Panel discussion | Delivering a pipeline under pressure

► Simon Draper, Chief Executive Officer, Infrastructure NSW ► Dale Connor, Chief Executive Officer Australia, Lendlease ► David Clements, General Manager Delivery Australia, Transurban ► Roch Cheroux, Managing Director, Sydney Water

► Eva Wood, Vice President and Executive Director of Operations South-East Australia (New South Wales,

Victoria, Tasmania, Australian Capital Territory) and New Zealand, Jacobs

Eva Wood (EW): Welcome. I will start with an acknowledgement of our elders past, present and emerging, and in light of talking about a pipeline under pressure and emerging leaders, we are also talking about the emerging elders as well, because we build this for a reason, for our future. So, that is something to keep in the back of our minds. The first question is about the range of external pressures beyond our control, which means that the sector is in a hurt locker to deliver an unprecedented pipeline of infrastructure on time, on budget and on scope. I’m going to start with you, Dale. Given that we’re from all sectors of the economy and the market, could you outline the core challenges and pressure points in delivering the outcomes and the upcoming pipeline from your perspective?

Dale Connor (DC): Thanks. That’s an easy question with no easy answer, that’s for sure. It is hard out there, absolutely. Everybody knows it’s hard in terms of supply chain, materials and getting a skilled workforce. It’s hard to deliver on the projects that we currently have. One aspect that can hopefully be a response to the hurt locker in times like this is focusing on the culture of your organisation. We are in construction and development, where the pool of resources that we draw from can actually be quite small if you look at all of the industries around the country. So, how can we expand to bring in more women? How can we expand for First Nations individuals? There’s a whole range of skilled people that we don’t have to rely on migration first, to identify. We can bring more people, skilled people, into our organisations. The only way to do that is to focus on the culture of your organisation, to make sure you are attractive, you are focusing on their career, and you have an increased focus on skills and training. Apprenticeships are going to be key moving through this. Everyone knows about the supply chain, but culture’s an important piece at the moment.

EW: Agreed. Roch, do you have anything to add to that?

Roch Cheroux (RC): Yeah; for the water sector, you were talking about a pipeline of projects, and we do have a bit of a pipeline in the water industry. For us, climate change is there and has been with us for some time, and we need to change the way we’ve done water in the past into something completely different. Population growth is one of the key pressures we have because we need to increase the size of our assets and provide new services. Looking at it as pressure is one way, but if you look at it as an opportunity, it’s actually a much better way. It gives us the possibility to think about the way we have done things in the past 100 or 150 years and do it in a completely different way – a more sustainable way that will be resilient to the future and that will be different. That’s really where the opportunity is, because without this change, we would still be stuck with our 100-year-old assets and ways of doing things. It’s really about taking it as an opportunity to change what we’ve got and how we’re doing things, and doing it in a much more resilient way.

Simon Draper (SD): Yes, clearly this has been a terrible year we’ve just been through, but I actually think the bigger challenges were there before COVID-19 started, and before the war in Ukraine and all the rest of it. In not only New South Wales, but other states, the biggest challenge we had was the scale of the program we’ve got and the composition of that program: more and more really large, really complex projects. I recall, a bit over a year ago, speaking to a forum similar to this. At that point, we had 17 mega projects to go to market, with 27 packages to go to market between 2021 and 2023. We had a lot of conversations with head contractors and others to ask, ‘Can you do this?’ Of course, everyone says they can, but there are moments of candour in which we all face up to the fact that this is actually quite hard. These projects have a lot of integration risks, they go through a lot of communities, and they’ve got a lot of exposure to in-ground risks and brownfield risks. More recently, we’ve discovered they’re also very exposed to industrial relations risk. Probably beyond what you think of in the construction industry, the prolongation costs associated with missing windows to possessions and those sorts of things has been really profound.

