Research in Transportation Economics xxx (xxxx) xxx

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Research in Transportation Economics

journal homepage: http://www.elsevier.com/locate/retrec

Shared leadership, value and risks in large scale transport projects:

Re-calibrating procurement policy for post COVID-19
Peter E.D. Love a, *, Lavagnon Ika b, Jane Matthews c, Weili Fang a
a
School of Civil and Mechanical Engineering, Curtin University, GPO Box U1987, Perth, WA 6845, Australia
b
Telfer School of Management, University of Ottawa, 55 Laurier Avenue East, Ottawa, Ontario, KIN 6N5, Canada
c
School of Architecture and Built Environment, Deakin University, Geelong Waterfront Campus, Geelong, VIC 3220, Australia

A R T I C L E I N F O A B S T R A C T

JEL Classification: Before the 2019 Coronavirus Disease (COVID-19) outbreak, the Australian Commonwealth and State Govern­
L1 ments invested significantly in the upgrade and construction of large-scale transport infrastructure projects (>AU
L9 $500 million). However, two trends prevail in Australia. Concessionaires/contractors face a requirement for
Keywords: fixed-price contracts, high levels of risk, and low margins. Concomitantly, an increasing number of projects have
Alliance experienced significant cost blowouts, with adverse impacts on both the public and private sectors. Calls for the
Economic value
public sector to engage with collaborative procurement approaches to deliver large-scale transport projects,
Private participation in infrastructure
Procurement
however, have gone unheeded. In this paper, we critically review existing policies and practices used to procure
large-scale transport projects and examine the challenges they pose in a post-COVID-19 world. We suggest that
the public and private sectors need to work in unison to overcome the significant economic hurdles that COVID-
19 presents to the nation’s infrastructure demands. We then proffer that governments need to re-calibrate their
procurement policies to future-proof their large-scale transport infrastructure projects. To facilitate the process of
re-calibration, we develop a theoretical procurement framework for consideration based on the concepts of
shared leadership, value creation, and risks. It is envisaged that our procurement framework will provide a
platform for engendering economic value and accounting for all-important societal costs and benefits in a world
post pandemic.

1. Introduction of the freight network (Commonwealth of Roads Western Australia,

“The secret of change is to focus all of your energy, not on fighting
the old, but on building the new.”—Socrates.
Over the last several decades, many governments throughout the
world have invested significantly in the upgrade and construction of
large-scale transport infrastructure projects to improve the economic
and social well-being of their economies. Concomitantly, many projects
have experienced significant cost blowouts, with adverse impacts on
both the public and private sectors. Australia, the geographical focus of
this paper, is no exception.
In 2019, the Australian Commonwealth Government announced in
its “budget to invest $100 billion over 10 years from 2019 to 20 in
transport infrastructure, which includes an additional $23 billion for
new projects and initiatives”. The goal was to address congestion, better
connect regional areas, and improve the safety of roads and the quality
2019: p.2). This funding from the Commonwealth generally comes in
addition to that of the State governments in support of projects. Exam­
ples of significant transport projects underway include Sydney’s West­
Connex ($16 billion), Melbourne’s West Gate Tunnel ($6.8 billion),
Brisbane’s Cross River Rail ($5.4 billion) and Perth’s Metronet ($1.84
billion) to name a few.
Despite such investment and the infrastructure boom, the headline of
a Global Construction Review article claims that major contractors are
close to insolvency and that the whole construction industry in Australia
is “teetering on the brink of collapse” (CIOB, 2020a). Alas, several Tier
one contractors have been experiencing high levels of turnover and
lower profit margins, if not financial losses, after delivering significant
large-scale transport projects (>AU$500 million). This situation rings
alarm bells and begs the question: Why is this the case?
In this paper, we argue there has been a proclivity for Australian

* Corresponding author.
E-mail addresses: p.love@curtin.edu.au (P.E.D. Love), ika@telfer.uottawa.ca (L. Ika), jane.matthews@deakin.edu.au (J. Matthews), weili.fang@curtin.edu.au
(W. Fang).

