Major projects | panel discussion

Major projects – panel discussion

L–R: Peter Regan, Dan Marshall, Emma Thomas, Kevin Devlin and Robert Montgomery

Major projects

Chair:

Panellists:

Robert Montgomery, Chief Economist and Head of Policy, Infrastructure Partnerships Australia • Kevin Devlin, Chief Executive Officer, Level Crossing

Removal Authority • Dan Marshall, Head of PPP Programme, New Zealand

Treasury • Peter Regan, Deputy Secretary, Finance and Investment,

Transport for NSW • Emma Thomas, Director-General, Transport Canberra and

City Services

Key points:

• Looking beyond benefit-cost ratios, project effectiveness and impact could be evaluated with a holistic view of the networks they operate within. • The availability of public information is changing the face of community engagement, and social media amplifies the views of vocal minorities. • Resourcing major projects in an active trans-Tasman market is challenging, but also provides opportunities for interjurisdictional learning.

Robert Montgomery (RM): Can you each give us an overview of the projects that you’re working on, and where they are up to?

Kevin Devlin (KD): The Level Crossing Removal Project is removing 50 level crossings. We are aiming to remove the first level crossings by 2018, and the full 50 by 2022. We have made a pretty good start; we’ve got four complete, 15 under construction, six in active procurement and 25 in design development. We feel we’re on track thanks to the industry partners’ ability to deliver on that. At the moment, we’re also procuring the Mernda rail extension and the Hurstbridge rail extension, and constructing the Pakenham–Cranbourne line upgrade project. In total, we have in excess of $7 billion worth of projects under management, so it’s exciting to be part of that.

RM: Certainly a big task. How about you, Emma?

Emma Thomas (ET): The Canberra Light Rail project Stage One is a 12-kilometre light rail project north of Canberra, and through the city. Interestingly enough, Infrastructure Australia’s most recent audit of infrastructure around the country found this was the corridor that was the most congested in the Australian Capital Territory. We signed the Public Private Partnership (PPP) contract in May 2016 during financial close – Pacific Partnerships with John Holland, and a number of other partners involved in the venture – we’re looking forward to having light rail operational by mid 2018, and construction has commenced.

RM: From your perspective, Dan, can you update us on some of the bigger projects that are happening in New Zealand, or that you’ve worked on?

Daniel Marshall (DM): Sure. Keeping with the transport theme, our pivotal highway project that we announced early last month is in the negotiation stage, and anticipating financial close in November 2016. There are some school projects happening, and we’re also looking at a major prison project.

RM: Finally, Peter, if you’d like to give us an update on the Sydney Metro Project?

Peter Regan (PR): Sydney Metro is being delivered in two parts: the Metro Northwest is well under construction at the moment, and the tunnel was completed, with a PPP running all the systems. That’s all under construction, and due to open in 2019.

We’re proceeding well. Certainly, if you go out to the north-west of Sydney, it is an enormous undertaking up there that is well underway. That’s the first part of the Metro.

The second phase is the City and Southwest, and many of you will be aware that that goes from Chatswood in the north under the harbour, through the city with three new stations via Central Station, and then connects to the tunnel with one of the existing suburban rail lines. It is in relatively early stages of

Major projects – panel discussion

procurement, being procured over a series of contract packages. The shortlist for targeted contractors for main contracts was recently announced, and there’s a series of stations and systems packages to come. Over the next 12 to 18 months, there will be a progressive release of those processes. One of the next phases is looking at Central Station itself, and the broader opportunities around the station for developing another precinct.

RM: Thanks for that, Peter. One of the things that we’re trying to get our heads around in the policy world at Infrastructure Partnerships Australia (IPA) is how we can talk about the delivery of major projects in a way that emphasises the service reforms and overall system improvements that can be delivered by major projects – particularly through focusing on outcomes that are achieved, rather than inputs as a measure of success, as how we measure whether a project is successful or not. I might start with you, Dan, on this one because New Zealand does some quite cutting-edge stuff in terms of outcomes-based procurement.

