UP FRONT
BREAKING CONTRACTUAL
HABITS
INFRASTRUCTURE COST BLOW-OUTS ARE CONTRIBUTING TO ADVERSARIAL CONTRACT DISPUTES, EXPERTS SAY. ROADS & INFRASTRUCTURE EXPLORES THE NEED FOR MORE COLLABORATIVE MODES OF CONTRACTING.
O
ver the past 15 years, Australian governments have spent $28 billion more on transport than they told taxpayers they would, according to a 2016 Grattan Institute report. There are multiple factors that could mean cost blowouts are unavoidable – unexpected weather, ground conditions and community objections, to name a few. However, when analysing all 836 projects valued at $20 million or more and planned and built since 2001, the Grattan report found 90 per cent of cost overruns were explained by 17 per cent of projects that exceeded their promised cost by more than half. While the study paid focus to project costing estimates by governments, project governance is an equally important factor to ensuring projects remain on time. The Productivity Commission in 2014
report highlights that governments are sometimes weak at determining what, where and when infrastructure projects should be scoped and constructed. The report attributes this to deficiencies in using coherent decision-making frameworks to assess a portfolio of potential projects, citing inefficient risk allocation between public and private partners. When costs and delays reach melting point, there’s been a tendency for aggrieved parties to turn to litigation.
While cost blowouts are nothing new, experts believe the nature of adversarial contracting is continuing to enable behaviours not in the best interests of all parties. THE MODUS OPERANDI OF CONTRACTING Scott Langdon, a partner at KordaMentha Restructuring, says an opportunity exists to change the way we think about the contractor-principal-subcontractor relationship. He calls for a bespoke approach to construction contracts.
Experts argue inappropriate risk allocation goes back generations making adversarial behaviour habitual. roadsonline.com.au
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