Redefine What Productivity Is to Improve It Says the Institution of Civil Engineers

Thursday, 5 December 2024

The Institution of Civil Engineers (ICE) has today published a report, How Can Infrastructure Delivery Productivity In Australia Be Improved?

The report’s findings follow a green paper and consultation that gathered input from the ICE’s civil engineering experts and partners in Australia and the UK.

The ICE says productivity improvements are critical to delivering the infrastructure Australia needs to support its growing population, particularly as many projects are currently over budget and over schedule.

“There is a broad understanding that design and construction practices in Australia are inefficient, but existing approaches to measuring and reporting on productivity are too prescriptive,” said David Hawkes, interim associate director of policy at the ICE.

“Calculating the ratio of inputs versus the quantity of outputs doesn’t factor in improvements in sustainability, safety or community engagement.”

“A key recommendation from the paper is to update the definition of productivity. Infrastructure investment should be driven by delivering better social, economic and environmental outcomes for the broader public – that’s why we must consider the total value and benefits being delivered.”

How is productivity currently defined?

The Productivity Commission typically refers to either labour productivity or multifactor productivity (MFP).

Labour productivity is the ratio of output to hours worked, whereas MFP refers to the ratio of output to the combined input of labour and capital.

The ICE recommends that a collaborative advisory group made up of government and industry representatives is established to update the definition.

An alternative approach might consider the effectiveness and efficiency of processes.

“More effective processes will help deliver infrastructure that benefits society. Being more effective means selecting the right projects, making the right design choices, and choosing the right delivery models.

“However, to be more efficient, we must deliver projects that meet needs in a way that doesn’t create unnecessary waste or cause undue harm to the planet. More efficient processes would consider factors like the consumption of materials, effort, talent, data, energy, carbon emissions, land and ecosystems. In turn, improving efficiency reduces costs and provides better value for money,” said Hawkes.

The Productivity Commission’s latest five-year review, published in 2023, declared that Australia is experiencing its worst labour productivity growth in 60 years.

The ICE’s report makes several additional recommendations to improve productivity, including developing a long-term National Infrastructure Strategy and introducing a new leadership role within government to ensure its longevity through political cycles.

Based in the UK, the ICE is a global membership organisation with 97,000 members spread across over 160 different countries including the UK, the UAE, New Zealand, and Hong Kong. It has 2,300 members in Australia.

For more information, visit https://www.ice.org.uk

ENDS

Notes for editors

The recommendations from the ICE cover the following areas:

• Update the definition of productivity. Current measures of productivity are too focused on inputs, and market capacity constraints. There’s more to learn from a balanced consideration of benefits delivered to the public, and there needs to be a shared and full understanding of what productivity means in the context of infrastructure in Australia.
• Infrastructure investment decisions need to support the national vision. Without a clear national vision, Australia’s infrastructure plans are a collection of unrelated projects that make little overall impact. For Australia to achieve its long-term infrastructure goals, it needs a single, dependable, predictable pipeline of projects.
• Learn from completed projects. Currently, there’s a push to lower costs through competitive tendering processes. This stifles collaboration and innovation. When projects are completed, there should be more thorough reviews and opportunities to learn lessons. This would ensure that processes that work are repeated on other projects.
• Develop a workforce strategy. One of the key challenges in delivering infrastructure continues to be workforce shortages. A workforce strategy should be developed, and aligned to the national infrastructure strategy to help ensure the country has the right skillsets to deliver commitments.
• Use collaborative contracts. Currently, bespoke contracts that place an uneven amount of risk on contractors are often used in Australia. This practice contributes to higher costs and stifling innovation. Collaborative and more standardised contracting could help increase the Australian’s government for risk, and in turn, unlock greater productivity.

Read more about the ICE’s recommendations here: https://www.ice.org.uk/news-views-insights/policy-and-advocacy/policy-engagement/how-infra-productivity-in-australia-can-improve/

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About the Institution of Civil Engineers

The Institution of Civil Engineers (ICE) is a 97,000-strong global membership organisation with over 200 years of history.

It is a centre of engineering excellence, qualifying engineers and helping them maintain lifelong competence, assuring society that the infrastructure they create is safe, dependable and well designed.

Its network of experts offers trusted, impartial advice to politicians and decision makers on how to build and adapt infrastructure to create a more sustainable world.