Public infrastructure: who’s creating great investment options?

Public infrastructure investment choices

The focus on making better infrastructure investment choices begs the question: who’s offering great investment options? While customers and markets have a role to play in achieving better infrastructure performance, they’re not the whole solution. Governments must also be more specific about public infrastructure outcomes they want to buy. It’s time the infrastructure community collaborated to perform better in generating sustainable public value.

Who’s providing good choices?

Over the past decade there have been several substantial reviews of Australia’s infrastructure predicament. Improving how infrastructure projects are chosen is a common theme. This was reiterated last week in comments made by outgoing Reserve Bank of Australia governor Glenn Stevens [1]. But the issue of choice raises other, perhaps more fundamental questions:

  • Who is cultivating a genuine demand for superior projects?
  • Who, if anyone, is providing superior projects from which to choose?
  • Who is defining the attributes of superior projects?
What’s the role for customers?

The latest thought-provoking contribution from Garry Bowditch, Gordon Noble and Glenn Maguire of the John Grill Centre for Project Leadership [2] argues for “the customer to lead the nation” in specifying the service outcomes required from infrastructure. This begs the question: “Are customers informed buyers?”

I agree that customers can play a larger, useful role in shaping infrastructure. Yet while customers can express preferences between options presented to them, they are typically less well equipped to conceive new solutions or even express what their unmet needs might be. It’s why anthropologists are engaged to observe people, to spot new product and service opportunities that people may not recognise themselves [3].

Progress must be achieved through collaboration

There’s no doubt that customer needs and operating conditions are changing. A growing population increases overall demand, but new technologies and business models, greater network inter-connectivity, uncertain funding streams and policies, and changing social expectations complicate the planning, design and decision space. With complexity comes uncertainty. It’s also true that over longer timeframes the uncertainty (or error bands) around demand projections and operating conditions are large and growing. As a consequence, confidence in the medium and long-term value of today’s infrastructure assets is diminished. It’s a key factor in the case for more adaptable infrastructure.

Bowditch et al observe that “uncertainty about the future can be a powerful catalyst for innovation”. Undoubtedly this is true. But behavioural science also tells us that people generally avoid rather than engage with risk, and are twice as likely to be motivated to avoid risk as to seek benefit [4]. We need only reflect on recent events to find evidence of public responses to perceived risk, on balance tending more toward protectionism than innovation.

Furthermore, numerous recent reports evidence the poor state of innovation commercialisation in Australia [5], with relatively lower relative levels of R&D investment occurring in construction and utilities sectors [6]. Capability gaps also exist in current leadership ranks to navigate emerging business conditions where complex problem solving, design thinking, digital literacy, collaboration and deal making are key to success [7,8,9]. Too few organisations and leaders are willingly disrupting themselves.

Nevertheless, there is a growing consensus and weight of evidence to justify improvements in the way that infrastructure is perceived, conceived and achieved [10,11]. It’s also clear that there are many actors and stakeholders in infrastructure, with important political, financial and operational inter-dependencies. Achieving effective change cannot be done alone. Indeed, to spread risk and leverage insight, resources and authority, infrastructure development should be done collaboratively.

Clarifying the outcomes we want to buy

While privatisation of public assets like water and road networks is offered as a key part of the infrastructure solution, it seems unlikely that the public (i.e. voters) will be supportive unless they trust public institutions to protect public interests over private interests. The parlous state of public trust in government, big business and even non-government organisations is hardly encouraging [12].
So it seems that a critical first step is to improve the governance arrangements surrounding infrastructure. It’s not just the mechanics of decision making that must improve, such as the rigour and transparency of business cases. Improvements must encompass consideration and articulation of the public outcomes we want to buy. Inclusive growth and network attributes like adaptiveness and resilience are critical yet poorly addressed both in principle and in practice. Indeed, an audit of infrastructure on the basis of these and other public value attributes may be valuable in catalysing action, focusing effort and rewarding corresponding innovation.

Kicking goals … by design

Undoubtedly, experimentation will need to occur to optimise institutional and governance arrangements in our highly co-dependent operating environment. Fortunately, an appetite to test new approaches is evidenced through initiatives like the New Deal for Urban Australia [13] and the federal government’s City Deals (based on the UK model of the same name) [14]. Considerable opportunity and value can be unleashed via the approach that investors, developers, operators, regulators and the community work together to conceive and achieve by design [15,16].

Customers, markets and privatisation can play a constructive and important role in modernising Australia’s infrastructure, building on past lessons and success. But we may be collectively ill-prepared for the next phase this game. Equally, too many years have passed standing on the side-lines hoping that someone will take a genuine lead on the field. The fans are rightfully restless. It’s time to reshape the rules of the game and get match fit. Who wants to play?

 

[1] Jacob Greber (2016) Looking for the modern Snowy, In: AFR Weekend, p 11.

[2] Garry Bowditch, Gordon Noble, Glenn Maguire (2016) Shifting Australia’s infrastructure mindset to the long game, Policy Outlook Paper No. 2, John Grill Centre for Project Leadership, The University of Sydney, Sydney.

[3] Tom Kelley, Jonathan Littman (2005) The ten faces of innovation: IDEO’s strategies for beating the devil’s advocate and driving creativity throughout your organisation, DoubleDay, New York.

[4] Daniel Kahneman (2011) Thinking, fast and slow, Penguin Books, London.

[5] Cornell University, INSEAD, and WIPO (2016): The Global Innovation Index 2016: Winning with Global Innovation, Ithaca, Fontainebleau, and Geneva.

[6] Department of Industry, Innovation and Science (2015) Australian Innovation System Report, Australian Government, Canberra.

[7] Centre for Workplace Leadership (2016) Leadership at Work: Do Australian leaders have what it takes? Faculty of Business and Economics, University of Melbourne, Melbourne.

[8] AiGroup (2015) Addressing enterprise leadership in Australia, Australian Industry Group, Sydney.

[9] LSE, UCLG (2016) Habitat III Policy Unit 4: Urban Governance, Capacity and Institutional Development, Policy Paper, London School of Economics with the United Cities and Local Governments Global Task Force, London.

[10] Infrastructure Australia (2016) National Infrastructure Plan, Australian Government, Canberra.

[11] Garry Bowditch (2016) Re-establishing Australia’s Global Infrastructure Leadership, John Grill Centre for Project Leadership, The University of Sydney, Sydney.

[12] Edelman (2016) Edelman Trust Barometer 2016: Annual Global Study, Edelman Inc., Washington DC.

[13] The Urban Coalition (2013) New Deal for Urban Australia, published jointly by ABSA, ASBEC, ACF, Australian Institute of Architects, Consult Australia, GBCA, Planning Institute of Australia, Property Council of Australia and the Urban Development Institute of Australia, Sydney.

[14] Department of Prime Minister & Cabinet (2016) City Deals (as per the Smart Cities Plan), Australian Government, Canberra.

[15] Nicholas Fleming, Susanne Cooper (2013) Insight Trading: Collaboration to transform the infrastructure that shapes society, Sinclair Knight Merz Pty Ltd, Sydney.

[16] Nicholas Fleming (2016) The missing key: unlocking high value infrastructure by design, Innergise Pty Ltd, Melbourne.

 

 

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Nicholas Fleming

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