By David Hawkes, Interim Associate Director of Policy, Institution of Civil Engineers
Effective and efficient construction processes could be the key to improving productivity.
It’s likely not news to anyone reading this that stagnant productivity has been a longstanding issue in Australia. Nor is it likely to be news that in the last year the Federal Government has made construction productivity and market capacity national cabinet priorities.
It’s a problem that has received analysis from organisations such as Infrastructure Australia, the Australian Constructors Association, Engineers Australia and the Productivity Commission.
With this being said, you might be asking why a UK-based institution is diving in.
The answer is that the challenges the country is facing are by no means unique to Australia.
As a global membership organisation with 97,000 members spread across more than 160 countries, (including 2,300 members in Australia), the Institution of Civil Engineers (ICE) harnesses the experience and insight of its membership to advise policy and decision makers on infrastructure delivery all over the world.
In other words, by delving into Australia’s challenges, we may find insights that are universally relevant.
With that said, if there’s any consensus in the wide-ranging, international discussion on infrastructure productivity, it is that there is no single route to fixing it. Nor does the ICE expect to be able to come up with a set of recommendations that will be a magic fix.
What we do hope to be able to do is offer fresh insight into some of the challenges, and how they can be overcome, by examining improving infrastructure delivery through the lens of process.
Defining productivity
For solutions to be successful, you must identify, and agree on, the problem you’re trying to solve.
You must also be sure you’re speaking the same language. It’s no use introducing productivity measures and tools to collaborate better if you don’t agree on a definition of productivity or what successful collaboration looks like.
This is something that’s often overlooked by infrastructure professionals and policy makers alike.
So, before proceeding, let’s examine what the ICE means by productivity.
At a high level, productivity refers to the rate at which goods and services are produced (output) per unit of labour, capital, raw materials, etc. (input). Thus, productivity can be understood as a ratio of the quantity of output against the quantity of input used.
Most reports reference research by the Productivity Commission, which typically refers to either labour productivity – the ratio of output to hours worked – or Multifactor productivity (MFP) – the ratio of output to the combined input of labour and capital.
However, these are incomplete measures for communicating the state of infrastructure delivery. They do not capture any improvements in the quality of outputs or an expansion in the range of outputs.
These definitions also ignore the fact that infrastructure is not created solely for infrastructure’s sake, but rather to serve the needs of the public by delivering better social, economic and environmental outcomes – not outputs.
So, the question is, do we need to change how we measure productivity?
This brings us back to examining infrastructure delivery through the lens of process.
More specifically, at the ICE, our view is that processes should be examined for effectiveness and efficiency.
Examining effectiveness and efficiency
Effectiveness is about making sure that the solution delivers the outcome required or, put simply, to do the right thing.
A more effective process produces outputs of a greater quality or at a greater scale. Effectiveness means selecting the right projects, making the right design choices and choosing the right delivery models.
Efficiency focuses on improving how that outcome is achieved or, in simpler terms, to do things right.
Efficiency involves a considered approach to the consumption of materials, effort, talent, data, energy, carbon emissions, land and ecosystems.
A more efficient process is one which has a greater ratio of outputs to inputs. This will also reduce costs and provide better value for money.
In this context, efficiency includes the increased outputs that economic productivity measures capture, but also effectiveness measures like driving positive social impact, carbon and climate outcomes, and includes a greater range of inputs than solely labour hours or labour and capital.
In a nutshell, to improve productivity, you must increase both effectiveness and efficiency.
That means government departments and companies involved in infrastructure delivery need to analyse their processes for effectiveness and efficiency to identify the problems they need to solve.
Otherwise, we’re all just guessing at what could make it better.
When that happens, solutions applied with the best will in the world may do little good and could end up hindering progress.
Where to begin?
To jumpstart this analysis, the ICE has published a paper with some themes for discussion.
I’ve already touched on one: a shared and comprehensive definition of what productivity is in the context of infrastructure delivery should be established.
The second is to achieve an infrastructure pipeline that is stable, sustainable, and that supports Australia’s vision for the future a robust project assessment process should be created. This should align with long-term infrastructure goals.
Lastly, tools like standardised collaborative contracts to better mitigate and more fairly distribute project risks should be considered, as these could help improve the conditions for productivity.
Our aim now is to gather further insight into the challenges that need to be overcome.
Our team is particularly interested in insights that will help shape the policy environment, but thoughts from practitioners are also very welcome.
Tell us your views
In particular we’re interested in responses to the following questions:
- Are there more effective outcome measures for the infrastructure delivery sector than labour productivity or Multifactor productivity (MFP)?
- How can social, economic and environmental outcomes be considered alongside economic measures for a more holistic understanding of infrastructure delivery?
- How can infrastructure projects be consistently subject to robust, transparent, independent assessment against long-term infrastructure goals?
- Is Australia’s national vision for infrastructure clearly articulated? Is its vision reflected in its infrastructure pipeline?
- Are government decision-makers adequately held to account for infrastructure project selection? If not, can this reasonably be achieved?
- Do government and industry have the capacity to correctly deliver and administer collaborative contracts? If not, how should this be achieved?
You can share your views with the ICE policy team by emailing policy@ice.org.uk