sector to articulate just how much demand there is to build and the constraints the industry is up against.
Currently, Australia has a combined five-year infrastructure pipeline worth at least $647 billion.
That figure takes in everything from major to smaller projects.
If we are to look solely at the nation’s five-year pipeline of major infrastructure projects, it currently stands at $237 billion—$15 billion higher than it was in 2021.
For the pipeline, major projects are defined as having a value higher than $100 million in NSW, Victoria, Queensland and Western Australia, and more than $50 million in Tasmania, South Australia, Northern Territory and the ACT.
Now, the vast majority of demand in the pipeline this is being led by New South Wales, Victoria, and Queensland.
In fact, altogether, the east coast jurisdictions make up 84 per cent of the pipeline.
Or, to put a dollar figure on it, $197 billion.
State-by-state, we see NSW represents the lion’s share with projects worth a value of over $100 billion ($102.5b).
Victoria then has the second largest share, with projects worth a value of over $60 billion ($60.6b).
For Queensland, projects represent a value of over $34 billion ($34.1).
Each of these jurisdictions plan to invest the highest proportion of their budget on major transport infrastructure.
As we can see through these numbers, there is a great demand to build.
Of course, we need only look at the news headlines, and the very construction happening in our states and cities to see that.
What these numbers articulate, however, is just how much value they carry for governments—the level of investment they are making into their communities.
With that value, it also represents the weight of the investment they have made.
An investment they want to protect and ensure is not wasted.
I have talked about the large amount of demand, but what about the supply?
Well, the industry is facing equally and if not stronger inhibiting forces, which are limiting the capacity for these projects to be delivered.
As some of you will know, Infrastructure Australia has been researching and reporting on market capacity constraints since 2020.
We work with States and Territories, and sources both at home and abroad to compile data and investigate the unique issues that are leading our industry to be at capacity.
From our latest research, we know that the constraints on the market have never been so high.
To start, labour demand for major public infrastructure activity over the next five years is valued at $133 billion—the largest share of total expenditure for projects.
But, the construction industry, like many industries across Australia is facing a skills shortage.
Last year, public infrastructure projects faced a shortage of 214,000 skilled workers.
This year, we are expecting demand to more than double supply and extend to 442,000.
At the same time, productivity in Australia’s construction industry has stagnated for decades.
In fact, we know that compared with manufacturing and transport, the construction industry has not changed since the nineties.
Federal Treasurer Jim Chalmers noted in March this year that Australia’s productivity, as a whole, had fallen to its lowest level in 60 years.
What Australia and, specifically, the industry has done to remedy this is push its workforce to work harder and faster.
This attitude means 64 per cent of construction workers chalk-up more than 50 hours over a six-day work week.
We all know what happens when we redline a car’s engine for too long.
Well, the workforce is the engine room of the construction industry, and if it continues to be redlined it will result in catastrophic consequences.
We already know from research that:
- 59 per cent of the workforce are unsatisfied with the work-life balance in construction
- Three quarters report moderate-to-high-stress levels
- And we have an industry-wide rate of suicide that is twice the national average.
Materials, like skilled labour, are another constraint on the industry.
Materials account for the second largest proportion of projected expenditure.
In fact, materials will be valued at approximately $76 billion of the $237 billion over the next five years.
Of those materials, steel and concrete are among the most demanded materials.
Significant disruption to supply chains caused by volatile demand and, more recently, the war in Ukraine has meant materials are increasing in cost.
This increase in cost, coupled with prolonged wait times for materials means that construction companies are really feeling the pressure.
As I said, there is demand for projects, but the industry’s capacity to meet this demand is well and truly stretched.
Consequently, companies are being brought to their knees.
Projects are not being delivered on time or to budget, which then has flow on effects for communities and taxpayers.
To add an extra layer to the market constraints, construction companies are operating at 90 per cent or greater capacity.
But what does this all have to do with taking a whole industry approach to delivering projects, and further the need to have a holistic approach to planning and prioritisation?
The answer is simple—to get it right.
To get it right and make sure the billions in taxpayer dollars that are and planned to be invested into new builds are not wasted due to limited and short-sighted planning.
Without a holistic approach, we risk projects running overtime, over budget and impacting communities.
We also risk projects not fitting in with other projects being planned and delivered, and not properly integrating well with the systems around it.
