The overriding message of this draft report is the need for a comprehensive overhaul of processes in the assessment and development of public infrastructure projects.
- There are numerous examples of poor value for money arising from inadequate project selection.
- Without reform, more spending will simply increase the cost to users, taxpayers, the community generally, and the provision of wasteful infrastructure.
- It is essential to reform governance and institutional arrangements for public infrastructure to promote better decision making in project selection, funding, financing and the delivery of infrastructure services.
- Well-designed user charges should be used to the fullest extent that can be justified. However, governments will have to at least partly fund some infrastructure projects and address equity issues.
- Significant road pricing and institutional arrangements are proposed to create more direct links to road users and to take advantage of advances in vehicle technology.
- Only if implemented well does private sector involvement in infrastructure provision and/or financing deliver efficiency gains.
- But private financing is not a 'magic pudding', ultimately users and/or taxpayers must foot the bill.
- Government guarantees and tax concessions are not costless.
- Governments have the capacity to fund more projects than under current fiscal and debt management practices provided the reform package in this report is implemented.
- Data problems beset the detailed analysis of the costs and productivity of public infrastructure construction, and of the effects of various policies. A coordinated and coherent data collection process can address this and improve future project selection decisions.
- Nevertheless, there is evidence of recent significant increases in the costs of constructing major public infrastructure in Australia. The mining construction boom has been one factor, but no single input has played a decisive role in cost increases.
- Until recently, labour productivity growth has been sluggish. There is no conclusive evidence that Australian levels of productivity in construction are higher or lower than comparable countries.
- Despite significant concentration in the market for large public infrastructure projects, the market appears to be workably competitive. However, there are some uncertainties, including whether this applies across all market segments.
- There is significant scope to improve public sector procurement practices and to lower bid costs for tenderers, with potentially large benefits for project costs and timing.
- The industrial relations environment in the construction industry remains problematic, though this appears to mainly relate to general rather than civil construction, with the problems much greater for some sites, unions and states. Governments can use their procurement policies to drive reform, and penalties for unlawful conduct should rise.
Download the report
This report was released on 13 March 2014. You are invited to examine the draft report and to make written submissions and to participate in public hearings.