HOW THE SUPPLY CHAIN IMPACTS MEGA PROJECTS
Mega projects — construction of infrastructure projects valued at over $1 billion — represent an impressive new benchmark for the civil construction industry. In the lead-up to his presentation at the 2018 National Construction Equipment Convention (NCEC), we spoke with Lindsay Le Compte, Executive Director of the Australian Constructors Association, on how to overcome the development and implementation challenges of mega projects, which can be almost as large as the projects themselves.
As the Executive Director of the Australian Constructors Association, Mr Le Compte has witnessed the rise of the mega project and understands the obstacles that come with them.
He said initial responsibility for the smooth execution of a mega project falls on the client. In this stage, preparation and research are paramount.
“The client has an obligation to ensure that they have undertaken all of the relevant background investigations to enable them to develop an appropriate tender specification,” Mr Le Compte said.
“They must have thought through the key commercial, operational and related risks in their project and worked out how they’re going to deal with them, and then they need to select a tenderer with demonstrated capacity and commitment to work collaboratively with them to successfully undertake the project.”
Supply chain management at an early stage
Supply chain management has always been a significant component of project management, but the complexity of mega projects necessitates involvement with suppliers at an earlier stage and in a more refined manner than clients and industry may be used to.
“The traditional approach pre lodgement of tender has been for contractors to obtain from supply chain organisations, such as suppliers of cement, concrete, aggregates, steel, and bitumen etc, indications as to price and deliverability of their materials,” Mr Le Compte said.
“However, the supply chain may not be engaged at a time in the project lifecycle that would optimise the opportunity for organisations to add value through innovation, or in more effective management of project delivery programs. There may be many reasons for this occurring, including the constraints of the tender process itself, but the end result may be a lost opportunity to achieve cost and time efficiencies.
“However you look at it, early contractor and supply chain involvement in mega projects can ensure that the project is delivered on time, within budget and without disputes,” Mr Le Compte said.
“The timing of construction is an important factor. Clients sometimes have an unrealistic expectation of completion timing and tenderers may overpromise and under deliver. In the end, no-one is happy and the project may suffer as a result.”
The task of ensuring that all the moving parts of a mega project work in harmony requires a special breed of project manager — one with both the technical background to understand project specifications and issues as they emerge, and the interpersonal skills to communicate with the client, supply chain, local community, stakeholders, and other parties.
“The person who manages the project on the contractors’ side has to be more than just a project manager,” Mr Le Compte said.
“Today’s mega projects require a project management structure that manages the construction components as well as the interfaces, including communications and stakeholder engagement, at levels of complexity well above general project management skills.
“Effective communication and collaboration between client and contractor is essential. Clients must engage with contractors throughout the lifetime of a project and contractors must be prepared to raise issues early and solve them on a dispute avoidance basis.
“The parties also need to manage project cost expectations in a more flexible way. Mega projects often encounter issues that are not easily identifiable before a project commences but once identified may be expensive or difficult to solve. This is where the traditional approach of a set-in-stone project timeframe and budget encounters problems. The parties need to be pragmatic about the potential for project overruns to occur and to have in place systems to expeditiously solve issues in a collaborative environment.”
Despite the degree of complexity in their delivery, Mr Le Compte is optimistic about the future of mega projects, forecasting that their prevalence in civil construction will only escalate in the years to come.
“I think mega projects will be here for the foreseeable future because governments are responding to community expectations for new infrastructure and more liveable cities.
“The future for the civil construction sector and delivery of mega projects is bright. There is great scope to reduce the cost of projects through efficient design, innovation and good management – a win/win for all parties.”