Aecom’s global chief risk officer feels the NSW and Victorian governments have grown too fond of lumping their private sector partners with the bulk of the risk in major infrastructure projects, and says a shared risk model is the most constructive option for the sector moving forward.
Aecom risk boss Regis Damour reportedly spoke with the Australian Financial Review over the weekend, days after Spanish infrastructure firm Acciona filed a case in the NSW Supreme Court claiming it is owed more than $1 billion in extra fees by the State Government, for unexpected extra work done on the CBD and South East Light Rail project.
The Spanish firm’s lawsuit alleges the State Government of “misleading or deceptive” conduct.
Acciona claims it was given inconsistent information on how Ausgrid’s existing underground cables would be handled as the contractor worked its way down George Street.
The firm told the court last week it was told one thing by Transport for NSW, and another thing by Ausgrid a few months later. This difference created “unknown risk of cost and delay,” according to Acciona, particularly through the CBD, where the firm says there are at least 100 “clear conflict[s]” between the light rail construction and the Ausgrid network.
The Supreme Court gave the State Government until May 23 to respond to Acciona’s filing.
But Aecom’s Damour says the case is an example of Australian governments’ growing tendency to take an “adversarial” approach to managing infrastructure contracts.
“The current model is not in the best interests of the taxpayers,” Damour was quoted by AFR on Sunday. “When you end up with projects with a billion dollar claim, how can that be good for anybody? An adversarial-type approach is always making only lawyers rich.”
Damour reportedly singled out the NSW and Victorian governments as being overly eager to push risk onto their private partners.
“Nobody is going to convince me that using an adversarial model with full risk transfer can be the right approach because nobody has any clue what’s underground,” he was quoted.
“There are certain risks that the authorities can control, they need to do more homework on existing utilities.”
He said major projects often to find suitable insurance policies, with the Melbourne’s Metro tunnel and stations project being a prime example. Aecom is the project’s independent reviewer, but Damour reportedly says the company’s broker, Marsh, has been unable to find the $50 million insurance policy the State Government has asked for.
The project’s delivery consortium, which includes John Holland, Lend Lease and Bouygues, has also reportedly struggled to find $200 million in insurance.
“There is not enough insurance for the project,” Damour was quoted as saying, “partially because it’s a lot of money, partially because it’s Australia, and partially because it is a high-risk underground project.”