Are we getting value for money and what we can do to achieve it
Infrastructure is the latest buzz word on every politician’s lips. It is seen as the answer to restoring our staggering economy, an opportunity to promote economic growth and create more jobs. Governments at every level are spending a lot of money building new infrastructure projects. The Victorian government’s “Big Build” boasts the delivery of approximately $70 billion of transport projects including 119 major road and rail projects and the creation of over 15,000 jobs across Victoria. But most of this is being spent on a small number of mega projects. The latest on the Victorian government’s drawing board is the Suburban Rail Loop (SRL). The Government says it will be “the biggest public transport project in Australian history” with a proposed start date of 2022 and completion date of 2050. The guestimated cost at this stage is $50–100 billion” although is it likely to be much higher given the absence of a detailed feasibility study and an increasingly uncertain economic environment which is likely to compromise many of the assumptions that underpin its viability. The question we must ask – is this investment in areas where needs are greatest? Are we getting value for money, remembering that it is our money government is spending, and what are the risks?
The growth of mega projects is not confined to Australia. As Bent Flyvbjerg (Said Business School University of Oxford) notes in his in 2014 paper “What You Should Know about Mega projects and Why” ” total global megaproject spending is assessed, at US$6 to US$9 trillion annually, or 8% of the total global gross domestic product (GDP), which denotes the biggest investment boom in human history”. But as Flyvbjerg notes they have a terrible track record which he describes as his “iron law” of megaprojects: “megaprojects are systematically subject to “survival of the unfittest,”- “over budget, over time, over and over again
This would not be so bad if these were inherently good projects and designed to meet community needs, but this is rarely the case. As Bent Flyvbjerg notes “Like the Tower of Babel, nations’ rulers want to create the tallest, widest, biggest projects they can; and so often these are driven by ego rather than financial good sense”. He describes these drivers as the four sublimes
- the technological sublime as the rapture engineers and technologists obtain from building large and innovative projects, with their rich opportunities for pushing the boundaries for what technology can do,
- the “political sublime”, which is the rapture politicians obtain from building monuments to themselves and their causes
- the “economic sublime”, which is the delight financiers, business people and trade unions get from making lots of money and jobs from megaprojects. Given the enormous budgets for megaprojects, there are ample funds to go around for all rent seekers, including contractors, engineers, architects, consultants, construction and transportation workers, bankers, investors, landowners, lawyers and developers.
- the “aesthetic sublime” is the pleasure designers and people who appreciate good design get from building, using and looking at something very large that is also iconically beautiful, such as San Francisco’s Golden Gate bridge or Sydney’s Opera House.
There is a fifth sublime ofcourse and that is the use of capital projects for shameless political pork barreling often linked to pressure from vested interest groups (rent seekers).
And this is how much of the community’s money – our money paid from taxes and charges is now being spent today, and explains to a large extent why many areas of need become run down because they have been starved of funds. All of this is built on debt of course, which ultimately must be repaid but comes at a huge opportunity cost when investment in areas of real need remain neglected. This includes much of our existing infrastructure that is in poor condition because of inadequate maintenance or is in urgent need of upgrading or renewal.
It is time to get back to “basics” and understand what infrastructure is, its role, the way it creates value for the community and investment criteria that should be applied when evaluating and approving projects in the first place. It is also time to start applying proper processes to the evaluation, assessment process and ranking of projects as part of an overall planning framework and plan for the future. At a more detailed level it requires the identification of alternatives. For example many of the outcomes that could be achieved by an SRL could be achieved by improving the bus network, much of it to smart bus standard. This could be achieved at a fraction of the cost and very quickly, probably within a parliamentary term instead of decades and with minimal risk. It would also create many new jobs. There are other options ofcourse. The question needs to be asked why these have not been included in the evaluation process. It is likely this option does not satisfy Flyvbjerg’s sublimes. Whatever the reason pursuing the current trend will rapidly impoverish our State/nation and lead to disastrous social outcomes.
Government financing will become increasingly difficult in the future. This should force a radical cultural change in which governments and the community at large will be forced to do more with less. Some cities have demonstrated how this can be done. Frugal but appropriate and well designed investment in physical infrastructure releases government funds for other areas of need, particularly in social infrastructure: public health, education, research and development, community services, and many others that are highly valued by the community and contribute to its livability and its place as a civil society. It also enables communities to focus more sharply on the social and environmental challenges ahead, challenges that will dwarf those of the past and will need to be tackled seriously and effectively with increasing urgency.
Future investment in public infrastructure must become an integral part of a broader sustainability strategy in which resource use will be a key issue. This will require a fundamental shift in thinking by government and many of its agencies about the role of infrastructure, the way it is operated and managed and the demands placed on it in the future.