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Deakin researcher warns of cost blowout

A Deakin University professor has warned governments to do more to prevent cost blowouts, before new major public infrastructure projects begin.

Dominic Ahiaga-Dagbui’s caution follows the release of Infrastructure Australia’s 2019 audit, which suggests that to cope with a forecast population of 31.4 million in 15 years, government must spend $600 billion on major infrastructure projects.

Dr. Ahiaga-Dagbui said history shows major infrastructure projects routinely cost more than predicted.

According to a Deakin media statement, Dr. Ahiaga-Dagbui specialises in capital expenditure and cost overruns associated with delivering major infrastructure projects.

Dr. Ahiaga-Dagbui is currently modelling transport infrastructure cost performance, as well as the impact of delivering mega projects in Australia.

“It is welcome news that state and federal governments are investing in the critical infrastructure needed to support economic growth, connectivity, liveability and safety of Australia,” Dr. Ahiaga-Dagbui said.

“However, there are some major questions that need to be answered in order to deliver value-for-money for taxpayers.”

Dr. Ahiaga-Dagbui said that research shows the pressure to start projects quickly often results in too much residual risk being carried through to the project finishing stage.

“Capital-intensive projects are notorious for being delivered late and over budget. In fact, the odds of successfully completing these projects to their predicted cost and time targets are only slightly better than a coin toss,” Dr. Ahiaga-Dagbui said.

“Transport infrastructure projects, for example, routinely exceed their initial cost estimates, leaving asset owners, financiers, contractors and taxpayers dissatisfied. The ongoing Sydney Light Rail project is a perfect example.”

Dr. Ahiaga-Dagbui said despite the prevalence of cost overrun on mega projects, predicting and preventing the problem remains challenging.

“In fact, a lot of the research in this area is superficial and largely ineffective in dealing with risks and uncertainty involved in major projects,” Dr. Ahiaga-Dagbui said.

Dr. Ahiaga-Dagbui said empirical research is needed to address the possible impact of concurrently delivered large infrastructure on the Australian construction sector.

“Concurrently delivered high-value projects may have the tendency to outstrip the capacity of the supply chain to meet the demand for materials and labour,” Dr. Ahiaga-Dagbui said.

“Research is also needed to explore the interventions available to delivery agencies and funding entities to sequence projects so that the demand for scarce inputs, such as finance and labour, does not negatively exceed supply.”


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