DM: I’ve enjoyed the discussion today, and the way that politicians on both sides can talk about utilising finance and approaching procurement on a ‘best for project’ basis. This isn’t necessarily the case in all jurisdictions. The challenge that this brings is that it puts the focus on the political side of the procurement method, rather than on the merits of the project itself.

The Auckland South Corrections Facility (Wiri Prison) Project is still very much our flagship in terms of an outcomes focus. It’s very much about the planning phase, and driving a different way for the agency to be thinking about the project and then promoting that.

Trying to reduce the political nature of the discussion around the project, or the way that it’s being procured, and trying to reshape that is another challenge, and it’s a challenge that we still face very much; but I think being able to bring it away from the project in dollars, and how it’s going to impact the lives of the people it affects, is what we need to discuss.

RM: Kevin, I might throw to you on this one, as well. Obviously, the Level Crossing Removal Project is largely about system-wide improvements and system-wide outcomes.

KD: We’ve certainly tried to look at the 50 as one project. While there are still very much 50 individual sites, we look at it as a system. I think that what’s getting harder in infrastructure – projects move beyond building a new bit of road in a paddock to overlaying and retrofitting within greenfield environments, and within the operating road and rail networks.

How you measure the benefit of a single project separated from everything else that’s going on is very difficult, and to really come back and assess how your project has contributed to outcomes with everything else that happens, and when all the other supporting projects have been mentioned. They’re all integrated – they’re a portfolio now, and they’re a system. I think we do need new ways of assessing the benefits of single projects. I think that our old benefitcost ratio counting methodologies are archaic in that sense, in terms of being able to adapt to a system’s approach with a network and portfolio assessment. I don’t know exactly what it looks like, but it’s certainly something that I think we need to move beyond in the single project focus.

RM: It’s certainly not clear yet anywhere you look. Emma, do you have anything you’d like to add on that?

ET: I agree completely with Kevin. We look at delivering a project; that project alone won’t deliver all of the benefits that we encounter, so the overall cost-benefit analysis is updated. We have to recognise that with completely delivering a project, there’s a whole bunch of other conditions, such as land use and how we allow land use to happen; how pricing of parking, public transport and ticketing feeds into the complex system that delivers the benefits; and if people lose sight of all the other things that need to happen and get distracted, and go on to something else, then you won’t actually deliver those outcomes for the project.

RM: Peter, there are a lot of projects throughout Australia that are facing some degree of opposition, whether that be from the media or the community. Do you think it’s gotten generally more complex than it used to be to deliver big projects?

PR: I think that there are different media channels, social media in particular, that perhaps might give a broader voice to what people might describe as vocal minorities. But does it actually make it any more complex to deliver a project? I think it means that there needs to be a lot of focus up front on community and stakeholder issues through the delivery of the project. In my understanding, they’ve always been complex issues, and while the forums

Major projects – panel discussion

Hobart

might change, it’s always been something that needs to be managed, whether it be environmental issues or issues of disruption to the community. These are issues that are one of the complexities and difficulties of building infrastructure that do have to be managed.

On the one hand, you do hear about some projects in the media, but there are other projects in the Sydney context that are very significant infrastructure projects underway, which you hear very little about. Notwithstanding the fact that they have a very similar level of disruption as some of the bigger projects, I think that there is certainly a group of people who do have themselves quite organised and get themselves heard. As a government, we need to be ensuring that we are engaging, we are consulting up front, that we are listening, and that we are dealing with people with respect.

RM: That’s a good summary of the state of play. Dan, are you seeing a similar sort of community opposition to projects that hold political risk or sovereign risk, and those types of issues in New Zealand?

DM: In terms of the project context, it really is about taking communities with you. I think we’ve still got a lot to learn in terms of getting communities on board so that they are advocating for those projects. Most of these large projects that we’re contemplating have a clear purpose because they make a difference for communities. That’s what underlies the project. If we can’t extract that support from the community, then I think we’re not doing our job right.

