22 minute read
The Hon Anthony Albanese MP
The Hon Anthony Albanese MP
Breaking the nexus between the electoral cycle and the infrastructure investment cycle remains the biggest challenge for policymakers, according to Federal Infrastructure and Transport Minister, The Hon Anthony Albanese MP.
The world does indeed face troubling economic times. Uncertainty within the European Union, the United States’ slow recovery, and China’s weakening growth continue to affect international financial markets, consumer confidence and government budgets.
The Treasurer called the economic uncertainty a ‘white-knuckle ride’.
It’s a good description. It would be all too easy for governments in these situations to become gripped with fear – reacting only to immediate threats and hanging on for dear life. And, given the political circumstances of the Parliament for which the Australian people voted in the last election in 2010, I think that would be reinforced as an easy, but understandable, option.
But to do so would be counterproductive, and that is not the approach of this Federal Government.
The challenge for infrastructure policy is simple. We need to break the nexus between the electoral cycle, which is short-term, and the infrastructure investment cycle, which, by definition, is over a much longer period. That’s why I am particularly passionate about the conference themes of economic reform, competition, sustainable funding and efficient infrastructure. These are themes that sit squarely at the heart of my portfolio.
I’m proud of the long-term view that this Labor Government has taken – and continues to take – to boost productivity.
On investment, we are delivering a record $36 billion through the current Nation Building Program. No other Federal Government in our history has directed this much towards improving our nation’s roads, rail tracks and ports. We’ve doubled the roads budget, we’ve increased the rail budget by more than 10 times, and we’ve committed more to urban public transport since
The Hon Anthony Albanese MP
2007 than all governments combined from Federation right through the 107 years up to 2007.
The Bureau of Infrastructure, Transport and Regional Economics (BITRE) has calculated that the Nation Building investments will result in benefits more than two and a half times their cost – or $2.65 to the nation for every dollar invested. That’s a real productivity dividend.
I am proud that our infrastructure agenda extends far beyond the money we have injected through the Nation Building Program.
The government has made a concerted effort to rethink the way in which we identify future needs, prioritise projects and then fund them. The game-changer in this process was the creation of Infrastructure Australia four years ago. IA has enabled us to prioritise our investments so as to maximise the economic return. This can, from time to time, create some friction with state governments if their pet projects are not given automatic support; but so be it.
IA has removed the politics from decision-making, so that funding decisions are based on transparent and national – rather than electoral – interest.
Infrastructure Australia has also had responsibility for ambitious reform work, including the development of the first National Ports Strategy, the National Land Freight Strategy and the National Public Transport Strategy.
Recently, the Council of Australian Governments (COAG) endorsed the National Ports Strategy as representing a common sense reform.
A logical extension of this policy framework is the National Land Freight Strategy. The Strategy is the result of broad consultation with both governments and industry – with 70 organisations and individuals providing submissions.
Freight is central to national productivity and international competitiveness. Improved freight planning will increase Australia’s competitiveness, lower the costs of doing business, and improve the use of our road and rail networks.
The National Land Freight Strategy provides a framework for a coordinated, national freight network of our ports, and the road and rail that link them, to ensure that we get the best out of our existing infrastructure and identify what we need in the future.
It also makes a range of recommendations on matters including the use of more productive freight vehicles, dedicated rail freight infrastructure, and
The Hon Anthony Albanese MP
linking proposed ports with transport corridors needed for exports, including for our mineral resources sector.
The Strategy also seeks to establish mechanisms to develop a long-term pipeline of infrastructure projects attractive to both government and private investors, and to ensure that the right investments occur at the right time.
The government’s national urban policy indicated an expectation that by 2014, states would develop their own 20-year freight strategies that align with national directions, as part of the Nation Building 2 Program.
It also indicated that the National Land Freight Strategy would inform future Australian Government investments and reform policies.
Australia faces an enormous freight task in coming decades. Movements are expected to nearly double to 1000 billion tonne kilometres by 2030.
The road and rail projects required to meet that demand have a long lead time.
We need to invest – and invest right now – if we are going to meet this expected growth.
And we are doing so.
Since coming to office, we have embarked on the largest, most extensive modernisation of the nation’s Interstate Rail Network in almost a century. We’ve upgraded one-third of the interstate rail freight network, upgrading 3800 kilometres of existing track and replacing the old timber sleepers with 3.4 million new Australian-made concrete sleepers.
