Why do so many infrastructure projects have cost blowouts? | 7.30
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- čas přidán 6. 08. 2023
- Some of the nation's biggest construction and transport projects are running tens of billions of dollars over budget. Why do so many of these large projects seem to follow the same pattern, over promising on costs? Adam Harvey reports.
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You can be sure all these disastrous project are as the result of consultancy with the 4 giant consultancy companies.
Cut them off.
*ENGINEER HERE:* There isn't one of these projects that doesn't have some merit and some real payback to us the general population of Australia. The real problem is HOW these projects are planned from the start and that includes the contracts that are rarely negotiated in good faith by either or both the government or the contractors.
So for everyone interested here's 4 basic project items and for anyone who has ever done a project and wondered what went wrong simply ask which of these wasn't done well enough. Sorry if some of this is longish but I hope it will explain a number of things and how to NOT have projects go wrong.
1) SPECIFICATION:
This is the basic what, why and how.
What are we going to build - a bridge, a road, a building, a sports stadium or even a submarine.
Why are we building this bridge, road, building, sports stadium or submarine.
The what and why don't need much detail. Its can be as simple as, _We need this bridge to go over that river because the old bridge needs replacing._
BUT the *HOW* must be detailed and most importantly it must explain what STANDARDS must be met. Most people and especially lawyers don't realise that most engineering standards are NOT required by law or regulation. There's actually very few standards that are required to be met by law and *yes this stuns most people.* So its incredibly important that every standard that a project needs is absolutely listed and described for its applicable use IN THE CONTRACT(s).
The single biggest issue with lawyers and engineering projects is NOT what they put in the contracts but what they leave out. See the comment at the bottom.
2) RESOUCES:
In all engineering projects there are 3 main resources - labour, machinery and money.
Labour from top to bottom needs to not only be available but also the required skills needed need to be available. This is an area where non-engineering human resource people are utterly hopeless. For all their claims (and I have experience with this issue) they CANNOT tell the difference between an mechanic and mechanical engineer, electrician and an electrical engineer or any other engineering skill set.
Machinery is another monster bug for engineers. Its no use planning to rent a 50ton crane when you need to lift a 100ton object AND YES THAT HAPPENS. You have to have people who know their subject plan what they need and when they need it. If you suddenly have to rent things like cranes, digging machines, scaffold,... etc. the people supplying those services can charge whatever they like because they know that holding up a billion dollar project is worse than paying ridiculous money to rent something.
Money is the worst thing engineers have to deal with because there's always some clown waving an economics degree like a caveman swinging a club screaming _"What's the business case for that?"_ or _"Who's going to pay for that?"_ In 99.9% of cases the reason why its costing more than planned is because the economics clown interfered back at the planning stage.
3) TECHNICAL VIABLITY: This is something that most engineers hate because it involves Donald Rumsfeld's 3 knowns. There's known knowns, known unknowns and unknown unknowns. Planning is about having as many known knowns as practical and the best way to have that is CLEAR SPECIFICATIONS. Think about the Apollo program. It had the very simple 2 PART specification. 1 - get a man to the moon and 2 - get him back SAFELY. That was why they could go there 9 times and land 6 times and not lose anyone in the process. The times they lost people were in training accidents where they were less clear about what they were doing and people were rushed and NOT checking properly.
4) COMPLETION DATE which is also called CLOSE OUT: This is possibly the worst thing done in all projects and again goes back to the specifications. If a job is NOT clearly specified then its gets very murky to what it means to be finished. Despite what people might think an unclear completion is music to a contractor because its easy to make a lot of money late in a project. Most of the major items are already in place so its mostly labour or variations and both are more money on top of profit. As we can all see from some of the enquiries into the Big 4 consultancies getting repeat work is what they want more than anything. In an engineering the equivalent to that are the contract variations at the end of a project. The way to avoid that is by (right up front) detailing in the specification: _"This is what we want and this is what we mean by being finished."_
Go check any project you know of and you'll quickly see the problems that happen when one of these things is not done.
And a perfect example of bad planning is Snowy 2.0. Yes as an engineer I can emphatically state that it is a project with merit and eventually we the Australian people will benefit from it. HOWEVER when you plan on building a power station you also need to connect it to the power grid. That was NOT done in the initial plans and that's where the biggest cost blowouts are. Plus the contractors KNOW they have us by the short and curlies because what's the point of building Snowy 2.0 if you don't connect it to the grid. It has to be connected so they have us. *Its a perfect example of the problem of what's left out of the contract.*
Yea but most engineer I deal with end up costing us more money. The labourers know more than the engineers
Thanks for the great insight 👍
@@GerardoFrancisco Thanks.