https://doi.org/10.1016/j.retrec.2020.100999
Received 9 May 2020; Received in revised form 24 October 2020; Accepted 28 October 2020
0739-8859/© 2020 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Please cite this article as: Peter E.D. Love, Research in Transportation Economics, https://doi.org/10.1016/j.retrec.2020.100999
P.E.D. Love et al.
State governments to adopt procurement approaches that place too
much risk on contractors and have them subsequently accommodate
unforeseen costs not included in their accepted bid. This is the case of
mega-projects over AU$1 billion, which tend to be highly uncertain
and/or complex and reliant on Private Participation in Infrastructure1
(PPI) approaches for their delivery (e.g., Canberra, Gold Coast and
Sydney Light Rail).
Markedly, the prevailing procurement practices, except perhaps for
alliancing, may appear like a ‘windshield’ whereby risk is deflected onto
Tier one contractors, which places a financial burden on them. We
hasten to acknowledge, however, that when a contractor wins a bid,
they agree to deliver a project for a specific price and would have
accordingly considered the inherent risks. Therefore, rather than
accepting high levels of risk, contractors should not bid and accept a low
margin; instead, they should withdraw from the bidding process if
possible. This situation occurred during the construction of Melbourne’s
West Gate Tunnel. The joint venture contractors withdrew from their
contract citing force majeure, as they discovered the cost to remove and
dispose of contaminated soil was $675 million, an unacceptable and
unforseen risk that, in their view, had not been accommodated in their
bid (CIOB, 2020b).
In light of low-profit margins, we need to add to this mix the Corona
Virus Disease of 2019 (COVID-19), which is having a cataclysmic impact
on the economic and social well-being of Australia and countries
throughout the world. The likelihood of being able to effectively deliver
the much-needed transport networks and systems in the short-term is
now questionable, especially where there is a need for PPI. With the
devastating influence of COVID-19 on the delivery of existing and its
potential detrimental impact on future transport projects, we believe
there is now a motivation for the Australian public sector to re-calibrate
the way it approaches risk. This motivation is crucial as there is a need
for both the public and the private sectors to ‘work together as one’ to
overcome the fallout of this unprecedented pandemic and stimulate
much-needed economic growth. Governments cannot afford to miss this
window of opportunity to rethink their approach to transport infra­
structure procurement.
Notwithstanding this immediate need, for several years, the
Australian Contractors Association (ACA, 2017) has been calling for
changes to procurement practices to take place but to no avail. The ACA
(2017) has lit the beacons to move forward with the adoption of an
adaptive and responsive procurement strategy that focuses on “stake­
holder engagement, cultural environment and project leadership” (ACA,
2017, p. 4). However, the inertia that has stereotypically resided within
governments up until now juxtaposed with their fixation on risk
avoidance has hindered their ability to embrace the change needed to
deliver and future-proof2 large-scale transport assets. Even though each
State government has an explicit policy that promotes value-for-money,3
it has been given lip service, as the focus steadily remains on the lowest
cost and public accountability (Regan et al., 2015). The lowest bid from
1
Refers to any modality of private investment and/or private management of
infrastructure such as Public Private Partnerships and variants thereof, such as
Design-Build-Operate-Maintenance.
2
‘The process of making provision for future developments, needs or events
that impact on particular infrastructure through its current planning, design,
construction, operation and maintenance processes’ (Masood et al., 2016: p.
29).
3
The optimal use of taxpayer resources to achieve the intended procurement
objectives (Government of South Australia, 2018).
2
Research in Transportation Economics xxx (xxxx) xxx
contractors/consortiums to deliver transport projects remains almost
always triumphant and, in some instances, governments may be guilty of
institutionalising the ‘winner’s curse’4 (Signor et al., 2020).
In this paper, we critically review existing policies and practices used
to procure large-scale transport projects and examine the challenges
they pose in a post-COVID-19 world. Indeed, the pandemic may worsen
“pre-existing conditions” and the government’s ability to future-proof its
transport infrastructure. For example, “secular stagnation” – the com­
bination of low productivity, lack of private investment returns, and
near deflation will weaken demand, innovation, and access to finance
(Posen, 2020). Furthermore, the pandemic may lead to permanent shifts
in political and economic power in many developed economies such as
the United States, the United Kingdom, and Australia, which will require
the re-design of supply chains to make them resilient, adaptable, and
self-reliant (Stiglitz, 2020; Tooze, 2020).