I would use the City Rail Link project in Auckland as a good example of where local council got the community behind it. There were some arguably very unscientific and crude measures used where people were getting off trains and walking through certain gates to indicate whether they wanted a new train system or the old one that didn’t work very well. It’s all about building a profile, and ultimately [doing this as a] central government. We were almost painted into a corner where we had to support the project during those funding conversations, and all will happen on account of the public support. So, my view is that where you can mobilise the community, that’s the key.

RM: Emma, your project has attracted significant media and political attention in recent months. Does this make your job any harder?

ET: I think that our projects are more complex. We heard a lot about narrative telling, and I think we are constantly looking for better ways to engage with people. Gone are the days when you could just show up to a town hall with your map of the project and have a few casual questions. That approach engages such a small amount of people. What I loved about the Transurban presentation today was that people need to engage, touch and feel, and really live in something to understand it fully, as much as we do, and I think that it just sets the bar a bit higher for us to try to find better ways to engage with people.

RM: Kevin, on your project, level crossing removal plans have been altered more than once over the course of the project. How do you manage community expectations around those changes and the project more broadly?

KD: I think that it’s getting more difficult. Maybe I’m just scarred from coming from the East West Link to the Sky Rail to the Frankston Line – but it’s getting very difficult. We talk about getting the community on board with the benefits; these big projects by their nature have broad benefits. I think that in the last decade, there has been a growing self-interest that permeates, more so than it once did. It’s getting harder. Unless I’m seeing a playground being built around the corner [from] where I live, the benefits are not as tangible, and as the new era of digital communication and information rises, people have access to so much more information, and they

Major projects – panel discussion

demand more information. But giving it to them in a way that they can then understand through multiple channels is hard.

In the world we’re living in at the moment, there is a list of demands that the community wants addressed – congestion, removal of a level crossing, safer roads, a station rebuild, a new car park – and the project doesn’t affect their streets or way of life in any way. The list goes on, and I’m not saying they’re impossible challenges, but the nut of all that is what we’re trying to do, which is share our difficulty, share and change the equation for the community to try and now understand the trade-offs. There’s never been a project that I’ve been involved in that’s been a perfect solution that meets all those needs.

I think the community has to start having a conversation about self-interest versus the public good. I know it’s a very difficult thing to go and say to someone, while having to acquire their property, that we’re doing that because of the greater good. But we have that broader conversation to say that there are trade-offs, and that there are no perfect solutions to building infrastructure. We’re trying to give more information and use other influence groups because the public service now is seen as just as cynically as the political world, so we’re not a trusted voice. The next problem is, how do you find trusted voices?

RM: I guess one of the other big challenges we have, particularly in New South Wales, the Australian Capital Territory, Victoria and on the whole east coast – and I’m sure this is the case in New Zealand, as well – is that there are a lot of projects going on at once. I was wondering if you see any constraints in the market with similar projects on similar timelines, and how that will affect the project.

ET: It actually works for and against us. It is a challenging time and everyone’s desperate for resources, but at the same time we’re growing people at a rate that we’ve never grown them before. We’re getting a much better experience based across the whole of Australia. I know from a light rail perspective that the light rail projects, by no fault of anyone, had actually lined up pretty well in their phasing across the country. All the project directors, including the project directors from Auckland, have actually talked to each other quite often and shared their learning. So, as we deliver each light rail project, we’re sharing our values across the board, and we’re also sharing our advisers and where we’ve had difficulties, so I think that we’re actually in a better state because of having so much infrastructure being delivered than the alternative.

RM: Have any of you had difficulty finding people or paying higher prices... things like that, as a result of the huge number of projects?

DM: Broadly, the clash – particularly with the east coast of Australia – is a big one. Whenever we’re looking at a project with an agency, as much as we can, we’re trying to shape their expectation around when we think it can be delivered. A good example is that we thought we found a sweet spot to bring a prison to market. Unfortunately, New South Wales – as easy as projects may be to bring to market there – has a prison pipeline that goes forever. It’s not just a case of tacking on the back of Grafton, but it is certainly something that we see. For us, there’s a unique situation of trying to attract contractors to the New Zealand market. Trying to find these spots is huge, and it applies to resources, it applies to people, it applies across the board.

