Picking the right delivery model for your next infrastructure project
Local government is critical in delivering and maintaining public infrastructure. In aggregate terms, Councils are responsible for one third of all public infrastructure across Australia, maintaining an asset base valued in excess of $350 billion (with roads comprising more than $165 billion of this amount). This translates into local government spending billions each year maintaining and upgrading existing assets and delivering new infrastructure.
It goes without saying that there are inherent risks in delivering infrastructure projects. However, Councils often face their own unique challenges compared to their state and federal government counterparts, including increased funding constraints and ‘thinner’ in-house engineering and project management capabilities. The selection of a ‘fit for purpose’ delivery model, while not a guarantee of success, is critical for Councils to achieve a ‘value for money’ outcome and to reduce the risk of cost overruns and delays when delivering projects.
As we outlined in our ‘Delivery options for large-scale water infrastructure projects’ article, there are a variety of delivery models for proponents to choose from and no ‘one size fits all’ solution.
These include ‘traditional’ delivery models, from ‘construct-only’ and ‘design and construct’ (D&C) models at one end of the spectrum, to more collaborative styles of contracting, such as the ‘engineering, procurement and construction management’ (EPCM), ‘managing contractor’ and alliancing models, at the other.
A hybrid approach
However, local government should be aware that it is not limited to these traditional models, with public and private sector proponents alike demonstrating an increasing willingness in recent years to implement bespoke ‘hybrid’ models to suit the requirements of particular projects. One example is the ‘delivery partner’ model, which combines elements of the EPCM, managing contractor and alliancing contracting models to try to strike a better balance between cost certainty and ‘value for money’ outcomes on risker projects while providing proponents with the benefit of an experienced ‘delivery partner’ to supplement their own project management capabilities.
While the delivery partner model is relatively ‘young’, it has been adopted in Australia on a number of projects, including the delivery of the Western Sydney Airport by the federal government and the Woolgoolga to Ballina Pacific Highway upgrade by New South Wales Roads and Maritime Services. The model is also being used by Sydney Water to deliver the Lower-South-Creek-Treatment project, a $500 million program comprising the staggered upgrade and renewal of various wastewater assets in Sydney’s north-west.
A number of other hybrid models have been implemented on projects and novel hybrid approaches continue to be developed by industry.
Local governments should carefully weigh the advantages and disadvantages of a variety of delivery models in the context of the specific requirements and risks of a proposed project before making a selection decision. Our experts have experience with all project delivery models and are available to assist you with the selection of a ‘fit for purpose’ delivery model for your next project.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.