Infrastructure Australia have recently updated their Assessment Framework (Framework) for assessing infrastructure initiatives and projects of a national importance.
Infrastructure Australia, an independent statutory body with a mandate to prioritise and progress nationally significant infrastructure, were established by the Commonwealth to provide independent advice to both the public and private sectors on necessary and desirable infrastructure projects and reforms in Australia.
The Framework is used by Infrastructure Australia to evaluate potential initiatives and projects for inclusion on the Infrastructure Priority List (IPL) – a publically available list of potential infrastructure solutions to address nationally significant infrastructure problems and opportunities.
Updates to the Framework were released in March 2018 and focus on the following three areas:
- how climate change risks are treated in economic appraisals
- how land use impacts are captured in cost benefit analysis calculations
- the reviewing and reporting of projects after their implementation, so as to establish whether or not outcomes were achieved.
For companies seeking to submit proposals to Infrastructure Australia for inclusion on the IPL, it is essential that the implications of these updates are understood.
Set out below is a detailed analysis of each focus area.
Acknowledgement of climate change risk in economic appraisals
It is now widely accepted that climate change risks need to be addressed in economic appraisals of national infrastructure projects and initiatives.
Planning for these risks is likely to lead to drastic changes to the construction of infrastructure projects. This could include infrastructure being built to different standards, or new and innovative construction methods or materials being used.
By taking these risks into consideration when developing economic appraisals, proponents are likely to increase the resilience and asset life of their infrastructure projects. Conversely, by ignoring these risks proponents may expose themselves to the increased likelihood of wasted investments, stranded assets or compromised human well-being.
The Framework recommends proponents implement a scenario analysis mechanism in their proposals which identifies a range of design response options. In doing so, proponents should test whether a potential infrastructure project is robust by examining its ability to withstand a range of climate change scenarios.
This appraisal of diverse climate change risks will allow proponents to consider the direct and indirect effects on, and the transitory climate risks in an infrastructure project. This will in turn help proponents to realistically measure the overall cost and benefits of a project.
Capturing land use impacts in cost benefit analysis calculations
The second focus area of the updated Framework is capturing land use impacts by a cost benefit analysis.
This approach assesses the benefits and costs of a proposed project that are typically omitted from traditional appraisals. Proponents will need to assess the nature of each individual infrastructure project to determine whether such a process lends itself to that project.
Proponents who do intend to include a land use impacts assessment in their infrastructure proposals must provide substantive evidence of that assessment, and a justification for why land use impacts are likely to stem from the project.
Before the unique impacts of an infrastructure project can be assessed, proponents will need to identify the dependency and conditionality of the project, being how the presence of the project will result in a change of land use (dependency), and how the supporting conditions and activities surrounding the project enable the land use impacts to materialise (conditionality).
Once established, proponents will be able to assess the unique factors that measure land use impacts. The Framework does not prescribe a particular approach for measuring such impacts, but recommends proponents consider the following conditions:
- the interaction between supply and demand
- the time horizon in which changes are likely to occur
- the estimated benefits to the local and national economy.
The Framework also identifies a range of methodological issues which proponents should remain mindful of. These issues include double-counting (where a land use benefit has been acknowledged in a cost benefit calculation, but is implicit in another component of benefits) as well as skewed results which omit the effect of population redistribution in a geographic location.
Best practice for reviewing and reporting after the implementation of an infrastructure project
In an effort to develop more robust business cases, and more effectively allocate public funds, the Framework now includes a protocol for reviewing and reporting on a project post-completion. This iterative model helps identify whether the intended outcomes and performance of a project align with its actual outcomes and performance.
To assist the functionality of this reviewing and reporting model, proponents are encouraged to ensure the costs and benefits of their infrastructure projects are measurable, accurately recorded and aligned to forecasted expectations. The Framework has established the following five steps for best practice reviewing and reporting:
- set standards for data capture
- select reviewer(s)
- gather information
- complete review
In order to capture accurate and analysable data, the Framework suggests the first two steps are completed during the business case development stage of the project, whilst the last steps should be completed a short period after the infrastructure has been commissioned or become operational.
The Framework also recommends reviewing and reporting on the project at different stages to increase the data gathered. This may also extend to half-life or end-of-life reviews of projects worth over $1 billion in delivery costs, or where there are several beneficiaries.
During step four, proponents must also consider the strategic and economic fit of their construction projects, as well as, the efficiency of delivery. This analysis should also include additional lessons learnt throughout the development of the project.
Proponents seeking to have their initiative or project included on the IPL need to be aware of these important updates to the Framework.
On a broader level, these updates also reflect the changing nature and challenges facing the Australian infrastructure sector.
The incorporation of these changing national objectives and priorities into the assessment of significant infrastructure problems and opportunities, will allow Australia to be in a better position to deliver infrastructure initiatives and projects that:
- anticipate climate change risk and provide the nation with more sustainable and resilient infrastructure;
- assess the land use benefits of an infrastructure project so as to help prioritise projects and shape the cities of the future; and
- ensure that ideal business cases are developed nationally and public funds are allocated more appropriately.
Ultimately, this will improve the quality of nationally significant infrastructure, whilst simultaneously facilitating an exchange of knowledge that best serves the growth of our cities and regions.