Roads & Infrastructure Magazine sits down with Donald Cant Watts Corke’s management team to hear about the company’s instrumental consultation works on the Warrnambool Line Upgrade, as well as why the current contract distribution model is leaving much to be desired.
The Victorian Government is committed to increasing the capacity, safety, accessibility and efficiency of the state’s public transport network, which has resulted in an infrastructure boom.
Under the umbrella of Victoria’s Big Build infrastructure pipeline, the State Government is delivering 165 major road and rail projects across Victoria.
This $90 billion investment into the public transport network has also provided new opportunities for tier one, two and three infrastructure contractors.
Leslie Chung, Director – Infrastructure – Donald Cant Watts Corke (DCWC) says this investment has helped to establish programs aimed at improving the transport capabilities of regional communities.
“Victorian and Federal governments have committed more than $4 billion to the Regional Rail Revival Program, which will upgrade 10 regional rail lines,” Chung says.
As part of the Regional Rail Revival Program, DCWC – one of Australia’s largest providers of project management services – was awarded a contract in 2021 for works on the Warrnambool Line Upgrade in Victoria.
This upgrade aims to provide additional services and improved rail infrastructure for one of the State’s fastest growing regions.
“The Warrnambool Line Upgrade has been identified as a high priority project under this program, with Warrnambool’s population expected to expand by 20 per cent over the next 20 years,” Chung says.
On top of delivering suitable infrastructure to support the rollout and use of modern VLocity trains, the Warrnambool Line Upgrade also includes upgrades to surrounding infrastructure.
“All 57 level crossings around Warrnambool Station must be updated to fully activated axel counting-enabled crossings to allow more frequent patronage,” Chung says. “For our organisation to play such a pivotal role in a growing area and rail line makes us very satisfied.”
DCWC’s services for these works includes providing detailed constructability lines in cost budgetary, as well as a robust estimating service, which is fully risk adjusted to P50 and P90 risk adjusted prices.
These risk adjusted prices represent the probability that the project will be delivered within that cost estimate (P90 represents a 90 per cent probability and so forth).
Chung says DCWC is well placed to provide such guidance, even for a project of such a large technical scope.
“One of the reasons why we were selected to be a part of this project is our ability to produce budgets and a service that’s risk managed to the absolutely highest level. That’s usually between one to five per cent of the contracting market prices,” Chung says.
“Our accuracy and our confidence are commodities that our clients really value. We’re trusted cost and strategic advisors and we leverage off these skills while walking our clients through their journey.
“We’re able to mitigate risks on the spot and estimate to a very highly accurate number, even at the early stages of a project.”
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DCWC’s success in both government and private industry-led projects has resulted in the company being selected to provide services on other infrastructure projects, such as the North East Link Project and Metro Tunnel Project.
“The reason why we love working on these projects is that we can actually see the value of our efforts come to fruition on works that are contributing to the wider society and making it a better place,” Chung says.
“We don’t treat [projects like the Warrnambool Line Upgrade] as a mere transaction, but a partnership in realising our ambitions as a state and as Victorians. That’s what really excites me.”
The current contract model
Throughout his 35-year career, Peter Gill, Managing Director Infrastructure – DCWC, has seen the ebbs and flows of infrastructure delivery, both in Australia and overseas.
Gill says that the current distribution model for infrastructure contracts in Victoria, while effective, could implement changes in order to “share the load” between tier one and other infrastructure service providers.
Particularly for projects such as the Warrnambool Line Upgrade.
He says the early signs of this pattern could be traced back to the mining sectors growth in the late 2000s.
“If we go back to the mining boom between 2008 and 2013, the size of the projects that were coming out at the time were worth billions of dollars,” he says.
“The tier two and three contractors couldn’t compete with the big tier one companies. These contractors lost out on a lot of work. Then there was obviously a slowdown in the economy in 2014-15.”
Gill says these similarities can be drawn between this economic environment and the environment that the sector faces today.
“There were discussions around encouraging tier one contractors to provide more opportunities to tier twos and tier threes,” Gill says.
“We’re in a similar situation now, where there’s been a slowdown. Projects are being put on hold due the tight economy and escalations. One of the ways that [State and Federal] governments can add value and make the process more competitive is to recognise the tier two or tier three contractors.
“These companies have lower overheads, not only onsite overheads, but also offset overheads.”
Chung says that tier two and three companies can be supported by different contract models such as collaborative approaches.
“The traditional method of thinking is that bigger is better. That’s not necessarily the case,” Chung says.
“Multibillion dollar projects where the ultimate risk is passed on to a particular contractor, which is usually an international company, isn’t necessarily the best idea.
“Breaking down the projects into collaborative contracts allows local contracting firms to contribute funds back into the local economy. Changing the narrative will be pivotal for the next stage.”
Chung adds that these new models could potentially provide solutions to current economic, supply chain and skilled personnel constraints. He says that while these models have seen limited use in Australia, the results are so far pleasing.
“I think that the State Government is starting to realise that due to budget constraints, they have no choice but to look at alternative models,” he says. “Specifically, more collaborative and local market driven contractors and firms.”
“The sector has experienced significant transformations particularly in the last six months,” he says.
“We’re starting to see some of those results being tracked and reported back to the government. One example is Major Road Projects Victoria on the Roads Upgrade Program have been using a PPP model. I’d like to see more of a collaborative model.”
Gill says he expects these models to face further review within the next year, with hopes that changes can reinvigorate competitiveness in infrastructure project contracting.
“I think in the next six to 12 months they’ll be forced to look their procurement model, purely due to the current economic situation, the interest rate rise and their current budgets,” he says.
“The Federal and State governments need to provide a pipeline of work to make sure that we retain those resources in our country.”
“These models can help to break down these works into smaller packages, sharing around the world with shadow alliance and collaborative contracting to provide confidence to the market that there’s going to be works in the future.”
This article was originally published in the July edition of our magazine. To read the magazine, click here.