Stamford Plaza, Brisbane – 23 February 2009

Address by Peter Debnam MP

At this conference, you will hear speakers on all aspects of project risk. While my background was in the Navy and then corporate management, my last fifteen years have been in the NSW Parliament.

With the benefit of that experience I can say there is nothing more fundamental to this topic than the risk of just dealing with Governments.

Nothing so fundamentally risky as dealing with a Government

While public sector projects can seem attractive in terms of sales volume and profit potential, there is a significant risk in simply dealing with a Government. Every public project has the potential to become a political embarrassment and sovereign governments have almost total freedom of movement in dealing with any embarrassment.

Governments are by definition political animals and can frustrate, undermine or even openly attack their business partners – if it suits the Government’s political agenda at that time.

If anyone is in any doubt about that scenario then just consider the brutish behaviour of the NSW Government over the last decade.

Labor in NSW are not only demonstrably morally bankrupt, they have also entrenched planning and management practices, which are conducive to corruption.

While the NSW Government usually seems paralysed by process, it is very outcome focused for many union and business donors.

In terms of project management, whether dealing with Sydney’s Cross City Tunnel, rail infrastructure, rolling stock, public transport safety, urban planning or other decisions, NSW’s Labor Government has also demonstrated a new level of sovereign incompetence and then a further betrayal of community and contractor interest to ease the pain of their own incompetence.

With all this in mind, my message today is simple – if you plan to deal with the NSW Government in the two years before the next state election, then do so with your eyes open.

Your project should be based upon a well-balanced contract that does deliver benefits for taxpayers, the community, the contractor and for the users of the infrastructure or service? If the priorities and rewards for the community versus the contractor are unbalanced, the project WILL unravel.

And if the contractual relationship between government and contractor is unbalanced, then the contractor would be better to walk away before signing.

NSW desperately needs private sector involvement in almost all activities in the public sector but for the next two years before the election please understand the pitfalls.

In the next few years as the economy contracts, NSW ideally needs to dramatically improve its performance on infrastructure and other projects. It can be done if only we can get the current Government to understand.

So, today I’ll talk about a few realities of doing business with Governments and secondly discuss how the situation could be improved, eg is it possible to get the politics out of public sector project management?

Options to reduce risk and improve outcomes?

Given the political process, what are the options to reduce risk and improve outcomes?

I’ll suggest a few including: Transparency of Infrastructure Priorities; Independent Determination of Requirements and Priorities; Transparency of Contract and Process; Independent Management of Contracts along the ARTC model (appointed board overseeing professional management).

In discussing these issues, I’ll draw heavily on one of my previous speeches, delivered in August last year. That speech is available on my website peterdebnam.com.au

I’ll present a few ideas about State Government’s role in infrastructure delivery and, especially given I come from NSW, how to protect critical Infrastructure from a dysfunctional Government.

Now, a few months ago I was listening to a radio program discussing infrastructure failures and the program was attempting to explain why the projects keep going off the rails.

It actually took me a few minutes to realise they were NOT talking about NSW but in fact were discussing project problems in the UK.

As the Director General of the Chamber of Commerce said “The UK is supposed to be an advanced industrial nation, ….. but we just seem unable to deliver high quality transport projects on time that work.”

A French engineer was quoted as saying “The politics have been mingling with the project management.”

In talking about a particular project, the engineer said “I experienced so much political meddling I could write a book on it.

There was no way we could deliver on time and on budget. Politicians should not try and run a business or be creative. Let people with the proper skills do it.”

I kept listening and a columnist for The Guardian said “ Almost all the projects started with a big row, a big lie and a terrible mistake.”

I thought, that sounds familiar.

As he continued talking about political mismanagement of UK projects, I found myself mentally auditing NSW infrastructure projects like the Parramatta to Chatswood Rail Line (that’s Parramatta to Chatswood not Epping to Chatswood opened today years late and double the cost for half the distance), the missing SW and NW rail links, Sydney’s Cross City Tunnel, the Liverpool to Parramatta Transit-Way and Sydney’s M5 East to name a few.

But, what can we do about it? Well, there are several areas where we can change things for the better:

•    Public Trust in Infrastructure Delivery;
•    Maintenance;
•    Expansion of Current Infrastructure;
•    Nation-Building Projects;
•    Moving Contingencies from Back-side Covering to Infrastructure & Services; and
•    Fixing Dysfunctional Government.

But firstly, when I was elected to Parliament in 1994, the term “infrastructure” was not in wide public usage.

Now, everyone has occasion to talk about infrastructure and they know it covers all aspects of our built environment from roads, rail, schools and hospitals through to critical behind the scenes infrastructure such as water and electricity networks.

The public also know high quality well planned and accessible infrastructure is an essential foundation of economic growth in our democracy.
 
But regrettably, infrastructure is a talking point for the average punter because infrastructure failures impact their daily lives.
 
The New South Wales Government has frequently been associated with infrastructure failures - whether a failure to deliver infrastructure (such as secure water supplies or rail projects long promised and never delivered or other basic infrastructure in high growth residential regions) or a failure to maintain infrastructure (schools, hospitals, roads).