Overlaid on that, we now have things like input price risk: escalation. We have quite a shift in the appetite of many of the contracting firms. A lot of firms have said they can’t do what they used to do. That’s perfectly understandable and is simply people working off the experiences they’ve had over the past decade. I still think we are facing that situation we had before COVID-19, and we’ve got to digest the projects we’ve announced and we’ve committed to, and deliver them well, which sets a path for doing more projects. We have delivered great projects, we are delivering great projects and we will deliver more.

EW: David, what are the pressures and opportunities that you are seeing?

David Clements (DCl): Oh, a number have already been mentioned. To elaborate on some, the skills shortage for our business is absolutely crucial at this time. Risk management is something that’s not really emerging for us. I think it’s been emerging over time and we are going through a bit of a transition in the industry at the moment where risk allocation is changing. The health and capacity of the construction sector is absolutely fundamental. We have seen exponential growth in mega projects. Projects over $5 billion have increased tenfold over the past 10 years or so. The risks themselves haven’t substantially changed, but the complexity and the size of the consequences that come to bear when they come to fruition have grown exponentially.

Risk management contract and delivery models need to adjust and change, and move to a more equitable outcome. We’ve seen a bit of a consolidation, particularly in the Tier One

construction market. All these things are coming together at the same time and, certainly from our perspective, there needs to be a movement towards a more equitable distribution of the risks. There needs to be a far more collaborative approach between all sectors of the market in mitigation and management of that risk. We are starting to see some of that transition take place now, particularly in Victoria and New South Wales, and we are starting to see some really deliberate discussions about it in Queensland, too.

EW: A subtle transition to the next question for you, Simon: earlier this year, the New South Wales Government agreed to your recommendation to delay major infrastructure projects due to rising costs and constraints. Is there anything else to share about addressing these issues?

SD: Yeah, Minister Stokes gave a great exposition of that earlier. I must say, we’ve had a great collaboration working with the minister since he was appointed as the infrastructure minister in December, but there are a number of things we are focused on. One is decarbonisation and its ability to re-sequence and retime some of the projects not yet in delivery. It gives us time to take stock and make our program more durable. Decarbonisation is one of those things that’s going to take a little bit of time and thinking, and you’ve got to make space to do that. Our procurement models were already shifting and we’ve published the way that we procure them. We’ve had a series of new commercial principles that we’ve issued. Marina van der Walt – one of my colleagues – has done a lot of work on that, and recently published some changes to the way we procure, to adjust the scale of the work we’re doing and the complexity we face. We’ve got a big focus now on programs of work; smaller and medium-sized projects. We actually need to do a lot of work to develop our disciplines and our methodologies around those. We’ve been focused on these mega projects, so some of those routines have sort of taken a back seat.

That focus on programs is going to really include a focus on climate change adaptation. I know we’re talking about net zero, but we’ve got a huge task in infrastructure on adaptation. Our forward estimates show $112 billion dollars of capital investment over four years, but we’ve got nearly half a trillion dollars worth of infrastructure assets in the state and all of those are exposed through changing climate. We saw that in the Northern Rivers this year, and the Hawkesbury and Nepean, and that’s going to be a big focus for us – the role of technology and infrastructure, not just in the way we design and plan infrastructure, but also considering whether there are technology solutions better suited to providing the service that we require, rather than actually building new hard infrastructure. New South Wales Minister Victor Dominello has really pushed that, and Minister Stokes spoke about the way we conceive and design projects. First, that refocusing on the problem and the options analysis up front is where, once you’ve made those decisions, these processes get a momentum in Government. Sometimes it’s very hard to turn around once you’ve made some of those early decisions on options and projects you’re going to pursue.

We’ve got a big focus on early, structured engagement, as the minister said, both with industry to make sure what we are proposing to do makes sense in a delivery sense, but also with stakeholders. We’ve also found that a lot of our projects are highly exposed to communities, to landowners and to the workforce. Being able to deliver the benefits of those projects means getting people on board much, much earlier. It also involves change to the design standards, and challenging and testing some of those design standards we’ve used in the past. Our focus is on culture in the construction industry and infrastructure sector, and that goes to the type of people we’re bringing into the industry.

