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Global credit squeeze impacts Australia's road construction

First publishedon www.WorldHighways.com
2009 September
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This year's Roads Australia National Road Summit in Sydney attracted key road industry leaders from across the country

Roads Australia steps up in policy debate as road construction feels the pinch of the credit squeeze, as Mark Bowmer (RA media director) reports

Like all markets around the world, Australia is feeling the effects of the global credit squeeze and its impact on the delivery of major infrastructure projects such as roads. In Sydney, for example, lack of funding (both from government and private sources) is seen as the major stumbling block to the construction of a much-needed eastern extension to Sydney's main east-west motorway, the M4.

Yet despite feeling the hurt of the global financial crisis, federal and state governments across the country are doing their best to "keep the ball rolling" in terms of the planning and delivery of major road projects.
At the same time, the Australian road industry through its peak body, Roads Australia (RA), is working closely with governments to match the right solutions of funding, financing and delivery to the appropriate projects.

In its May budget, the federal government made public the much-anticipated priority list of national infrastructure projects identified and assessed by its key advisory body, Infrastructure Australia.

At the same time, the government announced AUD$8.5 billion (US$7.2 billion) in funding allocations to kick-start a number of these projects, among them road projects in Queensland (the Ipswich Motorway and Bruce Highway) and New South Wales (the Hunter Expressway and the Kempsey Bypass on the Pacific Highway.) Many of the projects will also require substantial contributions from the states.

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NSW Roads Minister, Michael Daley, addresses industry leaders at the 2009 National Road Summit
All up, the Federal Government has promised $28 billion (US$23.5 billion) for roads over the next six years.
At the state level, where national road funding is administered alongside state funding, NSW and Queensland recently announced record road spending programmes for 2009-10 of $4.4 billion (US$3.7 billion) and $3.5 billion (US$3 billion) respectively. Victoria is spending nearly $1 billion (US$838 million) on roads in 2009-10 on top of $1.6 billion (US$1.34 billion) already committed to major metropolitan road projects currently underway.

The Victorian Government is also moving quickly to get work underway on the $750 million (US$628 million) Peninsula Link project in Melbourne (see separate feature).

The government is delivering this project as an Availability Public Private Partnership (APPP), the first time this model has been used for an Australian road project.

Against the backdrop of bullish spending announcements, the road industry itself is working hard to establish a better dialogue with governments to ensure taxpayer dollars achieve the most effective outcomes.

Roads Australia, in particular, is taking a lead role on behalf of its members. It has undergone a remarkable rebirth over the past five years, growing to a membership of almost 70 organisations that represent all the major road industry players across Australia. These members include state road authorities, major road constructors, engineering consultancies, construction material and service providers, private road operators, the union movement and other industry associations.

In the past 12 months RA has ramped up its policy focus, forming four distinct Policy Chapters: Industry Capacity, Road Funding and Financing, Urban Road Congestion and Pricing, and Climate Change and Sustainability.

These Chapters are a long way removed from the traditional model of industry lobbying. Rather, they act as a conduit for policy development, bringing together representatives of both the private and public sectors to workshop ideas and exchange feedback on policy matters.

Some of the early successes achieved by the Policy Chapters were outlined to attendees at the recent Roads Australia National Roads Summit in Sydney.

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WH Sept 09 P 21 1
An aerial view of Melbourne's $AUD2.6 billion EastLink project during construction. Completed and opened in 2008, it was Australia's largest urban road project
The Capacity Chapter, in particular, has achieved substantial success in creating a strong working dialogue between the road authorities in Queensland, NSW and Victoria and their key stakeholders in the private construction sector.

The Chapter has held successful workshops in Sydney, Brisbane and Melbourne that have achieved positive outcomes.
These include commitments from the road authorities to review the balance of small, medium and large projects in forward programmes; develop with RA a coordinated, published forward programme of large projects (over $100 million/US$83.7 million) up and down the eastern seaboard, and to work towards uniformity of prequalification status and procurement processes.

In response to requests from the road authorities, the Chapter has also recently produced a paper that lays out the industry case for better sequencing and longer term planning of works.

The willingness of the road authorities to work more closely with industry through the Chapter was in evidence at the recent Victorian workshop, where VicRoads chief executive Gary Liddle used the occasion to announce that the road and traffic authority was moving to a four-year published forward programme of works.

Capacity Chapter chairman, David Stuart-Watt, told attendees at the RA Summit that the Chapter's agenda was also highly regarded in ministerial circles.

"We are now planning future meetings with road authorities in other states to achieve truly national outcomes for the industry," he said.

The Funding and Financing Chapter, the most recently formed of RA's Chapter, has been established as a small working group of very senior representatives, albeit with broad experience across the roads sector.

Recent meetings of the Chapter have focussed on identifying its scope and key objectives, which are to create a forum to stimulate debate around the topic of funding and financing of road networks; understand what is happening globally in the funding/financing space; and to become the 'go-to' group for governments around Australia in terms of advice and opinions on road funding and financing.

Chapter chairman, Tim Boyle, said the policy group was looking at the funding/financing question not just in the context of new roads but the ongoing maintenance of existing road assets.

"Work has begun on producing a policy paper that articulates the long-term challenge for the nation of funding the road network. We are also looking for solutions to the immediate challenge of funding and financing large road projects in the current economic downturn," he said.

The work of the Funding and Financing Chapter also intersects with the Urban Congestion and Road Pricing Chapter on the important and fundamental question of 'who pays' for roads.

The Congestion Chapter has attracted great interest from RA members, with over 100 active participants across a number of workshops.

Out of these meetings the Chapter has produced a draft policy paper which seeks to scope out the problem and possible policy solutions, including a number of road pricing mechanisms that aim to more equitably apportion the real cost of using and maintaining the nation's roads.

Two immediate focus areas for the Chapter are building congestion mitigation into new road contracts and encouraging behavioural changes by road users to alleviate congestion through programmes such as TravelSmart (see panel).
Deputy chairman of the Chapter, Phil Davies, told the RA Summit that looking forward, a key role for the group was to inform and promote the debate about congestion management and road pricing solutions.

"We are looking to lead the debate on transport network pricing and infrastructure funding," he said.
The Climate Change and Sustainability Chapter is focused on creating a forum to influence national policy. The policy group has about 40 members and has had three workshops aimed at scoping out and narrowing down the issues on which it hopes to effect change.

Chapter chair, Jo Moss, said it was clear that the group could play a very effective role in better equipping members to make their own contributions to the debate. "We also want to assist members to better understand some of the government policies on climate change, energy and sustainability," she said.

Looking ahead, all four Roads Australia policy chapters are working on focussed action plans with key deliverables: ensuring that RA can continue to play a key role in the formulation of both policy and practical outcomes that impact on the industry at large, the performance of the national road network, and Australia's long-term economic well being.

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