New research from The Grattan Institute titled Megabang for Megabucks: Driving a harder bargain on megaprojects has found that Australians pay too much for major road and rail projects because governments don’t drive a hard bargain on contracts with the big construction firms.
“Governments procuring transport infrastructure should focus on one principle: delivering services at the lowest long-term cost to taxpayers, for a given quality standard”, says the report. “To achieve this in Australia, we need more competition, smarter procurement, and greater transparency. Australia’s transport infrastructure costs are above the global average.
There is a government culture of caving in to contractor demands and paying sometimes hundreds of millions of dollars to settle a problem a few months or years after a contract is signed. Even after construction has begun, about 25 per cent of projects end up costing taxpayers more than governments promised when the contract was signed.”
The report’s recommendations for government procurement include:
- Paying more attention to costs
- Improving transparency
- Fostering greater competition with international firms entering the Australian market
- Scope projects properly and procuring systematically.
Read the full report here.
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