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When Sydney Metro’s city section first welcomed passengers in August 2024, public reaction was overwhelmingly positive. Journalist Melanie Tait wrote in The Guardian, “I was only in this new world an hour or so, but I want to live there now. I don’t want to take the normie train ever again.”

Dr Geoffrey Clifton, a senior lecturer in transport and logistics management at the University of Sydney Business School, said the new service felt like something “that’s exciting, that’s modern and futuristic”.

Social media feeds were filled with images of ultra-modern underground walkways, cavernous platforms featuring giant artworks – including murals, floor mosaics and light installations – with families making the journey part of their entertainment, not just their destination.

By all measures it was an enormous success, but it had been more than a decade in planning, design and construction, and has so far employed more than 50,000 people.

And it won’t be completed until 2032.

For the brave souls whose role is to ensure financial oversight on such a project – spanning political shifts, global pandemics, supply chain disruptions and more – the challenge is in maintaining a fine balance between financial discipline and fiscal flexibility.

“Sydney Metro is the biggest public transport project ever funded in Australia,” says Peter Regan FCA, Sydney Metro CEO. “There are different lines and stages, but more than A$60 billion has been committed so far, since 2012.

“It’s a 20-year project, a very long-running commitment, and money is allocated publicly and politically year by year. That constantly changes over time as to how much we spend each year. Different governments might speed things up or slow things down, so it has to be quite a flexible and dynamic process.”

“No single company is able to sign up to complete such a project, in terms of their capacity to deliver everything that’s required and to have all the necessary skills.”

The 100-year project

New Zealand’s Transmission Gully motorway, a 27-kilometre, four-lane route heading north from Wellington, cost NZ$1.25 billion and opened in March 2022. It was a notable project for a number of reasons, not least the fact it was more than 100 years in the making.

“Wellington, being the capital, is also situated on a fault line and essentially had a single highway north, along the coast,” says Cassandra Crowley FCA, deputy chair of the New Zealand Transport Agency Waka Kotahi and a former CA ANZ president.

“More than 100 years ago, some members of parliament mooted that perhaps we needed an alternate path and that the best path was through Transmission Gully. It wasn’t an easy project. It would require some interesting engineering solutions. And, if it was constructed earlier, because of the landscape challenges perhaps it wouldn’t have been as successful as it has been.”

The motorway was first proposed in 1919. Construction began in 2014 and, after delays caused by the COVID-19 pandemic, was completed in March 2022. When the contract was signed in 2014, the costing was NZ$850 million.

“There are always challenges with major transport projects,” says Crowley, who is also chair of Southern Cross Travel Insurance, independent director of South Port New Zealand Ltd and Silver Fern Farms Ltd.

“Labour or certain skill sets can be a challenge from time to time. So can various aspects of the technical build such as the geotechnical side of engineering, here in New Zealand, because of our ground conditions. Delays in consenting [gaining permission to use the land for construction] can add time and procurement can be a challenge when faced with supply chain disruption, as the COVID pandemic illustrated. Then, there’s the market’s ability to absorb the project or work programs overall.”

For example, right now a four-lane expressway is being developed from Auckland to Northland. If such a project was carried out all at once, risk would reveal itself on numerous fronts, from larger scale disruption of transport in the region to labour market pressure. The route also traverses various different types of landscapes and soil types.

To make it more manageable, Crowley says, it has been split into smaller projects.

“In transport infrastructure good preparation, in terms of business casing and good contracting, can actually be as much a part of the success of a project as what you do on the ground.”

Bite-sized pieces

As has been proven over the last decade, cost predictability is always going to be problematic over the term of a major transport infrastructure project. Determining an accurate budget for a project likely to span 20 years is all but impossible, considering the effects of inflation, supply chain challenges, market conditions, local political shifts, geopolitical pressures, weather events, pandemics, workforce issues and more.

“When it comes to horizontal infrastructure, there are clear physical spaces in which you’re working,” Crowley says. “Often you can identify a natural break point in terms of the community, the geography, the route, procurement, consenting, those sorts of things.”

Those natural break points are used to split the project into smaller pieces, which themselves are more manageable and financially digestible.

On Sydney Metro, the stages of work are also split by the type of engineering or contractor skill set that is required. Such stages include planning, design, tunnelling, station construction, rail installation and technology integration.