EW: Roch, the next question builds on that conversation around resilience and climate change. You’re currently in the market and about to build a massive advanced water recycling centre to serve the Aerotropolis and Western Sydney Airport. Is there anything that you’d like to share that you’re doing differently in how you’re going to deliver that project?

RC: Yeah, it’s a really good example of how you can do things differently. So, there’s probably two aspects to that. One aspect is very much about the asset itself, which is not a traditional water treatment plant – it’s very much seen as a circular economy hub. And that’s about taking advantage of the nexus between water and waste, and water and energy, and water and foods. We’ve got this opportunity to create this circular economy hub in Western Sydney and connect industries we are very close to: the electricity, gas and waste industries. Obviously there’s an agriculture precinct in Western Sydney in the future, so this project was very much about not thinking about the project as a water treatment plan, but as a hub for the different industries. And that’s exactly what’s going to happen. We’re about to start construction and it’s going to have a massive impact on Western Sydney. The other aspect is the way we’ve gone to market and how we’ve engaged with our partners on this project. The conditions are difficult in the market. We know there is a lot of competition to access resources and companies. And there are not a lot of companies that can build this sort of huge asset. So, for us, it’s been very much a journey, working with the private sector on being clear about what we’re trying to achieve. After that, we actually invited the partners around the table and really worked with them to develop a solution that was not only technically the best value for our customers, but that, at the same time, found a balance in terms of risk management between us and our private sector partners. It’s been a journey; there’s been a lot of discussion around the table, but we’ve come out with a fantastic outcome and some of

the senior water team members are here with us today. We’ve done a fantastic job making sure that, at the end of the day, we’ve got a commercial framework that is going to deliver value for our customers, but also deliver value for all our partners.

EW: Dale, building on that, you’ve talked about culture and Roch spoke about doing things differently from a delivery perspective. And David, you talked a little bit about the risk allocation side of it. How does that resonate with your part of the supply chain? What are your thoughts from the comments said so far?

DC: What Roch and Simon said is spot on regarding where the market is at the moment. For us, it’s about where can we add the most value in an opportunity that’s coming up. How can we target that and think about that early? How can we make sure we believe we can deliver, and that we’ve engaged with all of the necessary stakeholders and can make their feedback work? The earlier we can come into that conversation, we feel, the more value that we can provide. It isn’t necessarily about coming in early and doing things the same. We are doing the Powerhouse Museum at Parramatta for Simon. We’ve got a disaggregated steel approach where we are doing all parts of the supply chain in structural steel. For other projects, we actually look at the market and go, ‘Where could we find a contractor that can take a whole piece of work?’ We feel they’ve got the expertise, they’ve got the capability and it suits their time in the market. It’s really looking early to then have design specifications – as you said, Simon. It’s about really thinking about what’s important and therefore guiding the project in the right direction for success.

That will end up in a risk allocation that I think makes sense because you identify those risks early. Who can control them? What’s the best value for the project as to who controls them? How do we share in that? How do we eliminate it early? I would never want us to be waiting for 100 per cent documentation and we are just tender mode, and our effort is in tenders, as opposed to our effort being in making a project a success. When departments really look and bring you in early, you can then manage those results.

EW: I’ll open this up more broadly for those who want to respond. Minister King spoke earlier about the restructure of Infrastructure Australia. The question is in terms of the themes we’ve talked about, linking back to some of the conversations this morning around cost escalation and decarbonisation –thinking about how we could solve that. What is the balance of Government needing to answer these questions versus leaving it to the industry to work out? Where should it sit in terms of trying to solve these complex challenges and being able to capitalise on the opportunities you’ve mentioned? Who’d like to go first?