Thanks to this investment, we can expect a sevenhour saving on the trip along the busy rail route between Brisbane and Melbourne.
In response, Woolworths – one of the biggest freight carriers in the nation – has begun transferring from road to rail 34,000 tonnes of dry goods.
This is a case of public sector investment leading to private sector activity, working in harmony to deliver economic benefits for the nation.
Woolworths is able to make that commercial decision because the line is now faster and more reliable thanks to nine separate new passing loops, better crossings and signalling systems, and the removal of tight curves.
This was not an easy decision for Woolworths. There are new transfer arrangements and new deals with rail carriers. Woolworths’ decision is removing 1000 B-double trucks from our highways, leaving the air cleaner and our roads safer.
Once the planned investments in rail are finalised by 2016–17, it is expected that the northsouth interstate rail market will grow by more than 30 per cent.
There are plenty of other examples I can give you. For example, the rail trip across the nation to Perth used to take 53 hours; now it takes 44, thanks to track improvements, such as the extra passing loops. That means it is now feasible for express trains to use the line, attracting business from large parcel carriers such as Star Track Express and Australia Post, who are transferring Perth-bound deliveries from road to rail. continued on page 50
AUSTRALIAN RAIL TRACK CORPORATION LTD.
INVESTING TO MAKE RAIL MORE COMPETITIVE.
Over the last ve years the Australian Rail Track Corporation has invested more than $3 billion into the Interstate freight network.
Much of this has been directed towards the Melbourne, Sydney, Brisbane corridor because of its importance to Australia’s economy and the businesses and producers supporting that economy.
ARTC understands that businesses depend on rail to get their freight to a terminal within a speci c availability window.
That’s why our investment has targeted projects that release more track capacity and improve the reliability of the journey between Melbourne, Sydney and Brisbane.
RECORD INVESTMENT IN RAIL OPENS NEW OPPORTUNITIES FOR AUSTRALIAN BUSINESS
An efficient and reliable interstate rail freight network is vital to supporting and growing a productive national economy, Australian Rail Track Corporation (ARTC) CEO John Fullerton says.
So when the Southern Sydney Freight Line (SSFL) was formally opened for business in early January, and with it, a major freight bottleneck on the eastern seaboard of the nation removed, it proved a significant milestone in ARTC’s multi-billion-dollar investment program into improving the nation’s rail infrastructure.
By separating freight from passenger services and removing the accompanying seven-hour-a-day curfew, the dedicated freight line speeds up the movement of trains through southern Sydney and improves the overall reliability and travel times of interstate rail freight between Brisbane and Melbourne.
‘With the freight task across Australia growing – it is expected to double by 2020 and triple by 2050 – ARTC is very much focused on working with our customers and industry to convert freight onto the rail system, because it’s far more competitive than ever before,’ Mr Fullerton says.
The new $1 billion, 36-kilometre SSFL provides a tripling of capacity for the rail corridor through the south of Sydney, and forms part of record investment in the nation’s interstate rail network.
Alongside projects such as curve-easing works on the North Coast of New South Wales, improvements to the ballast condition between Sydney and Melbourne and upgrades to the Metropolitan Freight Network in Sydney, rail’s claim for Australia’s land freight task is being transformed.
‘We’ve invested a lot – and it’s now about demonstrating to our customers what this investment into the network means for their business,’ Mr Fullerton says.
‘Capturing more freight onto rail means creating value, improving reliability and lowering costs, and that’s why our investment has targeted areas to improve rail’s reliability and capacity on that important freight journey between Melbourne, Sydney and Brisbane.
‘Customers want confidence that their freight will arrive at the terminal when it’s meant to – we recognise that we are part of a complex chain, and we’re absolutely committed to working with the industry to make it more competitive.’
Fullerton says ARTC will continue to work with government, customers, rail operators and stevedores to take full advantage of the capacity that is now available to move freight off the road and onto our rail network.
‘This not only helps ease congestion on our roads, but also improves national productivity,’ Mr Fullerton says.
The Hon Anthony Albanese MP
continued from page 48
Key to the success of our National Land Freight Strategy is a growing network of transport intermodals. This government has committed to 11 intermodals either operating today or under construction around Australia.
