Traditional business practices and delivery models appeared flawed, as they fail to plan and organise the construction of mega projects when a crisis hits. Read more from Peter Gill, Director for Infrastructure at Donald Cant Watts Corke.
Early contractor and supply chain involvement is perhaps the most critical challenge facing the Tier 1 Contracting industry at present.
With recent announcements by Perrottet and Pallas, the State Treasurers of New South Wales and Victoria, of nearly $3.2 billion of infrastructure spend into the economy every month, an impressive new benchmark for the civil construction industry has been set.
Notwithstanding the complexity of these mega projects, supply chain management necessitates the involvement with suppliers at an earlier stage and in a more engaging way than clients and industry may be used to in the past.
Traditional approaches include the obtaining of prices and lead times for major commodities such as concrete, aggregates, and bituminous products, just prior to lodgement of tender. However, the timing of these enquiries may not be in that part of the project lifecycle that would
promote the supply chain to add value through innovation and the management of long lead items.
Early contractor and supply chain involvement in mega projects can therefore provide assurance to budget and program constraints, and prevent lengthy contractual disputes in the future.
The Problem
The challenge around early contractor and supply chain engagement is not new and was recognised back in 2018 by the then Executive Director of the Australian Construction Association, Lindsay Le Compte, who said:
“The client has an obligation to ensure that they have undertaken all of the relevant background investigations to enable them to develop an appropriate tender specification.”
“They must have thought through the key commercial, operational and related risks in their project and worked out how they are going to deal with them, and they need to select a tenderer with demonstrated capacity and commitment to work collaboratively with them to successfully undertake the project.” (Lindsay Le Compte the 2018 National Construction Equipment Convention, Sydney).
DCWC supports this initiative and, in line with state budgeting guidelines for high value, high risk projects, endorses the statement that the foundation for mega projects should be built on professional judgement where there is confidence that it can be achieved through good planning
of hard and smart work.
DCWC believes that such statements should apply to early contractor and supply chain involvement as well as the traditional stakeholder, commercial, operational and their related risks pre-lodgement of tender.
Significant challenges facing Tier 1 Contractors in relation to supply chain risk have arisen due to two main factors:
- The unprecedented spend on mega infrastructure projects – more than 2.5 times that of the previous spend during the mining boom period between 2007 and early 2013.
- The global pandemic of COVID-19 where key manufacturing zones such as Wuhan and South Korea have been affected by widespread quarantines, factory closures, and logistics disruptions.
These two major factors will have both short and long term impacts on mega infrastructure projects, and if it is true that clients have the obligation to ensure that they have undertaken all of the relevant background investigations to develop project specifications, then these clients should begin addressing these issues at the earliest opportunity.
Impact 1 – Unprecedented Infrastructure Spend