Now, it is all good and well for me to say there needs to be a holistic and longer-term approach to planning and delivering projects, but what am I exactly talking about?
First, it is about ensuring that any new infrastructure project, especially in a climate where there is a lot of demand to build, is properly fitting into a community.
Does it align with other economic and social infrastructure and of course the environment?
Additionally, does it align and fit with other new projects that are planned to occur around it?
Another question that needs to be asked is if they are resilient?
This is especially in the case of population growth, increased housing density, changing user expectations, and extreme natural phenomena.
Let’s take water for example.
The security of Australia’s water resources is under growing pressure from climate change, population growth, increased housing density, and ageing infrastructure.
These growing pressures demand a more integrated whole-of-system approach to new and existing infrastructure.
An approach that recognises the interdependence of infrastructure and land use, and social, environmental, and economic outcomes.
To give an example, ensuring major infrastructure planned for an area is considering the implications it will have on water.
Of course, this is not just in the immediate term, but in the longer term as well.
This includes water supply, sewage management, drainage, flood management, waterways and the existing ecosystems, and urban amenity.
Taking an approach where all these factors are considered will help in better managing the assets that are incorporated into a system.
From a water perspective specifically, this will be key to managing ageing water assets, meeting future needs, building greater resilience, and delivering increased value to communities.
There is a quick point I want to make on resilience in communities.
Infrastructure Australia found through its Australia Infrastructure Audit 2019 report that there is a lack of comprehensive resilience strategies for assets and networks.
It also noted that governments do not effectively incorporate sustainability or resilience into infrastructure projects.
With an increased occurrence of extreme weather phenomena and natural hazards such as floods, storms, drought, and bushfires, we need more holistic, systems-level thinking in the planning and design of assets.
In addition to taking this whole-of-system view, it is also important that the long-term view of an asset is accounted for through robust asset management plans.
This isn’t the most exciting thing in the world.
But these plans can really make or break the life of an asset in meeting the ongoing needs of a community.
Public asset owners need to have robust asset registers and a comprehensive understanding of whole-of-life asset costs, functionality, performance, use and condition.
Of course, whole-of-life planning and management of assets needs to be properly aligned to financial planning.
And this type of planning needs to start at the very beginning of when a new asset is being designed.
It is one thing to have the investment ready to build a new asset, but another thing to account for the life of that asset.
Taking this approach can create more sustainable outcomes for the sector where we don’t have to consistently build new to meet the needs of a community.
In turn, this takes pressure off the sector where there is a strong demand for labour and materials.
While the maturity of asset management in Australia is improving, there is still a long way to go.
IPWEA’s own research for the Australian Local Government Association, through the National State of the Assets Report, highlights some of the challenges that exist for local government.
For example, only 67 per cent of councils reported having asset management plans.
Effective asset information and management practices are vital for making informed, strategic decisions about the essential costs of maintaining assets and the timing of investment in renewal or replacement.
Proper asset management plans also provide the means for organisations to adopt more efficient and proactive strategies, including preventative rather than reactive approaches to maintenance.
Organisations also need to build the systems, processes, capability, and skills to embed global best practice in asset management.
Collaboration and information sharing across governments and industry are key to building this.
This conference is a great example.
Experts are being brought together to share industry best practice and foster environments of collaboration and information sharing.
Now, it is all good and well for me to stand here and say take a more holistic and whole-of-system approach to infrastructure asset management and you will be fine.
But how can governments and companies take this approach?
How can we make more informed and efficient asset management decisions?
And how can we see if a project will fit with its surroundings as intended and deliver value?
The answer—data and digital technology.
As our data management capabilities and use of digital technology continue to improve, so too does the potential for us from an infrastructure asset management perspective.
Leveraging available data and data collection throughout the life of an asset can better help organisations and companies gauge when an asset should be either maintained or upgraded.
Smart infrastructure sensors and other ‘internet of things’ technologies, for example, can provide rich intelligence about performance, use and condition of assets such as roads and bridges.
Using these tools can enable more effective investment planning, efficient asset management and predictive approaches to maintenance and renewal.
Implementing a digital-by-default approach and best technology practices in the infrastructure sector could result in a productivity improvement of up to 15 per cent and more than five per cent in cost efficiencies.
Tracking this data and integrating it into asset management plans will enable governments and companies to have a huge advantage in monitoring an asset and ensuring it can continue serving the needs of the community.