In Sydney, we are bringing the Moorebank Intermodal Terminal online; as important a project as there could possibly be for Sydney. It’s hard to overestimate the importance to the Australian economy of the Moorebank freight transfer hub – an opportunity talked about for a long time, but almost lost.
But it will now be delivered and it is in the perfect position, connected to the port of Sydney but also, importantly, on the interstate rail freight line and close to road networks in Sydney.
With Port Botany freight expected to grow at seven per cent per annum, Moorebank will generate at least $10 billion in economic benefits, remove 1.2 million trucks each year from Sydney’s congested roads, and create 1700 direct long-term jobs.
The size of this unique site means that trains up to 1.8 kilometres in length can operate at the terminal.
Moorebank is a perfect example of how the Federal Government can use its ownership of land to unlock private sector activity.
The government is seeking experienced people to form a board for a Government Business Enterprise that will deliver the intermodal. [GBE has since been appointed.]
The GBE will oversee remediation of the site and manage the tender process, but then, importantly, it will be a private sector company or consortium that will design, build and operate the new facility.
Moorebank will complement our work disentangling the freight and passenger lines along Sydney’s northern and southern rail corridors, including the northern Sydney freight corridor.
It will also complement our big program of improvements at Port Botany.
These all form a broader investment program to create a seamless national economy. We need to carefully and deliberately target the bottlenecks and the congestion that cost our economy billions of dollars in lost productivity. It is this same principle that will guide the second Nation Building Program to take effect from 2014/15.
This second Nation Building Program, to run until 2018-19, will focus on four central themes.
They are: Innovation, Moving Freight, Connecting People, and Safety.
Through the Innovation theme, investment will be in smart infrastructure, planning, research, evaluation and compliance.
There is much that technology can offer to eliminate, or at least forestall, the need for more expensive transport infrastructure spending. For example, smart infrastructure, such as electronic signage on our urban highways, has been shown to improve traffic flows by up to 15 per cent, helping to curb congestion, and there is nowhere better to see that operating than on the Monash Freeway in Melbourne.
Through the Safety theme, the Australian Government will build upon the national leadership role in road safety, making significant investments in local roads and black spots. The $500 million we have already spent during the current Nation Building Program is removing nearly 1500 black spots, which in turn is preventing 4000 crashes each year.
Under the Connecting People theme, we will pursue the productivity of our highways, roads and rail corridors while directly targeting pinch points and alleviating urban congestion.
And through the Moving Freight theme, we will further extend and connect our road and freight linkages – particularly at our ports and intermodal facilities.
State and territory governments recently put submissions to Infrastructure Australia and my department for consideration, and these projects are currently being assessed against the themes outlined.
It is hard to envisage any government having the financial capacity to completely meet all of the
The Hon Anthony Albanese MP
continued from page 50
nation’s infrastructure needs. That is why we have engaged in a deliberate, targeted program to attract private finance to public infrastructure.
More generally, BITRE has found that the construction of the nation’s infrastructure in 2010–11 was more than twice the level of a decade ago – in real terms. Private sector infrastructure investment has grown by one-third under this Federal Government, against a backdrop of the biggest global economic downturn in more than 80 years. One way we have done this is through the establishment of the COAG Infrastructure Working Group.
With the advice of this group: • we have harmonised pre-qualification regimes in the construction industry, reducing duplication and red tape for those tendering • we have reformed the process of alliance contracting and PPPs, driving greater value for money • we are driving best practice in the procurement and delivery of infrastructure.
This has meant greater private sector participation in the delivery of key infrastructure projects by making it simpler and cheaper for firms to bid on projects.
Another major initiative is the National Infrastructure Construction Schedule (NICS).
The NICS provides greater clarity and certainty to industry by outlining the whole Australian infrastructure picture – from projects identified as potential priorities, to those in the planning and feasibility study stage, through to committed construction projects.
It collates the infrastructure commitments of all the different tiers of government into a single project pipeline. It also provides the information that industry will require to place a tender.
It’s the first time all of this information has been available in one place, providing industry with a level of clarity not previously available. The NICS site is dynamic and will continue to be enhanced and adapted to improve its functionality. An RSS feed has been added so that users will receive an alert when new projects are listed, or changes are made to projects.
In recognising the pressures of financing infrastructure, particularly in constrained finance markets, we created the Infrastructure Finance Working Group (IFWG).
Brendan Lyon from IPA served in that group, together with a group of nine of the nation’s leading private and public infrastructure experts. It was chaired by Jim Murphy from Treasury.