RM: Peter, any comments on that?

PR: If you look back five or six years, in a similar forum to Partnerships, the discussion would’ve been about the need for a pipeline. The need for some certainty with what was going on in projects so that people could prepare. In a way, we have moved to a very different world in a number of jurisdictions, where there is a lot going on. There’s a lot of tunnelling and there’s a lot of rail, and that does place stress on parts of the industry. It also encourages additional resources to come into the industry and encourages new entrants.

So, I think we have to be sort of conscious, and all the governments are conscious that there are a lot of things going on. I don’t think we’ll ever get to the point where governments are deliberately

Above L–R: Dan Marshall, Emma Thomas and Kevin Devlin

Major projects – panel discussion

agreeing to delay projects. That is not how it works between jurisdictions.

The real difficulty is getting the quality into the public sector to manage those projects. Especially as things go really hot, the kind of people you might be able to get are more likely to be offered a lot more money in the private sector.

RM: Kevin, with a lot of projects happening simultaneously in Victoria, how do you coordinate with the other major projects that are happening, and does it impact your timelines at all?

KD: It does. I think Chris Eccles touched on it in his talk about the efforts; we’re going to try to coordinate projects. We’ve had a free run of it, for the moment, and have gone out there and got some projects done, but with everything coming on board, there will be a squeeze. We’re doing lots of things with the rail operator, with PTV and transport for Victoria, through the Coordinator-General’s office to coordinate all of the projects, and there will have to be some decisions made about prioritisation.

With that opportunity, we’re trying to do some things under the same occupations, and demand will be coming up in the next couple of weeks. We are doing $48 million work on the Bendigo lines, while taking out other lines, so it’s [about] trying to work together to minimise those disruptions for the community and maximising outcomes.

RM: Excellent. I think this leads nicely into the next question, which is really about the fact that with such a hot market on the east coast of Australia, and also in New Zealand, industry has certainly seen the entry of a number of international players. I was wondering, Peter, if you’d like to start here. What are some of the opportunities and challenges that you’re seeing with these new players, and the skills that are coming from overseas that are also very new to the market?

PR: One of the key things is that, notwithstanding the efforts of most of the procuring bodies in treasuries across different jurisdictions to simplify processes around bidding, the anecdotal evidence that I hear is that some new entrants really just don’t know what level of detail is required, or how to go about the Expression of Interest phase, or how to approach some of the frontend of the deal phase. Certainly, a greater degree of dialogue helps for new entrants to be partnering with people who have already been here, or use consultants who’ve already been here. In no way am I saying [that in order] to participate in the market, you need to keep it local.

I think there’s other ways to get that knowledge around how the process works, and through your advisers and the like. Clearly, for new entrants that come into the market and set up shop, and who really take their time to understand the perceptions, join IPA and come along to functions where it might be useful to get that sense of how the marketplace works.

There isn’t the depth of the Australian market to do everything, and there will always be different players, and I think that’s pretty well facilitated.

RM: And Daniel, what’s your experience like in New Zealand?

DM: We’ve been very fortunate that most of the international contractors look at opportunities in Australia, and consider New Zealand. It has been really beneficial with us, both for contractors and with equity providers. We’ve seen a lot of equity providers servicing New Zealand out of Sydney. We certainly encourage that, and it has been very beneficial for us. I guess that for us it’s about shopfront and how we get those opportunities in front of those people. The ability for people to come to Australasia and see that overall picture is really valuable for us. Obviously, there are a lot of people in Australia who sell our market to them, such as the likes of IPA. That’s a big thing, but for us we need the internationals to be creating that competition.

RM: Excellent. How has that impacted your project, Emma?

ET: We’ve only seen a benefit from having a good international playing field for our project. I think it is important to allow the diversity of thought and interaction. I think the feedback we’re certainly getting is that Australia is still quite a complex PPP bidding market, and our processes are complex. I think we need to continue to work on these; if you look at the value that’s created in other countries, it’s still quite expensive in Australia to deliver these projects. Maybe we could be doing something differently there.

