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Billion dollar skills stem from $20m gift

29 Oct 2012

Australian Financial Review

By Geoffrey Garrett and Archie Johnston

The recent $20m gift to the University of Sydney by John Grill is a vital step for ongoing Australian success, writes Professor Geoffrey Garrett and Professor Archie Johnston in the Australian Financial Review.

Multibillion dollar mega projects like the NBN or Gorgon natural gas facility are an underappreciated new feature of the global economy because they are often seen as temporary means to more enduring ends. While building a port is important, it is the traffic that will flow through it once completed that really matters.

But the stakes with mega projects are much higher. On the down side, their sheer scale means the costs of failing to stay on time and on budget are massive, and their complexity makes the risk of overruns endemic. Badly executed projects are anti-gifts that keep on taking, big time.

On the upside, as Australia looks towards its post mining boom future, our deep dive into the world of mega projects gives the country the opportunity to create the kind of high value added service and advanced manufacturing exports that will drive our prosperity for decades to come.

Executing large and complex projects requires CEO-like skills, but with the unique added demand that these skills require pulling everything together all at once rather than an on sustaining an ongoing business.

It is essential that Australia harnesses these skills to complete as efficiently as possible the slate of projects on the national docket. But at the same time, we should also develop the mega project know how and leadership skills completing these projects will demand and foster, skills that will be in ever greater demand the world over.

Based on data from Deloitte Access Economics and the Defence Department, we estimate that there are currently well over one hundred projects valued at one billion dollars or more either under consideration, committed to or in construction in Australia. About two-fifths of these projects are in mining, another one-fifth in transport, with the remaining 40% spread among sectors as diverse as defence, power, communications and manufacturing.

Not surprisingly, the very biggest Australian projects are in mining. The Chevron-led Gorgon natural gas project leads the way, with an estimated cost of $43 billion and its Wheatstone followup not too far behind. But the $36 billion NBN comes next, and Building the Education Revolution also makes it into the top ten at $16 billion.

All told, Australia is home today to twelve projects with price tags above $10 billion, with a total cost approaching $300 billion. Add mooted projects like building Australia's next generation of submarines and high speed rail from Melbourne to Brisbane, and the number mushrooms well above half of the country's GDP.

We tend to focus on the many thousands of jobs associated with these projects, with good reason. But in the longer term, the skills Australia develops in executing these mega projects can create a large new high value added export industry in large scale complex project leadership.

In scale and complexity, Australian mega projects stack up against the biggest in the world. Saudi Aramco and Dow Chemical have commenced their $20 billion Sadara project to build one of the world's largest integrated chemicals facilities. California has announced its multi decade intention to build a multi decade high speed rail link between San Francisco and Los Angeles at a total estimated cost of $68 billion.

China is rolling out new high speed rail lines, airports and building developments to drive its breathtaking urbanisation and westward spread. India's development will require the same, as well as massive power generation and distribution, and all this will have to come from public-private partnerships with international players.

The skills needed to deliver projects like these on time and on budget are diverse and extremely high level. Project leaders must of course have a deep familiarity with the technical features of their industries, and they will invariably rise through the ranks of their chosen fields.

But technical skills are only the beginning when it comes to leading successfully mega projects. Leaders must also be on top of the latest thinking and technology for logistics, supply chains and operations management.

What's more, all projects invariably involve governments, often at multiple levels at the same time, as regulator, client or partner. Land buy backs, many times involving indigenous lands, must always be negotiated. Mega projects are also invariably highly internationalised, in terms of financial stakeholders, ultimate clients, workforces, and locations.

Completing Australia's current slate of mega projects is clearly mission critical for the country. But at the same time developing the next generation of leaders capable to executing mega projects in Australia and around the world will pay off long after today's projects are completed.

That is the goal of the $20 million John Grill Centre for Project Leadership at the University of Sydney announced last week. There can be few initiatives better placed to leverage Australia's unique assets into long term global leadership.

Geoffrey Garrett is dean of the Business School and Archie Johnston is dean of Engineering and Information Technologies at the University of Sydney.

First published in Australian Financial Review

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