The approach I have taken to policy development is to break the old model. The old model was that the transport department did some work, they did some submissions and then Treasury and Finance commented on it, and after that process was over, some of you in the room might get to comment on the outcomes.
That’s not the approach that I’ve taken. The model that I’ve taken is to have the whole of government – so you get your central agencies engaged, Treasury, Finance, Prime Minister and Cabinet – and the private sector around the room when the policy is being written.
You’re far more likely to get better outcomes that are well received and understood, and with problems having been ironed out before the release of the policy, if you have actually had that collaborative approach to policy development, and this is something that I have done across the board.
The IFWG report, which was publicly released in June 2012, calls for a suite of reforms to encourage greater private sector finance. The Federal Government is now considering, or responding in practice to, each of the recommendations.
The Hon Anthony Albanese MP
One step that we are already in the process of taking is changing the Income Tax Assessment Act to further encourage private investment. Shortly, we will be introducing into the Parliament new tax provisions for infrastructure projects of national significance. These will allow losses generated by designated projects to be exempt from the Continuity of Ownership Test and the Same Business Test, and uplifted at the government bond rate.
We have also released another publication in the continuing stream of work on patronage forecasting.
In 2011, I had the opportunity to speak at the Patronage Forecasting Symposium in Canberra. One of the keynote speeches was by Dr Robert Bain – a renowned international expert from the United Kingdom.
We have drawn on Dr Bain’s considerable knowledge by commissioning a new report entitled Disincentivising overbidding for toll road concessioning.
It draws on international experience. It has some practical recommendations on how we can
Arup, engineering firm of the year 2012 (revenue over $200m)
Peter Bailey, CEO of Arup in Australasia
We shape a better world | arup.com
The Hon Anthony Albanese MP
discourage the situation where ‘overbidding’ for future concessions might occur in toll road projects.
Addressing this issue of overly optimistic bidding is very important if we are to successfully engage with the private sector to help fund and finance our major motorways.
I mentioned earlier the improvements in road and rail productivity, resulting in part from investment – both from the public purse and from private partnership.
The remaining piece of the puzzle is smarter regulation.
The introduction of single national regulators for the heavy vehicle sector and for rail and maritime safety will generate up to $30 billion in benefits over the next 20 years.
At the same time, it will reduce the number of transport regulators across Australia from 23 to three.
This equals less red tape, less time spent complying, and less confusion.
This is a practical reform that has been supported by state and territory governments and that has, from time to time, called upon the private sector to back in and encourage the ongoing reform at times when people were looking to stall it in order to continue to entrench bureaucracy in the various states and territories.
The American business guru Paul Meyer once said, ’Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.’
There is no doubt that this is true. There is also no doubt that we face uncertain times. Yet this should not be an excuse for avoiding the hard work of microeconomic reform. It should be a spur for us to do more, not less.
We must continue to work smarter in the way we approach our entire infrastructure environment – an environment that requires a holistic approach to planning, investment, construction and maintenance, and regulation.
Only then can this nation really achieve its best.
THE HON ANTHONY ALBANESE MP Minister for Infrastructure and Transport
Anthony Albanese is the Minister for Infrastructure and Transport, and the Leader of the House of Representatives.
Minister Albanese was first elected to Federal
Parliament in 1996 as the Member for Grayndler. He served as a member of the Shadow Ministry from 1998 to 2007.
Minister Albanese has an Economics Degree from Sydney University. His seat of Grayndler is located in Sydney’s inner west, where he has lived all his life. Minister Albanese was born on
2 March 1963 in Sydney, New South Wales.
CAPABILITY REVIEWS AS A DRIVER FOR THE SUCCESSFUL DELIVERY OF MAJOR GOVERNMENT INFRASTRUCTURE PROJECTS
BY PAUL FORWARD AND IAN SUTHERLAND, EVANS & PECK
The delivery of major government-funded infrastructure projects has a history, both locally and internationally, of cost/time overruns or underperformance of solutions. Projects that fit into this category are often characterised by one or more of the following features: poor client leadership and accountability, unsuccessful project team integration and collaboration, skills and knowledge within the project team that do not match the project’s complexity, and little focus on achieving best value-for-money outcomes.