Its something that totally infuriates me and a lot of other engineers. Even in industry we have the same issues. I have worked on several mining and resource projects where the incompetence of senior management was staggering and $$Billions were wasted.
Worse - Project management is such a simple thing to do if you plan well. You don't have to plan perfectly you just don't have to ignore things and/or dismiss them as "somebody else's problem."
If you haven't watched the 4-corners on the consultants its a MAJOR PART of the problem. They have so utterly infected government, the military and the private sector that it will take decades to clean them out. The only real skill they have is sucking money out of projects.
@@culturekingsboy6555 In some ways I don't disagree as there are so many engineers who get promoted by sucking up rather than doing the job properly, but you are picking a fight with the wrong engineer.
I'll agree any day you like that there are too many engineers who don't know what they are doing and don't have enough practical experience BUT DON'T YOU DARE try and claim that labourers don't screw things up.
The amount of stuff I have had to personally pick up tools and fix because some smartass thought they knew better is staggering.
In fact there's way too many project mangers who aren't engineers at all making idiotic decisions that people like me have to clean up *and I've had to clean up a lot of their SHlT in my time.*
@@tonywilson4713 I see, yea there are many brilliant engineers out there. It’s unfortunate that most of the T1 companies have decision makers who are great at giving handy during lunch break as well. Winslow is a prime example. They hit 11 coms and 1 live all within 1 day cause the supervisor thought it was a good idea to let all the spotters go get on a shovel whilst he pretends it’s the 1800 hundreds where he is the supreme white man.
WHY? 4 Corners literally lifted the lid on consultants Sunday night. Corporate crime is off the scale.
Because every contractor knows it's a government job and they can milk it to the absolute end..
Yes and not just the mega projects. Building a school canteen for an example will cost way more than it should.
And the govt will pay because govt knows (hopes) it should get money paid back in tax, in effect the govt is paying itself! What a beautiful scam!
At north east link, me and boys are on EBA rate of $160 an hour night shift. Just fyi for everyone wondering why it costs so much.
Get back to work ya bludger , it's a Monday night stop watching CZcams
Perhaps if we have a real public service, this wouldn't happen.
I work in the public service in Victoria, we’re being replaced by contractors that cost three times more than a VPS employee for the same job.
I suggest the ABC's "Utopia" documentary as further watching.
why isnt the LNP NBN MTM mentioned in this report? they promised done by 2016, for $29.5 billion and it is still being built today, costing double and due to the LNP decision to use copper has easily cost Australia over $80 billion bucks
Don't forget Labor was the party that started the NBN. The Minister was Stephan Conroy who announced the project to buy votes for the upcoming election. It was a stuff up from the word go and ill planned. True what Malcolm Turbull did was to make the project worse but if it was planned properly from the word go then there would have not been the opportunity for the proceeding government ie the Liberal government to fiddle with the project.
Apart from Government officials taking kick-backs, these projects blow out because Government is unable to write a contract.
To me it seems that the Utopia series is not too far off the mark when it comes to the way governments work
Wow, a real life version of every single damn episode of "Utopia".
To the dot!!
It’s corruption and lack of accountability for results in a promised timeframe/cost, for sure. Even basic projects blow out like clockwork in this country.
Extra money for ghina
the overpaid consultants that put together the funding proposal for the Comm Games was woefully undervalued the construction costs
Its not so much a matter of corruption as bad practice.
I'm an engineer and have left a lengthy explanation in a separate comment explaining how to NOT screw up projects.
Utopia is often considered more documentary than comedy
Mockementary!
Why? Zero accountability of the politicians - the most accountable people involved - apparently. This is a grave and long established part of Australian politics - hence the sad-sack state of everything...and I mean everything!
As a Project Management professional, there are many bias that cause major infrastructure blow outs. Optimism bias for estimation, Political bias on what is acceptable budget to start the project, availability bias of skills and resources, overconfidence bias, hindsight bias, all built into the estimates. It’s not unique to Australia, its happened in the UK with HS2, Wembley, and goes back in Australia to the Sydney Opera House… its a fact of life….
But it shouldn’t be and its incompetence. While some unforeseen circumstances can happen the massive scale of underestimation shows many someones are not doing their jobs proficiently and they should be given the sack (at the very least) and it starts at the top.
