A version of this article was published on 6 December, 2021 in the Australian Financial Review
The underperformance of infrastructure has grown as a serious societal problem. High levels of opaqueness, lack of accountability and monopoly power are to blame.
Regrettably, jingoistic nation-building slogans have overtaken infrastructure. It has skewed government to prefer megaprojects, with a casual indifference to our neighbourhoods’ decaying amenity, safety and quality of life.
Infrastructure investing is prone to misjudgements, pork barrelling, and corruption because of a lack of transparency, leading to the misallocation of capital. The role of customers, an absence of competition, political accountability for grand promises and under delivery are all at a low ebb compared to most other areas of the economy. This dysfunction must not be allowed to persist, and it can be fixed.
This context provides Infrastructure Australia (IA) with an opportunity to set itself apart as a champion of transparency, bringing conviction and courage to the fore to shape today’s infrastructure decisions to be the best they can be. When that is a reality, the rest of us can be more optimistic our infrastructure is doing its job – positively transforming lives and livelihoods.
Keeping errant governments inline
In mapping a more purposeful future for IA, we must first accept that depoliticising infrastructure is neither desirable nor appropriate. Infrastructure rightly sits at the heart of democratic processes, yet both political parties rhetorically seek to outsource it. The real issue is that transparency is missing, knowing the opportunity costs of infrastructure decisions, and shining a light of accountability to whether projects ever deliver on their promises.
Many governments worldwide, including Australia, want to give the impression of overhauling project selection and prioritisation processes by establishing independent agencies like IA. But this has struggled to work because too many appointees bring well established political affiliations and a mindset of treading carefully, not wanting to challenge or upset political masters who appointed them.
Next April, IA will be 14 years old. It has matured as an organisation, and its reports, processes and personnel all point to an organisation committed to professionalism and due process. But this is not enough.
A Federal election in 2022, means grand promises of high-speed rail, fantastic transport, water and energy solutions for cities and regions and transforming Northern Australia – will be replete with vision, hope and little guarantee of effectiveness. Australia needs an IA with the courage and conviction to pull errant governments into line.
IA’s insistence for business case preparation to assess and prioritise projects may be reassuring – experts carefully measure and check, in much the same way pilots do pre-flight checks of all systems before take-off.
The problem with the IA flight deck is that it flies by assumption. Nobody at IA is checking that the instruments are accurate. IA should be more forthright with the government that its costs and benefits in business cases are just estimates, often untethered from hard empirical evidence they can be achieved in the future. Moreover, there is a lack of commitment to systematically follow up on projects to confirm and validate actual costs and benefits. Instead, IA substitutes hope over hard evidence that benefit-cost ratios will be accurate, and that discount rates impacting these calculations were appropriate. The result is a lack of empirical feedback on project performance that reinforces existing biases and inefficient project selection practices. These practices speak to a tick the box mentality without objective evidence that positive legacies from projects can pass to current and future generations.
Other government departments like Federal Treasury have their budget and economic estimates heavily scrutinised against actual outcomes. It is a sobering process, but it provides accountability to do better, seeking out improvements when wrong.
Emulate the Productivity Commission
IA should get the data and inform decision-makers and taxpayers about how projects performed in the years and decades after completion. IA can make a big difference by harnessing the power of evidence, transparency and expertise. It is in the national interest to relentlessly pursue transparency and accountability on infrastructure projects, despite the protests from vested interest groups determined to keep the status quo.
Being an official independent advisor to the Federal government puts IA in a powerful position to effect change. But it requires courage and conviction to transparency, matched with intellectual integrity, quality of data and modelling to inform and disseminate information on the good, bad and ugly aspects of infrastructure policy and projects.
The Productivity Commission and its predecessors represent worthy examples for IA to emulate. The then Industry Assistance Commission’s economic analysis and the ability to communicate complex information to the public earned trust and credibility during the heady debates on tariff reduction. It successfully delivered the public evidence needed to change government policy by demonstrating the damage industry protection was inflicting on ordinary Australians. The nation needs IA to do the same for infrastructure.