The high-profile failure of publicly funded major projects has tarnished the reputation of governments and agencies in the public’s eyes. As a result, many governments in Australia and overseas, particularly the United Kingdom, have made a commitment to achieve better value for money from public spending, including an imperative to focus on the delivery of benefits to project customers at reduced costs. The challenges facing governments to reduce deficits and to retain credit ratings, as well as new pressures to cut funding but deliver better outcomes, has resulted in a shift in the role of government in ensuring the successful delivery of major projects.
Changes to government approval processes
The United Kingdom Government, for example, has recently established a Major Projects Authority (MPA) within the Cabinet Office’s Efficiency and Reform Group to ‘... bring about the successful delivery of major projects across central government...’
This is a transformational – not incremental – change process that is being driven by the highest levels of government in the United Kingdom. Among other objectives is the pursuit of large-scale reductions in the whole-of-life costs of major projects. Target reductions quoted are of the order of 20 per cent in real terms.
At the heart of these new procedures is the responsibility of departments to demonstrate to government that they have the organisational capability to successfully deliver major projects. Previously, the focus of assurance was on the robustness of the project’s business case. Now, there is an additional need for agencies to assure government that they have the appropriate project team capability that can be trusted to deliver the expected benefits.
On a recent study tour of the United Kingdom (as part of a broader assignment for Australian governments), Evans & Peck Managing Director Peter Wood was informed by senior United Kingdom civil service officials that they consider a prerequisite for improving major project delivery to be an improvement in ‘owner capability in project leadership’. This ethos translated into the recent establishment of the Saïd Business School at the University of Oxford, which will design and deliver a new ‘Major Projects Leadership Academy’ for the United Kingdom Cabinet Office. The Academy will seek to ‘develop a cadre of world-class major project leaders within the Civil Service to direct major government projects of high complexity and cost...’
Within the United Kingdom, a new approach to the management of major projects is therefore being adopted. The new approach involves: • a mandatory increase in central government oversight and assurance of projects • greater collaboration between agencies • adoption of best practice program and project management processes • early private sector involvement to broaden the search for best valuefor-money solutions • an approach to procurement that encourages greater competition • an acceptance that major projects can be affected by unpredictable external influences • a stronger focus on the affordability of projects, within tight budget constraints.
Demonstrating capability to deliver
Over time, the capability of agencies to deliver major projects changes. Agencies learn by doing. Key resources leave agencies, and new capabilities are acquired. Moreover, the scale and complexity of major projects is increasing, with more mega projects valued in excess of $1 billion being undertaken. Therefore, the risk of learning on the job is too great for governments to bear. Early demonstration in the project life cycle of an agency’s capability to deliver is essential.
The structured Capability Review process used by the United Kingdom, New Zealand and Australian governments to review the capability of agencies to deliver government programs provides a methodology that can be adapted to focus specifically on the capability to deliver major projects. (See Susan Teasey and Paul Forward, ‘Capability Reviews: Central Pillar in a High Performance Public Sector’, June 2012 at www.evanspeck.com/papers.aspx.)
The approach is not an audit of past performance, but rather an independent assessment of an agency’s current and future capabilities necessary to deliver government programs and policies. It is a constructive tool to prioritise areas for improvement and to provide assurance to government of agency capabilities.
A Capability Review involves consideration of evidence and discussion with stakeholders in three key strategic capability areas: leadership, strategy and delivery. The three capability areas are relevant to the delivery of major projects, although the specific issues addressed in a traditional Capability Review need to be adapted to focus on the specific organisational challenges facing the delivery of large-scale, complex programs and projects.
Underlying many of the cost/time overruns or underperformance of solutions are issues that relate to client leadership capability, including accountability, project team integration and collaboration, and skills and knowledge to match the project’s complexity.
In terms of the strategic capability, agencies need to demonstrate that their project management team has a rigorous and structured process of generating, evaluating and filtering solution options that represent affordable and value-for-money outcomes. Similarly, an agency’s team needs to be able to demonstrate that it has the required skills and expertise to engage the private sector to effectively deliver the preferred solution and to manage the delivery process.
A new approach to project delivery
The reputational risk to governments and agencies resulting from poor delivery of complex infrastructure projects requires a more rigorous approach to assess the capability of the project management team and its project delivery methodology. The changing environment facing governments requires a new approach to project delivery. The Capability Review methodology provides an approach to independently assess agency capabilities to respond to the more demanding infrastructure environment.
