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Australians pay too much for major road and rail projects because governments don’t drive a hard bargain on contracts with the big construction firms.

Governments procuring transport infrastructure should focus on one principle: delivering services at the lowest long-term cost to taxpayers, for a given quality standard. To achieve this in Australia, we need more competition, smarter procurement, and greater transparency.

Australia’s transport infrastructure costs are above the global average. There is a government culture of caving in to contractor demands and paying sometimes hundreds of millions of dollars to settle a problem a few months or years after a contract is signed. Even after construction has begun, about 25 per cent of projects end up costing taxpayers more than governments promised when the contract was signed.

Governments should only sign contracts that they are prepared to enforce. All infrastructure contracts should be awarded through an open tender process. And governments should investigate how similar countries overseas manage to build high-quality transport infrastructure more cheaply.

Key recommendations:

  • Pay more attention to costs
  • Improve transparency
  • Foster greater competition
  • Scope projects properly, and procure systematically
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Grattan Institute Report No. 2021-04