The other advantage of having a clearer understanding of when an asset needs to be maintained or upgraded is stronger and more longer-term financial planning.
It can keep asset management plans in line with financial plans and vice versa.
The clear benefit here is rather than relying on assumptions or ad hoc assessments, asset owners will be able to better gauge when funding is needed for maintenance, upgrades, or renewal.
Organisations won't have to default to waiting for an asset to reach the end of its use-by-date and then plan for the financial costs of rebuilding.
Instead, it can have a more sustainable financial plan to keep the asset relevant in a community and get better financial outcomes in the longer term.
Another use of data and technology that the infrastructure sector can leverage is ‘digital twins’.
In fact, ‘digital twins’ is a concept that Infrastructure Australia recognises and advocates the use of in both our Australian Infrastructure Plan of 2021 and our 2022 Delivering Outcomes paper.
For those that are unfamiliar, a ‘digital twin’ is a realistic representation of the physical world in the digital world.
That could be anything from a physical asset, process, system, or an entire community.
We do not have to make a physical change to a system without having first simulated and optimised it in a ‘digital twin’.
By running through these variables, it also gives the opportunity to improve and strengthen the delivery aspect of a project by finding efficiencies and identifying challenges early on.
Of course, ‘digital twins’ go further than just allowing you to see a project play out as a rehearsal.
It can also give project teams a better understanding of the amount of materials they need, the labour required to deliver it on time and what variances to each of those will mean for the project’s delivery.
In a world where everyone wants to build, having this level of understanding of a project in the planning stages would prove incredibly valuable from a cost and time saving perspective.
Better still, it can enable us to track an asset in a community to better plan for and be ready for upgrades and improvements.
But we aren’t just wanting to look at singular projects.
We want to look at the entire industry holistically.
Fundamentally, infrastructure exists and operates as a system—everything is interconnected and interdependent.
While isolated ‘digital twins’ provide significant benefits in themselves, even broader benefits can be achieved through creating networks of connected ‘digital twins’.
Linking ‘digital twins’ allows us to understand how the system operates as a whole, rather than just the individual parts.
It allows opportunities to examine the interdependencies of infrastructure assets and the broad impacts that interventions can have.
For ‘digital twins’ to be linked effectively though, they need to be underpinned by a common information framework.
In Australia, ‘digital twins’ as a tool is gaining significant momentum with a number of initiatives in play.
Some of these include the NSW Spatial Digital Twin, Digital Twin Victoria, and Queensland Spatial Digital Twin.
However, while their use is increasing, it is not standard for all infrastructure projects.
Really, they are only used for mega projects where there is significant capital investment.
As I mentioned, Infrastructure Australia has advocated for the broader use of ‘digital twins’.
We believe that there is great value in the whole industry adopting this tool and using it to gain a stronger understanding of not just a whole project, but the whole world.
Naturally, this requires additional investment by project teams that are not already using it.
But the power of this tool alone to drive benefits for governments and project teams in ensuring their investments into projects are better protected is massive.
Using data and digital technology is but one tool that can help us.
It is not the be all and end all, but it is certainly a giant leap forward in terms of helping the industry with better planning, decision-making and the delivery of projects.
Coupled with other innovative practices the infrastructure industry will be better placed going forward to meet the demands to build while navigating the constraints of the market.
Data and technology aside though. It is the principle of taking a holistic and long-term approach to infrastructure projects that is critical here.
Data and digital technology are just the tools to help get the job done.
What is most critical is ensuring governments and project teams can apply a holistic view so to make using them more worthwhile.
Whether that be looking at infrastructure from a whole-of-system perspective to ensure a new project will appropriately fit alongside other new or existing infrastructure.
Or, looking at the infrastructure pipeline to better plan for and manage resources and materials.
At the end of the day, it is this way of thinking and approaching infrastructure that will lead to the benefits we need to see.
Creating high-quality, financially sustainable, and long-term outcomes for communities.
The point of a holistic view isn’t just for it to be applied because of the current state of play.
It is an approach that can be applied even when demand is low, and constraints aren’t as high.
But I am a strong believer of never wasting a crisis.
While demand is at the unprecedented level it is, and we are facing such uncertainty in the market, it certainly makes sense to be taking this approach.
Thank you