Billion dollar skills stem from $20m gift

29 October 2012

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 just a temporary means to a more enduring end.

While building a port is important, it is the traffic that will flow through it once completed that really matters.

The stakes with mega projects are much higher. On the downside, their sheer scale means the cost of failing to stay on time and on budget is 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.

Executing large and complex projects requires chief executive-like skills, but with the unique added demand that these skills require pulling everything together all at once.

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 knowhow and leadership skills that completing these projects will demand.

Based on data from Deloitte Access Economics and the Defence Department, we estimate there are currently well over 100 projects valued at $1 billion 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 remainder 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. Its Wheatstone follow-up is not too far behind. But the $36 billion NBN comes next, and Building the Education Revolution also makes it into the top 10 at $16 billion.

All told, Australia is home today to 12 projects with price tags above $10 billion, with a total cost approaching $300 billion.

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 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, and India's development will require the same, as well as massive power generation and distribution.

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 mega projects. Leaders must also be aware 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 buybacks, 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 of 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, which was 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 University of Sydney Business School and Archie Johnston is dean of the Faculty of Engineering and Information Technologies at the University of Sydney.

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