24/03/2011 - 00:00

How best to deliver infrastructure

24/03/2011 - 00:00

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Delivery of WA’s economic and social infrastructure comes in many forms, which is a good way to evaluate different contracting options.

How best to deliver infrastructure

READERS of this week’s cover feature will notice a theme that runs through many of the articles – the diverse range of contracting models used to deliver infrastructure across the state.

Whether it is roads, railways, hospitals or water supplies, there is a wide range of public and private – regulated and unregulated – arrangements in place.

Finding the best delivery model is a fascinating exercise.

Those of us with a few grey hairs can recall the days when the old Public Works Department used to handle most capital works projects in Western Australia.

We can also recall a period in the 1990s when Main Roads farmed out nearly all of its work to the private sector, to the extent that the agency found itself bereft of in-house expertise.

Over the past decade, the public sector in WA has become a lot smarter about contracting.

The Water Corporation, for instance, is widely acclaimed for its use of alliance contracting, a model that allows it to tap into the expertise of private sector companies while sharing some of the risk, rewards and knowledge.

Its current alliance partners include international firms such as Black & Veatch, Tecnicas Reunidas and Zueblin, along with Australian contractors Thiess, WorleyParsons and Brookfield Multiplex.

Alliance contracting is now used by other agencies, particularly in circumstances where a project is technically complex and the agency has an opportunity to build its knowledge or skills.

The Public Transport Authority provides a recent example; it has entered an alliance with a John Holland-GHD joint venture to complete the $360 million sinking of the railway between the CBD and Northbridge.

In other cases, government agencies simply contract the private sector. For instance, a joint venture between Leighton Contractors, NRW and GHD has recently been contracted to widen a section of Great Eastern Highway at a cost of $225 million.

The value of contracting models often rests on their finer details. This has been illustrated by Main Roads’ move from term network contracts (for maintenance work) to integrated service agreements.

Industry players see the new agreements as a way of giving the government agency more control and greater capacity to build its in-house knowledge.

Within the health sector, the government is employing several different contracting models.

At Fiona Stanley Hospital, the private sector is the builder (Brookfield Multiplex) and will also provide non-clinical services (Serco).

At the new children’s hospital, the private sector will be responsible for design and construction.

The proposed Midland Health campus, in contrast, will feature one of two short-listed consortia, led by Ramsay Healthcare and St John of God Healhtcare, taking responsibility for the construction and operation of the hospital.

In the water sector, the Barnett government has gone a step further, recently appointing a private consortium to fund, build and operate the new Mundaring water treatment plant.

One of the advantages of having different contracting models is the potential to measure their respective performance.

Declaring one to necessarily be inferior, or superior, is jumping the gun. That is why the Labor party and union campaign against the so-called privatisation of hospital services is so disappointing

The entire campaign is based on experience from the past and takes no account of contemporary thinking or circumstances.

Much of WA’s economic infrastructure – ports, railways, pipelines and power stations – was either built by, or is owned by, the private sector.

This throws up a number of challenges around pricing and access.

The solution in the energy space is to have a regulatory system, which leads to some truly arcane debates around concepts like rates of return and cost of capital.

There is no established regulatory framework to govern access to other assets, like the iron ore railways in the Pilbara.

Hence the long-running dispute to try and find an access regime that suits all parties – the companies that built the rail networks, and the emerging producers who want access.

This debate is not an ideal situation, but the issues are arguably even more complex in the Mid West, where Oakajee Port & Rail is seeking to build the infrastructure to service a range of proposed mines.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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