An opportunity for our Transport agencies reinvigorate our economy and lift construction productivity

Published on LinkedIn on 14 May 2020

Our founder, Owen Hayford, was delighted to have been given the opportunity to deliver the legal side bar at today’s IPA Webinar. Below is what he had to say about the opportunity that post COVID infrastructure spending provides to not only reinvigorate our economy and put people back into jobs, but to also shift the dial on construction sector productivity.

“Firstly, let me say thank you to Adrian and the team for the great webinars the IPA has put on over the last couple of months. 

They are often the highlight of my week … especially the legal side bars. 

I’d also like to thank Rod, Neil and Nick for their excellent presentations on the thinking within our east coast transport agencies, including on forward construction pipeline. 

Transport has been the engine room of the Australian construction sector for as long as I’ve been practising as a lawyer.

So it comes as no surprise to me that our transport agencies will do the heavy lifting on the infrastructure related stimulus that our economy now needs to help us put workers back into jobs.

I’d like to take this next few minutes to share some thoughts that DLA Piper has on the opportunity we see for our Transport agencies, in pursuing this important endeavour, to shift the dial on things that have been preventing the Australian civil engineering industry from reaching its full potential.

As Australia’s biggest buyers of civil engineering services, our east coast Transport agencies are in a unique position to show leadership on some critical issues that have prevented our civil engineering sector from reaching its full potential, in terms of its productivity.

There are many reasons for the low productivity growth experienced in the construction sector over past decades.

But the reason which resonates most loudly for me is the sub-optimal nature of our procurement and our contracting frameworks. 

Conventional fixed price procurement models have long been preferred by most project owners including our Transport agencies, for their simplicity and the certainty that they provide.

But, as we all know, they have features that discourage the collaboration needed for significant productivity improvements.

The allocation of responsibilities and risks encourages the blame game, rather than problem solving, when things go wrong

Fixed prices motivate participants to do the minimum required of them, even if doing more would result in better project outcomes

And there is no incentive on other participants to contain the cost impacts of variations. 

At DLA Piper, we believe the economic crisis created by COVID-19 provides an opportunity for the sector to ‘double down’ on the industry reforms that the NSW Government commenced with its 10 Point Plan for the Construction Sector. 

We encourage Rod, Neil and Nick to have our east coast transport agencies show true leadership through this opportunity, and lead the industry through the reforms that are needed to re-set our procurement and contracting approaches, in a way that will enable the industry to not only reinvigorate our economy but also achieve the step-change in productivity that we all desire.

As we have seen over the last two months, the need to respond to a crisis can bring about change that was previously considered impossible.

Thanks again to IPA, for giving me the platform to make these observations, on behalf of the legal sector.”