I’ve been involved with the Ag and hospitality industry for a long time and it has its share of unforeseen circumstances but its dealt with within the specified time limits and contract requirements most of the time, sadly the building industry in Australia at present is filled with dishonesty.
@@alyssaoconnor every single Olympic bid for the pas 25 years (including Sydney) has doubled in price, in the first 12 months of winning the bid. This is political bias…. If the true cost was shown, nobody would bid and win. The Sydney Opera house was the same back in 1973; it came in at 4 times more than estimated…. Could you now imagine Australia without the Sydney Opera House?
People are overly optimistic. Tenders can be pitched too low to get the business. Analysis of outurn v budget aren't shared with public projects or even within an organisation.
@@norfolkinchance Every politician wants to be known for creating something big and doesn’t care about the end cost because there is no accountability for losses, they are more then happy to take the wins and blame someone else for the failures.
When it comes down to it Australia’s a business and you can’t run a business on champagne tastes on a beer budget, long term planning is an essential measure to a successful venture. Find the extra money later doesn’t work forever, is a bad and negligent business practice.
The Sydney opera house risk paid off but there are many more risks that didn’t, as well as many unneeded practices that happen regularly.
Just down the road from me billions was spent redeveloping a government tourist building, the end product was an unpractical building not fit for purpose, now 6 years later they are currently in planning mode to gut it and spend billions to change the lay out with the same architect, building company ect. Not at any stage was anyone using the space consulted or practical needs the focus - the whole project was about the narcissism of most involved and they patted themselves on the back plenty.
While no one can account for everything there has certainly been enough rail and government infrastructure to develop experience and get reasonably accurate costing, there is no way projects should double or triple regularly due to incompetence or as a deceptive practice to trick the tax payer.
@@alyssaoconnor I’m not disagreeing with you. I’m merely stating what happens in the world of project management. If we use historic costs etc, this is termed parametric estimation, there are many flaws with this approach based on regulations change, supply and demand, materials costs, and then there are the unknown unknowns all adding to the increase in cost. Each project is unique, hence its a project, and the human psyche is to want things to happen and we all, everyone of us, convince ourselves it’s the right thing to do, and continue to do, once we have invested time and effort into a job.
Infrastructure Australia is simply a road building lobby, with a peculiar hatred of rail.
Road programs are appallingly inefficient but their costs never questioned.
Cost plus contracts, price gouging and a loss of skills due to not maintaining an advanced construction pipeline. It's the same story throughout the West.
I'll answer it, the builder over chargers and blows out the time frame so he gets paid for five years he worked and he gets paid for five years he spends in Bali
Stop giving the contracts to the same companies over & over. None of them actually do the work because they just outsource everything to sub-contractors.
Because people like KMPG underpricing the quotes and them clean up with a rort.
Reminds me of the TV show Utopia.... 😂😂😂😂
Well it is a nation founded by convicts
And it has succeeded beautifully.
Its tough work ⚒ hard to find quality labor, and if it requires out of box 🗃 thinking than it is bound to go above estimates. In IT sector 60% projects fail atleast in construction 🚧 they are eventually completed. Informative documentary ❤
They fiddle the numbers with unrealistic assumptions and estimates, screw suppliers just to meet political objectives then screw the pooch with mindless bureaucracy. Same the world over.
I would say cost blowouts are due to a number of things:
-Ineffective/insufficient planning leading to less than adequate budgets being set
-Unrealistic timelines set by people who have no concept about how long it’s gonna take
-NIMBYISM
-Strict Labour laws (which I am absolutely not against)
Because being a thief pays and nobody is really watching or holding accountable the thieves running these projects.
Taxpayer money is there to be stolen. Ask any politician!
The problem is not that Australia is too ambitious in commissioning infrastructure projects, but that since the mid 20th century we have lost the habit of long term thinking and execution. More of these projects, with greater professionalism is the answer, not stopping everything. Also, please stop talking about ‘business cases’ and start referring to ‘infrastructure cases’. They are different animals: a BC is a shorter term (2-5 year), limited scope commercial initiative which is justified by an NPV. An infrastructure case is a long term (25 year+) macro economic investment, considered in terms of its impact on the greater economy. The fact that these terms are mixed up shows half the problem.
As a Project Manager, I wish my role didn't have any accountability...would be sweet.
Its usually easier to blame the contractor than to blame the PM...
Check which Contractors are Chinese owed in Vicyoria
Still rather a railway link than blooming nuclear subs for 360 bill
If we go ahead with the sub deal it will cost over $1T!
