28/04/2014 - 09:57

Counting costs of bad planning

28/04/2014 - 09:57

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The Property Council of Australia is set to release a report that calculates the true cost of poor planning and delayed infrastructure.

Counting costs of bad planning
RETHINK: Joe Lenzo has commissioned a study that measures the costs of poorly planned and delayed infrastructure.

The Property Council of Australia is set to release a report that calculates the true cost of poor planning and delayed infrastructure.

The report due in June looks at the key impacts to residential, commercial, retail and retirement developments as well as the economy at large when infrastructure assets are not completed to original expectations and timeframes.

While some costs are easier to quantify, such as paying for temporary generators after promised electricity transformers were delayed, others, such as determining reduced revenue from building a downsized apartment development alongside a previously planned MAX light rail station, are trickier.

WA executive director Joe Lenzo said the impetus for the report came from PCA’s members, who were sick of gearing up for property developments that capitalised on major infrastructure plans, only to have the rug pulled out from underneath them.

However, GHD commercial and cost services senior principal Richard Croxson said there were many ways the construction industry could mitigate against time and cost overruns, despite not having control over aspects of large projects.

Mr Croxson said increasingly competitive tendering environments meant companies had to be cautious.

“Establishing ‘what-if’ scenarios and devising action plans to invoke in the event the identified risks occur will help achieve the desired outcomes,” Mr Croxson said.

“Good business practices demand that any uncertainty is factored into the cost of a project.”

The Property Council found that despite uncertainty surrounding some major projects being a key challenge for developers, it had uncovered a trend across all property sectors that competitive pressures were greater.

That meant the fear of losing out to competitors was greater for developers than waiting to see how an infrastructure project would pan out.

Mr Croxson said in cases where there was greater uncertainty, there was also a risk for greater cost.

“Contractors often have to make decisions based on incomplete information. Inevitably, this is going to lead to some instances where insufficient allowance has been made,” he said.

“This in turn could give rise to friction between the parties and sometimes disputes.”

Mr Croxson said the key for companies was to plan for all risks and give responsibility of managing them to the best-placed person who could act if they materialised.

Mr Lenzo said the report, which also includes confidential interviews with key government planning staff, had looked at the big picture.

He said it aimed to convince government to provide a more coordinated method of looking at infrastructure, which could in turn give industry greater certainty.

“The certainty element is really important, that’s what industry needs,” Mr Lenzo said

“We’re not saying the government has to do everything at once but it must provide a level of certainty and that’s what a plan does, so the private sector can say ‘ok, this is the sequential movement that is going to happen and therefore I can plan for that.”

The report includes 20 case studies from property developers, which had projects constrained by delayed or postponed infrastructure and gives examples of how they coped and what were the implications.

Mr Croxson said owners or developers and contractors could also play their part to avoid having projects run over time or budget.

He said owners or developers could stick to budgets by avoiding design rework, design and scope changes and sticking to approvals timeframes.

Contractors could prevent cost blowouts by avoiding poor workmanship, poor productivity, and poor supervision or management. 

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