RM: And Kevin, what sort of experiences have you had on your project? What feedback have you been receiving from the international players who are entering the market?

KD: I suppose we’ve been somewhat struggling to get the international players to come and play with level crossings and the operating rail network. The operating rail network creates some additional complexity that, if you’re not familiar with it – particularly in Victoria – presents a lot of risk.

Major projects – panel discussion

We haven’t maintained a broad field; what we are doing is targeting some of the smaller international companies to bid on some smaller jobs to, if you like, cut their teeth on, and learn when there’s less at stake. We’re getting some success there; we’ve been focusing on that, but the broader area where the internationals are struggling in – particularly some of the sophistication in the solutions and the design responses, where that the Australian market is very effective, whether it be the banks or the big design houses crowding out the internationals – is in accessing some of that local knowledge, particularly on the design side.

RM: Thanks Kevin. I’d like to run through all the panel members one last time and get any final thoughts on your outlook, not only for your own project, but for major projects in general, starting with you Kevin, if you’re willing?

KD: We think we’ve got a huge amount to be excited about. We’ve adopted a mantra within the organisation of delivering great change in everything we do. We think that we have to show the community, because again, there hasn’t been a project – whether you look at Southern Cross Station or Federation Square – that once the project is built and functioning, and people are experiencing the tangible benefits, the controversy is long forgotten. With elevated rail, we’re really looking forward to making sure that it’s a really successful outcome so that it can pave the way for the community to be able to understand that we need new and modern solutions in transit-oriented developments, and stations that development of change is not a bad thing. We’re truly trying to manage that, and to stop the temptation for them to move to outrage about new projects so quickly. We want to get some runs on the board, and hopefully that will take precedence. Something tangible is the best way to show people that there are those benefits.

RM: Emma, I’m sure you can echo those statements, and are looking forward to the time when the controversies are over?

ET: I think we’re just in the most exciting time for infrastructure. Everyone’s talking about it and everybody knows we need it, it’s just that everyone’s debating too much about which infrastructure we need. I think there’s such a long planning tail or planning lead in to actually building and getting on to the stage where everyone’s happy with it.

We’ve got to get past that stage really quickly, so if we can work with Infrastructure Australia and the various infrastructure bodies to make the decisions, and build, then we’ll be in a much better place.

RM: And how about New Zealand?

DM: We’d love to see bipartisan support. That’s a big one. I think one of the things that struck me was the comment Terry made this morning; it was a challenge to the people in the room not to be looking at these projects from a self-interest perspective, and sell the benefits of the projects. I think that is certainly something that has really resonated for me. Obviously, Kevin’s challenge is that we can get communities to do the same. I think collectively, that’s where we can move the conversation when we start to take that political piece out of it, and that’s positive.

RM: And Peter, you have numerous projects underway with Transport for NSW at the moment.

PR: We do have pretty cool things coming down the pipeline and under construction. We had a number of further rail, light rail, motorway and other road projects to be procured over the next couple of years. That will involve potential pilot financing. We’re very interested in moving ourselves into a slightly different space around the transport-oriented developments, and the related property aspects that are around infrastructure. We are looking to continue in a horses-for-courses approach, and use the right kind of models for the right kind of projects. I think that’s where the industry can really help us, and try and do the thinking. We certainly benefit from discussions like this one.

I think that we do need to collectively work with government, the private sector and different jurisdictions to solve some of these longer-term problems and not jump to answers, but rather come up with a range of solutions that people can debate. That’s going to be very important.

For us in New South Wales, it is a balancing act between ensuring that the delivery gets done, and continuously thinking for the future. I think we’ve learnt a lot more about having to manage the disruption while you’re doing a lot of things at once, and you find that true in Canberra. Even with the light rail, once it’s up and running, people forget about the disruption, whether it be trees, whether it be property or something more controversial.