While it makes the larger project more manageable, financially and otherwise, this task splitting also introduces a new potential problem known as interface risk.

“No single company is able to sign up to complete such a project, in terms of their capacity to deliver everything that’s required and to have all the necessary skills,” Regan says.

“Up to a certain size of project, a group of companies can form a consortium and take the full risk, but once you get above five or six billion dollars, no group of companies can afford the downside risk. So, you end up with government entities, such as Sydney Metro, ultimately taking the gap risk between a series of different contracts.

“The challenge is that you buy all those things up front in a kind of sequence. So, if contract A is delayed, then contracts B and C are inevitably delayed, too. Those parties signed fixed-price or almost fixed-price contracts and the risk of changing that price then sits with the government. You can’t hold them to that if the previous contractor didn’t hand over what they said they would, when they said they would.”

There are several contractual and financial models. The Transmission Gully motorway, Crowley says, was a Public Private Partnership (PPP) with Wellington Gateway Partnership, and a private consortium of financiers and contractors. It was the first motorway in New Zealand to be constructed under such a model, allowing private investors to assume some of the financial risk, mitigating some government risk. The PPP included design and construction, followed by 25 years of operation and maintenance. The same PPP model was also used for the Pūhoi to Warkworth motorway.

A similar model, a collaborative alliance with constructors, is also an increasingly popular option for infrastructure owners. It can help to mitigate risk, may result in more innovative solutions to problems, and helps experts such as design engineers get in on the ground floor, often leading to better and more efficient real-world outcomes.

“COVID-19 showed us that just when you think you’ve got all the potential unknowns covered, unexpected risks can still come into projects,” Crowley says. “It’s about how you contract for and cost those in a way that means you spend the time resolving what the solution is, rather than figuring out how you account for or pay for it.”

Accountants always think about things like risk allocation tables, particularly when several parties are involved, she says. They think of what the probabilities are and where contingencies sit.

“Good preparation, in terms of business casing and good contracting, can actually be as much a part of the success of a project as what you do on the ground.”

Regan agrees. “You can’t realistically expect that everything is going to go to plan,” he says. “You have to keep adapting and changing. That gets harder as you get further into it, because you’re a lot further away from what you originally contracted.”

Technology: do more with less

The labour squeeze is a very real issue, with most major engineering and construction projects in Australia, and some in New Zealand, reporting skills shortages.

Longer-term solutions include attracting more people into the space, working harder at retaining current workforces and welcoming foreign engineers. The industry, membership bodies and government are working on all of these options.

In the shorter term, another way forward is to do more with less. That’s where technology comes in.

Crowley has seen technology implemented in a number of ways for various valuable outcomes. In one case, a “digital shield” was developed to protect digger operators from hitting electric powerlines when working next to a live railway. The digital shield automatically stopped the digger’s boom from coming close to electric services, meaning human error was removed from the equation. As well as improving safety, this enabled unconstrained and longer daily construction windows.

On a larger scale, she has seen ‘digital twins’ built for specific projects. Before a hole is even dug, engineers and data analysts can experiment with various options, materials, timelines and other changes in the digital model to explore their outcomes. AI and automation are beginning to help this part of the process too.

“If we hit a challenge, we’re now working on using technology for scenario analysis to help us recognise our options,” she says. “That might be a gold option, a silver option and a bronze option, and each requires different materials and resources. Having that greater computing power is helpful to empower decision making.”

Massive project, massive satisfaction

Having helped to manage a major transport infrastructure project to completion provides enormous satisfaction, Regan says, but not in the way people might imagine. It’s not as if he can point to a bridge and say, “I built that”. Instead, for Regan at least, there is gratification in knowing a long legacy has been left for an entire city.

“It’s an incredible change for the city and the community,” he says. “It’s a change that lasts forever, making it easier for people to get around. And there are real positives on the way through. We’re injecting an enormous amount of money into the community. It might start with large contractors, but ultimately most of the work on the ground is done by smaller businesses and local tradies.”

Crowley has similar feedback. “The Northland project is a great example,” she says. “We’re connecting the Northland region, which is not overly prosperous, with our largest city and economic base. What that means for opportunities for businesspeople, for communities and for citizens is quite amazing.”