Compare the labour and materials cost 30 years ago, adjusted for inflation; I bet projects now cost way more.
Same as the PWC scandal. Governance from the Australian Government is non-existent
Solar another classic , Govt could put free solar panels and batteries,on every building in the country cheaper than the power lines cost blowouts comming, offshore wind turbine what a joke , no-one must of priced what commercial boating costs
Governments don't do power lines Howard's 2004 decision hits us hard from 2010.. look it up..goldplating
@@ozwunder69 yep why do anything when you can just subcontractor jobs out for kickbacks,and retirement jobs there's no need to actually attend
Why? Because they are very hard to judge. Budgets have always been best guess, and projects like these are multifaceted. Hence, budgets often go over. Such is life. Get over it.
More delay more pay
Egypt is building a new capital city and river to supply it with water for around the price of this one tunnel.
It’s due to blackmail. Get the job half built then threaten not to build the other half. Govts cave in as it is not their money.
Sydney light rail ... what a joke..they had an extensive tram system decades ago..ffs.
5:45 ANOTHER F'ing REVIEW??? Let me guess who's doing the review? Consultants.
We voted em in 😂😂😂
Its because the estimators can't cost the job on tender properly
Well it used to be blamed on the unions I recon the unions are owed an apology.
Egotistical management
This is easy. No accountability and using “outside” or “consulting firms” help
For what it's worth, if the costings were right on the ball, no want in the decision making process will go for it. It would be so hard to explain to taxpayers how it is justifiable to tender for the event..... No? Common sense prevails!!!
If you know how to use money, money is your slave, if you don't, money is your master.✌
Soooo Utopia on ABC is a documentary then....
RORTS
who cares. The alternative is not build and slowly suffocate. build it and let inflation swallow the cost.
good for jobs, good for taxes good for commuters.
anyone who has every attempted any project with the word MEGA in front of it knows it will blow out.
If lunatics run the asylum this is what happens 😮
💯
Wa rail... why have there been a plethera of studies 🤑🤑🤑 over consecutive years!!! ...seemingly little or no action?
Plan.
immoralities rules and corruption rives to the core . enjoy living
Scammers and thieves.!!!
unions
Chrisenti
As a professional scientists & engineer who has managed a few small projects iam appalled & angry about the amounts of tax payer $$$ flowing into these infrastructure projects and into the pockets of union reps who are also benefiting in an unjustified way...We also have a group of incompetant "pen pushers" and technocrats who are incapable of scoping these types of complex projects...
Like the property bought for a car park for Metro train, paid $30 mill, worth $10 mill? It's greed, incompetence is the lie to help us sleep at night AND they want us asleep otherwise we'd be out with the torches and pitchforks.
No mention of unions and the power they yield in driving up costs .... hmmmmm
Yet there are industries that still get products and services done on time and also have unionised workers. Couldn’t be the rorting companies, incompetent pen pushers and overpaid overdrunk politicians at fault 🙄.
Building infrastructure is not like ordering a 2 min cheeseburger or running a factory. It's impossible to know everything that's underground, to know what every single stakeholder wants and to know what materials and labour will cost halfway through a project that will span several years.
People can't wrap their heads around the idea that predicting the cost of a major infrastructure project with several variables is near impossible.
If you want to know what fast major infrastructure looks like, just look at countries where peoples homes are forcibly demolished, forests cleared without hesitation and community engagement is a foreign concept.
If you want something that benefits the most amount of people with least impacts to the environment, then it will costs time and money.
Unless you've ever tried to build, manage or design a major project, your opinion on costs blowouts are irrelevant.
Cost blowouts are the norm not the exception so your argument doesn't stack up. Also cost blowouts are not a small percentage but are way off the mark. Governments clearly low ball the price of a project to make it palpable for the voters. A good example is the Wyangala Dam upgrade. It was promoted by the Liberal state government to cost $650 million. Now clearly someone must have done some research to come up with that figure and passed it on to the government. But it wasn't long before an engineer from Melbourne said a project such as this will cost $2 billion. Clearly with some proper research a project estimated cost will be close to the money. Fortunately the Wyangala Dam project has quietly been forgotten about but it could have easily been given the go ahead and be a another cost blowout project and not just a bit over budget but 4 times over budget.
Too many politicians like Andrews have never had a job outside the political bubble thus they are often clueless about managing budgets and more concerned about maintaining power with various groups.
Politicians buying votes and here you ABC excused Andrews , Pathetic