Roadmap for Change

In previous speeches, again on my website, I have set out a roadmap to change the machinery of government with a strategy of structural and administrative initiatives to kick-start infrastructure renewal in New South Wales.

The strategy included the need for a clear, transparent plan driven from the top and with the maximum involvement of the private sector.

Key reform objectives included reducing bid costs and improving project flow and certainty.

The Government must lift its own performance standards with clearer objectives to avoid project delays resulting from re-bids, moving goalposts, abandonment of projects and unnecessary levels of detail required before going into a fully documented bid.

We need to re-institute an appropriate balance between necessary probity protections and an instructive flow of information between bidders and the Government.

We need to foster innovation with real focus on outcomes and less prescription in bid design. We need to reform procurement and asset maintenance.

And we need to acknowledge that real reforms will only come with political will. Restructure and reform are meaningless without political will.

Public Trust in Infrastructure Delivery

One of the key drivers of reform will be transparency and that will assist greatly in re-establishing public trust in infrastructure delivery.

Governments don't like transparency because it leads to accountability and ministers and bureaucrats would then be under some pressure to justify poor performance versus generous salaries.

If you do plan to deal with Governments, it IS in your interest to insist that all contract documentation become public at contract signature. If you don’t believe it is in your interest to make everything public, then you are signing the wrong deal.

If we are to get world-class infrastructure, priorities need to change and transparency and accountability must become primary objectives.

It must also become outcome oriented not process paralysed as it is today.

Instead of publishing a pre-election glossy brochure in the style of the State Infrastructure Plan, the Government must commit to supply properly sourced and detailed information about infrastructure deficiencies and projects on a website – just as I first proposed in the run-up to the 1999 state election.

NSW didn’t do it then or since, but the Queensland Government partly picked up the idea.
 
Embracing transparency and shifting the information out of the bureaucracy and into the public domain, via a website, will be the mother of all power shifts and will engage the public in an ongoing debate about priorities.

We must involve the community in an open and honest discussion about future infrastructure projects.
In addition to re-establishing public trust, let’s talk about the basics of infrastructure in terms of maintenance, expansion and what is often called nation-building projects.

Maintenance

Governments notoriously avoid investing sufficient resources in maintenance.

For example three years ago, the NSW Auditor-General highlighted the Government’s failure to provide adequate road maintenance funding.  He noted State Roads’ replacement value is $69 billion but the NSW Government “is rebuilding at less than half its long term target, and has not met this target at any time this decade.” And he said the Government’s own plans acknowledge “it is not doing enough rebuilding to ensure the long term viability of the network, thereby presenting a risk to safety and reliability, and of higher repair costs.”

In further maintenance embarrassments, hospital and school maintenance in NSW are grossly under-funded. In any region across the state, you can walk into many hospitals and schools and see for yourself their sad rundown condition.

Maintenance may not be sexy but it is critical and better transparency must force more resources.

Expansion of Current Infrastructure

As our population and economy grow, existing infrastructure will need to be expanded and there is demand for road network expansion both in terms of capacity on certain routes and in terms of missing links ie the M4 East and upgrade of the Pacific Highway.

Rail links to the NW, SW, Illawarra, Central Coast and Hunter need investment. Schools and hospitals also demand additional resources.

What’s missing is action. Changes to process and funding may finally deliver the action so long overdue.

Nation-building / Landmark projects

The third category goes beyond maintenance and expansion to nation-building or landmark projects.

Instead of tolerating mediocrity in NSW, I believe each four-year term of State Parliament starting now during the downturn, we should as a community commit to at least one new landmark project – the type of nation-building project which so readily inspires Australians.

There are several obvious candidates screaming for recognition and approval.

Roads

In relation to roads, I’ve mentioned a number of network expansions such as the M4 East and upgrade of the Pacific and Princes Highways. But beyond those expansions, there is a road project, which will do more than anything else for the economic future of the western two thirds of NSW. It will also result in significant improvement in road safety as well as increased amenity for everyone living or working in the Blue Mountains.

It is the construction of the Bells Line Expressway over the mountains. My former colleague Ian Armstrong has been a relentless champion for this project and despite Labor’s refusal to embrace the project, I believe its time has come.

Light Rail

In terms of public transport, it really is time we joined the rest of the world and embraced light rail in the CBD and regional areas of Sydney, Newcastle and perhaps Wollongong. The dollars involved are not large but because the project needs to break the logjam of prejudice against light rail in government ranks and in the bureaucracy, I put it in the category of a landmark project.

Water

There is no more critical infrastructure issue than drought-proofing our state. With that in mind, remember that every day, even on a dry day with no rain, one billion litres of water are poured into the Pacific Ocean through Sydney’s three major Ocean Outfalls. We must recycle that water.

On a dry continent, with a much debated water crisis, it defies commonsense that the state Government refuses point blank to put major recycling on the infrastructure agenda.

While on water, combined with recycling the ocean outfalls, we must increase the size of Warragamba Dam. Increasing the height of the Warragamba Dam wall can double the volume of the dam.

