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Law firm report grim news for projects

Law firm report grim news for projects

Billions of dollars worth of Australian infrastructure projects are failing to undergo adequate risk assessments, according to a new report into the construction, infrastructure, mining and…

Billions of dollars worth of Australian infrastructure projects are failing to undergo adequate risk assessments, according to a new report into the construction, infrastructure, mining and energy sectors.

The report, Scope for Improvement 2011 - Project Risk - Getting the Right Balance and Outcomes, was prepared by top-tier firm Blake Dawson and examines more than $55 billion worth of projects across Australia.

It found that 10 per cent of project participants failed to undertake any formal risk identification process before entering into a contract. In over a quarter of the projects surveyed, key risks were missed at the outset and first identified after contracts were executed, thus leading to cost blow-outs and delays.

The report is based on a survey of participants within construction, infrastructure, energy and mining projects that have been completed in the last five years.

According to respondents, inappropriate risk allocation resulted in major delays, expensive disputes and cost overruns. Ten per cent of respondents said projects worth more than $1 billion experienced cost blow-outs of more than $200 million.

Of the projects which were late because of inappropriate risk allocation, more than one quarter experienced delays of one year or more.

The survey also shed light on the differing perceptions of principals and constructors, with a majority of constructors feeling that all or the majority of risks were imposed on them, often inappropriately. The majority of principals disagreed.

The report also found that less than half (48 per cent) of the projects surveyed were delivered on time, on budget and to the required standard.

Infrastructure Partnerships Australia currently estimates that the backlog of infrastructure projects across Australia is valued at $770 billion.

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