To this end, we suggest that the approach taken to procure large-
scale transport infrastructure projects after the pandemic will need to
be more resilient, should accommodate uncertainty, and focus more on
the digitization and automation of work. Responding to these needs will
require governments and industry to work together and engender and
enact shared leadership, value creation and risks in their projects to ensure
they are future-proofed. We provide policy-makers with a new theo­
retical procurement framework that can be used as a frame of reference
to kick-start their journey to address the difficulties that confront the
delivery of their future large-scale transport projects in a post-COVID-19
world. We commence our paper by describing our underpinning
research approach.
2. Research approach
Review papers can take several forms such as traditional or narra­
tive, bibliometric, systematic, and scoping. Each type of review has its
advantages and disadvantages, is dependent on the nature of the
research and the question to be addressed (Grant and Booth, 2009).
While ‘systematic’ and ‘traditional’ types of literature reviews (Grant
and Booth, 2009) prevail in the transport literature (Van Wee &
Banister, 2016), we deliberately settle for a traditional review consid­
ering the novelty of the COVID-19 context surrounding our research
area, which has received scant attention and where there is not a
dedicated body of work (Thoma & Eaves, 2016). Indeed, there have
been no review papers that have critically examined the procurement of
large-scale transport projects and identified the gaps needed to adapt
and respond to COVID-19 notably in Australia.
Though limiting, such an absence of a direct literature thwarts the
potential of bias inherent within the search of relevant sources of liter­
ature (e.g., electronic databases) in any traditional review. To fill this
void, however, the theoretical procurement framework that we develop
in our paper is based on a critique of the cognate normative academic
and grey literature. To this end, we naturally rely on our experience and
knowledge of the project procurement challenges to synthesise the
literature through qualitative analysis (Thoma & Eaves, 2016).
Furthermore, the projects we specifically refer to in our paper have
received widespread media attention due to their mis-performance (e.g.,
deviations in cost and schedule). We, therefore, reference these projects
to reinforce the need for re-calibrating the prevailing procurement
policy. We now review the procurement and risk nexus, as this has been
a topic of predilection within the transport literature.
4
In an auction, the winner’s curse arises when a bidder immediately accepts
an irresponsible bid (offer) and fails to obtain the expected deal. The winner is
then said to be cursed in one of two ways (Thaler, 1988, p. 192): (1) “the
winning bid exceeds the value of the tract, so the firm loses money; or (2) the
value of the tract is less than the expert’s estimate, so the winning firm is
disappointed”. The winner’s curse phenomenon often plays out in construction
when a contractor offers too low a bid to deliver a project.
P.E.D. Love et al.
3. Procurement and risk
Economic (e.g., productivity levels), social (e.g., population growth),
political (e.g., change in governments), and environmental (e.g., climate
change) uncertainties surround the delivery of large-scale infrastructure
projects. Thus, there is a need to embrace, not reduce uncertainty as
often is the case in practice, which requires flexibility and adaptation
and out-of-the-box thinking for a successful project delivery (ACA,
2017). Uncertainties (“unknown-unknowns”) and risks (“known-un­
knowns”) are inherent features of transport infrastructure procurement.
They can both significantly affect the final cost of a project, but risks can
be foreseen. Hence, the focus of this paper rests squarely on risks.
With the need for larger and more extensive transport systems and
networks that will support new technologies (e.g., autonomous and
electric vehicles, trackless tram, and smart freeways) a myriad of risks
come to the fore. Such risks need to be identified and managed, but
determining who will be responsible for them poses a challenge. The
allocation of risk occurs in any situation where more than one party (e.
g., government agency and contractor/consortium) is responsible for
executing a project (Hartman, 2000). This is a key aspect of Agency
Theory (Eisenhardt, 1989). Fundamentally, the risk management goals
of a public sector agency can be achieved through the selection of a
procurement method, which can motivate a contractor/consortium to
deliver a transport project (Love et al., 2012).
We use Contract Theory here and draw on its innate features to briefly
examine how issues such as information asymmetry, adverse selection,
opportunistic behaviour and moral hazards materialise during the pro­
curement of transport projects and result in adverse outcomes (e.g., Hart
& Holmström, 1987; Hart & Moore, 1988). Information asymmetry5, for
example, tends to prevail during the tendering process as contract
documentation provided to contractors/consortiums is seldom complete