RM: Thanks for taking part in the Major Projects Panel at Partnerships this year. Thank you, Peter, Daniel, Emma and Kevin. I’m sure we’ll all be very interested to see the outcomes of all of the various projects you’re working on.

Major projects – panel discussion

Robert Montgomery, Chief Economist and Head of Policy, Infrastructure Partnerships Australia

Robert Montgomery leads a team of economists and infrastructure policy experts, working across the transport, energy, water and social infrastructure sectors.

IPA’s policy team produces numerous policy reports each year, and provides IPA’s members with regular research notes on the state of the Australian infrastructure market. Mr Montgomery has extensive experience in the utilities sector, having previously been an economist for the Northern Territory Power and Water Corporation.

Prior to joining IPA, Mr Montgomery worked in strategy consulting, where he completed projects across the construction, finance, media and technology sectors.

Mr Montgomery holds a Master of Economics and Bachelor of International Studies from The University of Sydney.

Kevin Devlin (BE (Hons), BCom, PDM, Chief Executive Officer, Level Crossing Removal Authority

Kevin Devlin is responsible for overseeing the planning and delivery of Victoria’s Level Crossing Removal Project, the Mernda Rail Extension and the Hurstbridge Rail upgrade.

Mr Devlin has extensive experience in delivering engineering projects in both the public and private sectors, working on a broad range of contractual models and across the full life cycle of projects.

Prior to his current role, Mr Devlin held a number of senior positions, including Executive Project Director for the East West Link, and Project Director for the Middleborough Road Rail Grade Separation and the Westgate Bridge Strengthening projects, which received Victoria Engineering Excellence Awards in 2007 and 2011 respectively. The Westgate Bridge Strengthening project was also awarded the profession’s highest accolade, the Engineers Australia 2011 Australian Engineering Excellence Award.

Dan Marshall, Head of PPP Programme, The New Zealand Treasury

Dan Marshall leads the New Zealand Treasury’s Public Private Partnership (PPP) team, which is responsibile for the implementation of PPP procurement in New Zealand – both at a practical and a policy level.

The PPP team’s role includes advising agencies on specific PPP transactions through both the development of a business case and the procurement process, as well as the ongoing progression of the PPP market in New Zealand.

Mr Marshall has played a key role in the development of the New Zealand PPP programme over the last five years, cementing its reputation internationally as an innovative and dynamic programme bringing wellformulated opportunities to market.

Prior to joining the New Zealand Treasury, Mr Marshall spent a number of years in advisory roles with PwC.

Peter Regan, Chief Financial Officer and Deputy Secretary, Finance and Investment, Transport for NSW

Peter Regan is responsible for ensuring strong financial management across the cluster of New South Wales Government agencies involved in the provision of road and public transport assets and services, as well as identifying and acting on commercial and financing opportunities to support the significant investment in transport infrastructure currently underway in New South Wales.

Mr Regan has more than 20 years of experience in infrastructure and project financing in both Australia and the United Kingdom, with a particular focus on the transport industry. He has a strong track record of delivering innovative outcomes through efficient use of public and private sector capital and expertise, and in the effective delivery of strategic priorities.

Prior to joining Transport for NSW, Mr Regan has performed senior roles at NSW Treasury, Sydney Motorway Corporation, Transport for London and Deutsche Bank.

Emma Thomas, Director-General, Transport Canberra and City Services

Emma Thomas brings extensive experience in both the commercial and public sectors, including on major infrastructure projects that span most forms of transport, including planes, trains and automobiles.

Prior to leading TCCS, Ms Thomas was the Director-General of the Capital Metro Agency, delivering Canberra’s first stage of light rail. Prior to this, she was the State Rail Commissioner for South Australia and Deputy Chief Executive of Public Transport.

Previous experience also includes senior executive roles at the Department of Transport and Main Roads Queensland, and Boeing. She commenced her career as an aeronautical engineer in the Royal Australian Air Force.

Ms Thomas is passionate about creating a simple and responsive customer experience, and is excited, with the formation of TCCS, to proudly deliver services to the people of Canberra.