It still rains over the dam and at least once a decade rain events will fill the dam.

Let’s commit to doubling the size of the dam AND recycling the ocean outfalls. The combination of the two will secure Sydney’s water supplies for the rest of the century.

But to be able to undertake these nation-building projects, the NSW Government Budget must be structurally sound. Currently, it is not and the economic downturn is not the only  problem.

NSW Government needs a total Cleanout - Moving Contingencies from Back-side Covering to Infrastructure & Services

Over a decade of prosperity, Australian Governments grew fat, self-indulgent and insulated from community concerns and the NSW Government is no exception and is probably the worst offender.

The prime objective for Government has become raising more and more taxes to fund an insatiable bureaucracy – a bureaucracy, which is not only expensive but also paralyses decision-making.

In NSW instead of building contingencies into services and infrastructure, the infrastructure is built with minimal capacity, eg M5 East, and services especially police, nurses and teachers are squeezed.

But the bureaucracy knows no bounds because Ministers want their praetorian guard to be well armed or rather well fed. The fact is the NSW Government needs a total cleanout from top to bottom. Not a spring clean – it needs to be turned upside down and shaken.

After years and years of gross excess, the public administration of NSW needs rebuilding.

The entire Government needs to be re-engineered to serve the frontline instead of just protecting ministerial backsides.

The contingencies currently larding up the bureaucracy need to be lipo-suctioned to provide funding for frontline services, tax cuts and infrastructure.

A bureaucrat freeze with a net reduction of 5,000 per year will cumulatively save more than $4 Billion over a four-year term of Parliament.

That funding should go to frontline services, to infrastructure and to tax cuts to make NSW competitive again. A reduction of the bureaucracy will also speed up decision-making.

Other changes are also required.

Fixing a Dysfunctional Government

Nine years ago, I spoke in the Parliamentary debate lauding the “Best Olympics Ever”.

Sydney’s Olympics had finished a month before and Parliament resumed with congratulations to all involved.

In addition to the messages of congratulations, I said “It is important to acknowledge that in New South Wales in recent years we have suffered failure after failure in government services. We in New South Wales must ask, "How did we get it so right with the Olympics? How did we get it so right during September 2000? Was it the Government that did that? Did the New South Wales Government deliver that success?"

And I noted that “No, it did not. It goes back to the hybrid organisation.”

For five years the Carr administration had not delivered on government services. Then, in September 2000, everything magically worked.

For the period of the Olympics, all government services and organisations seemed to work at or above world-class standards. We had to ask ourselves: What happened?

For the 2000 Olympics everyone got behind the dream and was committed to delivering the best ever Olympics. SOCOG and the Australian community drew on the best resources in the nation, supplemented by the best in the world.

Why did we do that? Because we knew exactly what we wanted, and we desperately wanted to deliver a successful 2000 Olympics.

We can apply that Olympics thinking, that same determination, to delivering everyday government? We can – if we want to.

The current New South Wales Government structure is a lethargic leftover from mid last century and is in urgent need of overhaul.

Governments are usually impotent because they are not structured to serve the modern needs of individuals or communities. There are too many gaps and overlaps between departments, especially in the outdated New South Wales structure.

The Government can be restructured to reduce bureaucracy and departments (down to nine – the Victorian model) and focus on improving services, instead of relying on crisis management.

The former Minister for the Olympics, Michael Knight, spoke about the challenge of the Olympics and said: “In order to do this properly, we had to alter the way a lot of things happen. We had to change the way government does business ... “ Importantly, he added: “These areas of change are not just for the Olympics, there's a broader change that's been unleashed.”

We wish!

During that same interview the Minister for the Olympics also said: “The way for government to go has to be smaller organisations—not building big entities but smaller organisations—that work smarter and outsource the appropriate things and get the skills piece by piece, rather than in-house, from the private sector.”

The Minister for the Olympics spoke also about his future, saying that he wanted to be involved in "something that's challenging, that's building, that's growing, not administering the status quo".

But whether it’s Michael Knight or some other brave soul, the NSW Government structure needs to be dragged into the 21st Century to have any hope of delivering world-class services and infrastructure and cleaning out the corruption.

We must move to an undiluted transparency of infrastructure projects and priorities via the website methodology I mentioned before.

We must adopt a truly Independent Determination of Requirements and Priorities; Transparency of Contract and Process; Independent Management of Contracts along the ARTC model.

Just as the Federal Government handed management of Monetary Policy to the Reserve Bank, it should be possible to remove political meddling from infrastructure delivery and management? 

The ARTC model with a Parliament appointed Board of Directors overseeing professional management would make the difference to infrastructure delivery.

We can argue till the cows come home about infrastructure priorities and about processes but until we fix the dysfunctional Government itself then no real progress will be made.

There is no greater challenge in New South Wales than reshaping government itself to focus on improving services and infrastructure for the community.

In the meantime, as practitioners in the field please understand and manage around the pitfalls in dealing with Governments especially in NSW.

Thank you.