It is only a matter of months before political parties roll out election wish lists inviting more budgetary black holes. IA needs to urgently build a body of evidence to support the sustainability of infrastructure spending and help Australia’s fiscal resilience. They could usefully build on the work of the Grattan Institute for this purpose.
Watch out for nation-building promises
IA should be more prudent in supporting megaprojects – the multi-billion-dollar undertakings that deliver significant announcement effects for politicians and a sea of problems that follow. Bent Flyvbjerg from Oxford University coined the iron law of megaprojects: ‘over budget, over time, over and over again’.
For example, the surge in regional population growth post-COVID will no doubt birth another round of high-speed rail dreaming. This will need a firm hand from IA to protect the interests of regional Australia by prioritising the fundamentals – proper hospitals, schools, sports, and recreation facilities to name just a few. All these infrastructure essentials will be less likely if resources are sucked up by unworthy projects in the name of ‘nation building’.
At the same time, super regions around capital cities lack transport connectivity. Renovating the rail system between Sydney to Newcastle, Melbourne to Geelong, Brisbane to the Gold Coast would deliver more widespread benefits sooner than very fast trains between capital cities. There is a need for a more balanced and responsible national conversation about options and IA must set guard rails to keep proponents honest.
In the case of WestConnex – a partially completed megaproject toll road in Sydney – was backed by IA with business cases and cost-benefit analyses. Better mobility and urban renewal were two prongs of its value proposition. While there was an enormous conviction to getting the WestConnex infrastructure built, the follow-through to urban regeneration has been disappointing, despite IA acknowledging its merits.
There is no doubt IA could have used its powers of influence to secure a better deal for housing and social aspects of WestConnex compared with the sheer institutional determination to build the road alone. IA could add much more value to the way projects impact the community if it pushed back harder on industry biases favouring investors and motorists over communities. A balanced approach would leave more room for other stakeholders to benefit, like residents and home buyers in need of affordable housing. Community trust in infrastructure pivots on the benefits being enjoyed more inclusively.
BIG FIXES supports a more effective IA
There is an enormous community trust bestowed on those responsible for infrastructure to do their jobs well. But the better organisations like IA can do their job, from planning, design, construction, and operations the more room there is for others to innovate, be productive, and ensure well-being and contribute to a better society.
It is appropriate to scrutinise, critique and debate IA as a lot is riding on them to do the heavy lifting in sharpening the nation’s capability to select and deliver excellent infrastructure. Anything less will fail the Australian people, undermine trust, and diminish the quality of life of our children.
Building solid relationships, honing skills of giving back to customers and communities and recognising the primacy of stakeholders over shareholders all form part of the solution. My recently launched new book BIG FIXES: Building bridges to an inclusive future sets out a tried and tested framework and practice of Customer Stewardship for owners and operators of infrastructure to lift performance and accountability.
It was written from a global perspective to help those responsible for infrastructure to understand what we do well and remind all stakeholders there is still enormous room for improvement. BIG FIXES makes the case for organisations like IA to strive for more transparency, impact and create positive legacies.
In reviewing the book, Professor Ian Harper encourages us to think of infrastructure as a gift that current generations pay forward to future generations. “When we invest in infrastructure, we express hope for the future. But we also create the future since good infrastructure empowers human’s ingenuity and creativeness that literally fashion the future.”
No one pretends that IA’s job is easy. However, the difficulties faced by infrastructure policymakers could be more easily overcome by having an honest and accountable commitment to transparency first, and a relentless drive to the centricity of citizens and customers for the whole life of infrastructure. After all, what is essential is not the physical assets but the life-giving services of infrastructure, making the challenge more immediate and manageable rather than constantly building new assets.
*Garry Bowditch is the author of BIG FIXES, available now on Amazon. He is a global infrastructure expert, Co-Founder of Customer Stewardship Alliance, formerly a senior Commonwealth Treasury official and inaugural Executive Director, Infrastructure Partnerships Australia.