A backlog of infrastructure projects could be decreased if proper steps are taken to identify and deal with risks from the outset, according to a new study by Blake Dawson.

Billions of dollars worth of Australian infrastructure projects are failing to undergo adequate risk assessments, contributing to cost blow-outs and delays, according to the report which was based on a review of more than A$55bn of projects. Of these projects, 10% failed to have any formal risk identification processes prior to contract entry and in more than a quarter of the projects surveyed, key risks were missed at the outset and only first identified after contracts were executed. Overall, the report found that less than half (48%) of the projects surveyed were delivered on time, on budget and to the required standard of quality.

At a time when Infrastructure Partnerships Australia estimates the backlog of infrastructure projects across the nation to be valued at A$770bn, lawyers in the field are urging principals of the projects to undertake key steps at the outset to prevent cost blowouts and delays. “If principals have identified, understood and priced into bids the various risks that can occur, then it would not be an issue,” said Blake Dawson litigation and dispute resolution partner Chris Davidson. “There are adverse project outcomes in the long run if you get it wrong at the outset.” 

For lawyers involved in front end construction and infrastructure work, Davidson said it was important to advise clients on the legal and contractual tools that can be used to ensure the allocation of risks is clear.  According to the report a majority of constructors felt that all or the majority of risks were imposed on them – many saying inappropriately.

The report is particularly timely given the outlook for Public Private Partnerships (PPPs) in Australia is very strong, according to Allens Arthur Robinson partner Emma Warren.  PPP projects such as the Sunshine Coast University Hospital, Sydney Convention Centre and Bendigo Hospital are helping to drive the resurgence in PPP projects, according to Warren. “The outlook for the next 12 months is very positive,” Warren said.

PPPs have become an increasingly popular way for Australian governments to procure the development of major social and economic infrastructure projects according to Warren, “in a way that produces innovation and value for money, while allocating project risks efficiently and effectively”. The firm has been involved in two of the largest PPPs in Australian history – the New Royal Adelaide Hospital PPP and the Single LEAP Phase 2 PPP.

The report, titled Scope for Improvement 2011 - Project risk - Getting the right balance and outcomes, was released by Blake Dawson today.