DCl: I think the decarbonisation element is like all other elements in the early engagement of contractors and all other critical stakeholders in a project. It’s all about trying to drive innovation and better outcomes. From Transurban’s perspective, we are really supportive of the Infrastructure Partnerships Australia proposal to start integrating the quantification of carbon in the evaluation of projects. The sooner we can have a more consistent approach to measuring carbon and decarbonisation, the sooner we will drive competitive tension and innovation. All these challenges can’t be left to any one party. It’s not a government issue and it’s not a private sector issue. All stakeholders have a part to play. There’s a couple of different aspects to it, too. The innovation in terms of new materials, new construction methodologies and new efficiencies that can be brought into the industry absolutely should be a focus.

The other focus is that our industry has a very robust approach to design standards, specifications, quality processes and assurances. It sometimes makes it very difficult to move and change, and get decisions made to facilitate innovation. Sometimes it’s a little easier just to stay with the status quo. All sectors of the industry, including Government, need to really challenge themselves on how they can drive better outcomes. One real opportunity for decarbonisation is looking at elements of the scope and seeing how we can reduce it by reducing performance requirements; by reducing some of the conservative approach that’s adopted sometimes and actually limiting the amount of scope that’s built. If we can build something with less concrete, less steel, less asphalt and less cabling, then it’s obviously embedded less carbon in the outcome. I think that’s a really important area we should be focusing on.

SD: Yes, David made the point that there’s a great complementarity here. First, which project should we build? Should we build them at all? Is there a need for them? There is a hierarchy in dealing with both decarbonisation and escalation. The first questions are: Are we designing it well? Are we dealing with the quantities of materials we’re putting into that infrastructure? That’s the first level that we need to think about. And that works in savings in terms of material costs in an escalation environment, but also in terms of decarbonisation. Then we think about the types of materials we can introduce and then waste. Working through that hierarchy serves the purposes of both decarbonisation and thinking more carefully about the cost of materials as they’re escalating.

EW: We talked about that before in terms of standards that you’re expecting. Dale, do you have anything to add?

DC: Well, it does need mandates and benchmarks. That’s where government can have a strong leadership role. It needs private organisations to make strong steps. As Shemara mentioned, we are building Macquarie’s new headquarters – a

fully electrified building. At Lendlease, we’ve mandated all our new developments of office space. It’s fully electrified, taking gas out of the project. So, it’s about those steps. Equally, on the ground, we’ve just got our first shipment of renewable diesel, to power the tower cranes at the Powerhouse Museum project in Parramatta. Unfortunately, you’ve got to take that all the way from Europe, but hopefully once you make a start and it’s encouraged across other projects, it becomes economical enough that someone decides to actually manufacture and produce that product domestically to suit a market and a demand that is there. I think it needs all parts of the supply chain, the Government and industry to take those steps forward.

EW: The supply chain will respond.

RC: Having clarity from Government is really important. At the end of the day, when we listen to our customers, this is also what they are expecting from us. It’s very, very clear in all the engagement that we’ve got with our customers that they are expecting us to provide exactly that. We take it as an opportunity for creating value with a circular economy because, in all the things we do, there’s a possibility to include the circular economy. We are talking about recycling material and more, but it’s also about using the traditional processes that we’ve got to generate something different. An example of that: all our biology process are generating gas. We are now feeding this gas back into the network and that’s something that we’ve not done in the past. That’s something new, generated by this request from our customers to do things differently, and to generate value out of things that, in the past, we would’ve considered as waste. There is the expectation that we will do that from a customer perspective.

EW: Dale, I’m going to start with you to answer the final question, but it is open to all. Boosting productivity, reducing barriers to employment and increasing participation, skills training and migration, along with future industry opportunities, all came through as priorities at the recent Jobs and Skills Summit. Do you think these begin to address the issues we have been discussing today and, as a sector, what do we collectively need to do in the trenches? In the trenches, some of us are walking the streets to navigate the next five years.

DC: Certainly, I think there’s a cultural responsibility for our industry to ensure we are focused on all individuals from a safety and mental health perspective, and are growing their skills and capability so that we are attractive to a wider range of talent than we currently have. We also believe in further immigration to the country, but you can’t just bring more people in if you don’t have an industry that is really thinking about the attraction, retention and protection of people. I think a lot of organisations in this room, and government organisations, are moving in this direction. So, we just need to keep it up and not just focus on production. EW: David, do you want to add to that?

