Why do roadworks cost so much?

The Age: Why do roadworks cost so much? August 3, 2014. Karin Derkley

A new roundabout in a local street can cost around $100,000 Photo: Dylan Robinson

About $800,000 for a roundabout and $21 million to widen a road. How can building and improving roads be so hideously expensive?

Construction costs are inflated by high bidding costs and poor financial transparency, federal assistant Infrastructure Minister Jamie Briggs was quoted this week in advance of an industry round-table discussion on the best ways to tackle the problems.

According to a recent leaked Infrastructure Australia report, road expenditure in Australia is notoriously inefficient and roads agencies lack intimate knowledge of roads systems, resulting in frequent cost overruns.

A former VicRoads employee said the roads agency has been deskilled to the point where there are too few experienced engineers to properly assess tenders submitted by private construction companies. Doug Harley, who was manager of network modelling at VicRoads, left the agency last year after three decades, over differences of opinion regarding the cost benefits of East West Link.

Because tenders are selected almost solely on their price, he said, private companies submit cheap tenders, and then later start adding variations that end up inflating the final price well above the original quote.

However, contractors who frequently work for VicRoads say such a scenario is unlikely. Allan Williams, operations manager at regular VicRoads contractor Bitu-mill, said any road construction business that engaged in under-quoting and then over-claiming on variations would be risking future contracts. “It’s a small industry, and your reputation and your ethics come into it when you tender, not just price. You’re only as good as your last job, and companies that did that may come unstuck next time they put in a tender.”

People are often ignorant of what it costs to build a road or install a roundabout, Mr Williams said. “When you see a noticeboard for a road project and it says $5 million, that includes a lot of costs apart from the construction – it also covers the cost of design, the site investigation, relocation of services, environmental plans, traffic management, even the costs of putting together the tender.”

Costs are also boosted by high community expectations regarding environmental and safety issues, he said, with continual improvements in worksite safety and procedures meaning upfront costs are greater. “In order to protect the personal safety of the general public and of road workers, a road construction project might need to include concrete barriers, worksite diversions, traffic management and project methodology – and that all costs.”

Civil engineer and transportation expert Professor William Young, from Monash University, said competition with the mining industry can be blamed to a large extent for the high costs of road construction in Australia.

“Labour costs here are three or four times higher in Australia than in England, for instance,” he said.

Competing with the mining industry pushes up the prices of materials as well as labour.

While the Infrastructure Australia report suggested the nation’s “addiction” to road building meant spending is inefficient and unaccountable, it acknowledged this was less true at the lower levels of government. Local government, it argued, tends to retain engineering personnel “who generally do manage and ‘know’ their road networks intimately”.

In the case of Darebin, in Melbourne’s north-east, the council has a pavement management system that audits the condition of its 512 kilometres of roads. Any requests for road improvements such as roundabouts and widening need to be closely costed and put out to budget for public review.

Darebin still carries out road maintenance in-house and has a substantial number of engineers on staff, thus ensuring it is able to carry out accurate estimates of bigger projects that need to be outsourced. This limits the chance of cost overruns in the final construction price, Darebin Council’s director of assets and business services Steve Hamilton said. “We have a good idea of unit rates based on our experience.”

This is not the case at VicRoads, according to Mr Harley, who claimed the agency no longer has experience building things and no previous job estimates to work off. “VicRoads has to go for the lowest tender, and because they have been deskilled over the years, they can’t tell whether or not the price has been deflated – or inflated,” he said.

VicRoads, denies this, claiming that even though most of its road construction works are outsourced, the agency still undertakes some road and bridge design and occasional minor road construction. VicRoads’ director of procurement and contract management Mark Koliba said this has been a deliberate strategy “to ensure that VicRoads maintains capability, continues to be an informed purchaser and is up to date with current market rates”.

How much does a road cost?

VicRoads declined to provide costings on road construction, stating there are too many variables influencing the cost to be able to generalise. These include the location of the project, whether land acquisition was required, whether services such as power, water or telecommunications needed to be relocated, and the availability of suitable construction materials. Costs also vary enormously depending on how much and what kinds of traffic the road is expected to carry. VicRoads looks after freeways and arterial roads in urban and non-urban areas, while municipal councils look after local roads.

As an indicator of the variation between road building costs, a major arterial road might require asphalt to a depth of 30 centimetres, while a local street might require asphalt only three centimetres deep.

The roundabout being built at the intersection of Gisborne-Melton Road and Melton Valley Drive, Melton, was contracted to Bitu-mill at $865,000 reflecting the scope of a project that involves an arterial road, traffic management measures and relocation of services. Meanwhile, a simple local roundabout constructed in a local street is more likely to cost $100,000 or less.

What is involved in building a local roundabout?

Design $3000

Construction prelims/mgmt $8000

Site preparation/demolition $4000

Road pavement $35,000

Kerb and channel $10,000

Footpath/crossovers $10,000

Drainage $20,000

Service alterations $5,000

Landscaping $5,000

Total $100,000

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