DCl: Scott Charlton, our CEO, had the opportunity to attend the recent Jobs and Skills Summit. We really appreciated the opportunity to be part of looking at what is obviously a critical issue facing the industry. Some of the topics that came out are really positive steps in the right direction. We’re very pleased to hear some of the steps taken by the Federal Government on releasing some of the opportunities on the immigration side of things, particularly the focus on 6100 placements for skills required for critical infrastructure. I think there were 4100 placements announced specifically for the technology industry. Our business is hugely reliant on technology skills and resources in that scenario where we really are struggling at present to attract and retain the right sort of people. It sometimes can take months for us to fill important roles, and 40 per cent of our workforce within the business is focused on customers and technology.

From our perspective, we have some good initiatives ourselves. We think it’s absolutely incumbent upon all sectors – the private sector and the Government – to work together in this space. We’ve had some long-term and really effective relationships with universities and educational institutions that have fed our workforce. We’ve had some great successes out of the Female Excellence in Engineering Technology Program and a close collaboration with a Victorian university in Melbourne where we have a range of interns come into the business every year. Typically, a number of them just start to roll through into the business through the end of their studies and then move into permanent roles, which has been fantastic. It’s a challenge for all of us.

The other area that needs focus is creating greater opportunity to draw more of the under-represented sectors of the community into the workforce. To that end, a positive coming out of COVID-19, I think, is the embedded flexibility that has been incorporated across all sectors of the economy. Our industry has benefited with regard to creating greater opportunity for that under-represented sector of the community.

We’re all competing for the same resources. You’ve got contractors poaching from contractors. You’ve got Government drawing a lot of private sector resources into Government with bigger and better-resourced project authorities and development teams. All sectors need to present an attractive opportunity and proposition to the employee market because it’s an employee’s market right now, and we need to work on the opportunities to give them growth, training and potential. We also need to look at how we can take the younger, less experienced cohort and really provide the training and facilitation of them to grow into our industry.

EW: We are definitely competing with other markets, too.

RC: Absolutely, I think looking at the job summit, they are

all good measures and that will help us to solve the problems we have today. What was really good to see is federal leadership in a number of different spaces. I’m thinking here from a water industry perspective; we’ve been asking for a new National Water Initiative or renewed National Water Initiative. One of the key reasons why we’ve been asking for that is because we’ve got a lack of consistency in terms of training and attraction of people into the water industry. So, seeing some federal leadership on initiatives like this one is really encouraging because that’s what we need to do. It’s what we have to do.

EW: Yeah, I agree. And finally, Simon?

SD: Yeah, look, a lot of the things the minister spoke about and I spoke about are all focused on productivity. The cost of delivering capital assets into service is influenced by all those things, starting at the very beginning: decisions, options, analysis, all the way through to the procurement methods. In terms of the culture, I know the industry has a really big focus on cultural change and particularly supporting women in the construction sector. The way we think about that is, there are probably three levels. One is dealing with the objections and obstacles to women coming into construction, and staying in construction. A lot of people do come in and then leave, even as apprentices, before they’re finished. And that goes to some really basic things – I can’t believe some of them we’re still talking about in 2022 – like the provision of facilities, the sometimes hostile environment of construction sites, and the treatment of people in the workplace. All of those things need to be dealt with. If you don’t do those things, then we are going to get nowhere. Creating a desire and an appetite for girls and women to enter the industry, and stay in the industry, and then making that easy for them by providing those pathways and the facilitation, is important. A lot of that work is going on, but we’ve got a lot more to do and Infrastructure New South Wales has been given a job to help coordinate that, to some degree, in our state and work with industry. So, you ought to change the culture of the industry to get women in the industry, but I also think getting a much bigger representation of women into the industry will change the culture of the industry in itself and that’s something we really look forward to.

EW: Great. Thank you very much. This has been a great conversation.

Roch Cheroux commenced with Sydney Water as the Managing Director on 2 September 2019. In Cheroux’s past role as Chief Executive of SA Water, he led the transformation of South Australia’s largest water utility to embed technology, culture and systems changes to deliver improved experience for the corporation’s 1.6 million customers. Prior to joining SA Water, Cheroux was Chief Executive Officer of SUEZ for the South-East Asia region and SUEZ-Degrémont Australia and New Zealand; Managing Director of United Utilities Asia and Pacific (TRILITY); and Chief Executive and Chairman of Tallinn Water in Estonia.

Cheroux is active across the industry and is currently Director of the Water Services Association of Australia, and a member of the Commonwealth Government’s Australian Water Partnership Advisory Committee. A dual French and Australian citizen, Cheroux holds formal qualifications in engineering and business management, and seeks to champion innovation and workplace diversity in the organisations he leads.

David Clements is the General Manager of Delivery Australia at Transurban, having held that role since April 2021. Clements is responsible for delivery of major projects and asset capital works projects across the Australian market. Clements joined Transurban in 2014 following an extensive career working in project management roles in Thailand, Vietnam and Melbourne. During his time at Transurban, Clements has served as the Program Director for the CityLink Tulla Widening, Program Director for Major Projects Victoria. Clements is the Project Director for the West Gate Tunnel Project, in addition to his responsibilities as General Manager Delivery Australia.

Dale Connor was appointed Chief Executive Officer of Lendlease Australia in July 2021 and is based in Sydney. He joined Lendlease in 1988 and has worked in a number of senior roles across the business in Australia, the United Kingdom, China and the United States. His most recent role was Chief Operating Officer of Construction and Infrastructure in Australia. He has also held executive positions in Lendlease America’s operations, including Managing Director of Project Management and Construction, Managing Director of Military Housing and Executive Vice President of Investment Management. Connor has broad experience in project management and construction, design, development and privatisation. He believes that a successful business is a safe business, and places a priority on operating incident and injury free. Connor holds a civil engineering degree from the University of Queensland and is a Board Member of the Australian Constructors Association.

Appointed in March 2018 by virtue of his position within the New South Wales public service and consistent with the Infrastructure NSW Act 2011, Simon Draper was reappointed in April 2019.

Draper joined Infrastructure NSW in April 2019. Within Government, Draper has previously served as Secretary of the Department of Industry, Deputy Secretary of the Economic Policy Group at the Department of Premier and Cabinet, and as a Tribunal Member at the Independent Pricing and Regulatory Tribunal.

Prior to joining Government, Draper had extensive senior executive management experience in infrastructure and utility companies. He is a former Chief Executive Officer of Lumo Energy, Chief Executive Officer of Wellington Airport in New Zealand, General Manager Commercial at Integral Energy and Chief Executive Officer of Northern Territory Airports. Draper has a Bachelor of Economics (Honours) from Sydney University and a Master of Business (Finance) from University of Technology Sydney, and has completed the Company Directors Course of the Australian Institute of Company Directors.

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By Rebecca Pickering, Inland Rail Interim Chief Executive, Australian Rail Track Corporation

The 1920s didn’t get off to the best of starts. Emerging from the devastation of the Great War with the Spanish flu pandemic quick on its heels, Australia faced the enormous task of rebuilding from the ashes amid a level of uncertainty never seen in the country before.

And as we suffer through another pandemic, it’s tempting to ask whether history will repeat itself. Once the virus passes, will the 2020s roar the way the 1920s did? Will this 10-year period be seen from a historical perspective as a decade defined by change?

At the Australian Rail Track Corporation (ARTC), we believe the Inland Rail project will deliver the potential to reform the way freight and logistics are undertaken in this country as Australia reshapes its priorities amid a changing world.

Over the past three years, the resilience of Australians has been severely tested, just as it was back in the Roaring Twenties.

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