(Love et al., 2011; Forsythe et al., 2015). In this case, the expectation is
that the contractor/consortium accommodates the missing information
and accordingly prices for it and accepts the risks. This situation can
result in adverse selection6 and opportunistic behaviour7 manifesting. As
we have mentioned above, public agencies have traditionally tried to
avoid risk and thus they allocate them to their contractor/consortiums
(Gransberg & Ellicot, 1997). However, we have seen several public
sector agencies in Australia, for example, increasingly using alliances to
deliver complex heavy rail (e.g., Level Crossing Removal Project, Mel­
bourne) and non-toll roads projects (e.g., Perth’s Metropolitan Road
Improvement Alliance), where there has been a willingness to share
design and construction risks (VAGO2017; Main Roads Western
Australia, 2019).
3.1. Sharing of risk
The most popular procurement methods used to deliver large-scale
transport infrastructure projects in Australia have fallen under the
banner of PPIs (Regan et al., 2017). Conventional procurement methods
such as alliances and design and construct (D&C) or turnkey forms, have
also been used to deliver government-funded projects where there has
been no requirement for a user-pay service (Hayman, 2018).
5
Information asymmetry exists when there is an imbalance between two
negotiating parties in their knowledge of relevant factors and details. The
imbalance occurs when a party with more (or complete) information enjoys a
competitive advantage over the other.
6 cannot be clearly allocated to one party. For example, because risks are
Adverse selection refers to a situation whereby the buyer has information
that sellers do not have, or vice versa, about an aspect of product quality; that is,
in the case where asymmetric information is exploited.
7
Opportunistic behaviour occurs where a party takes advantage of their su­
perior knowledge to further their interests, by failing to disclose the informa­
tion to the other party.
3
Research in Transportation Economics xxx (xxxx) xxx
3.1.1. Risk allocation
When considering the allocation of risk to parties in a contract, two
questions need to be answered (OECD, 2008): (1) who is best to prevent
the risk event? and (2) in the case where no party can prevent its
occurrence, who is best to manage its adverse consequences and how
should it be realised? Risks can be classified as being exogenous and
endogenous to a project (Reside, 2009; Roumboutsos & Pantelias,
2015).
Higher degrees of risk are incurred with PPP than conventional
procurement due to the sheer number of stakeholders, the significant
sums of investment and the lengthy concession periods (Carbonara et al.,
2015; Roumboutsos & Pantelias, 2015). Yet, the best way to allocate
risks in a transport PPP project equitably has been a bone of contention
within the literature and continues to be debated (e.g., Grimsey & Lewis,
2002; Medda, 2007; Siemiatycki & Farooqi, 2012; Carbonara et al.,
2014a; b; Roumboutsos & Pantelias, 2015; Liu et al., 2019).
In the main, there is no consensus on what and how risks should be
allocated within transport PPP projects. In theory, there is universal
agreement on how they should be shared. In practice, however, this has
not been the case, at least in Australia. Considerable angst has been felt
by concessionaires and their contractors over the cost uncertainties and
risks they have experienced in their projects. What is more, several
megaprojects delivered through PPPs have suffered significant cost
blowouts during their construction and revenue shortfalls during their
operation (Regan et al., 2017). However, political, legal, and archaeo­
logical risks are generally allocated to the public sector (Reside, 2009;
Roumboutsos & Pantelias, 2015). Contrastingly, the private sector is
usually allocated risks associated with a project’s design (including
technical risk due to engineering and design failures), construction,
finance, and operation. The risks that are often shared tend to be of a
macro-economic, natural, or social nature (Roumboutsos & Pantelias,
2015). In this instance, COVID-19 could be categorised as being a nat­
ural event; therefore, its adverse consequences would be shared between
the private and public sectors. However, it would be aberrant for a
government to expect the private sector in this instance to bear the front
of the costs for this unprecedented catastrophic global event.
In the case of D&C contracts, a contractor is allocated risks associated
with design and construction. In comparison, an alliance takes a “col­
lective approach to risk”; here the public sector assumes a “de facto
position as a designer and constructor participant” (Department of
Infrastructure and Regional Development, 2015a). If the alliance expe­
riences difficulties and incurs a cost increase beyond an agreed cap, then
the public sector client will typically assume the design and construction
risks. There is a general perception that risks are shared in an alliance –
this is not the case. Risks are rather “borne equitably (as opposed to
equally)” (Department of Infrastructure and Regional Development,
2015a).
Risks are jointly managed in accordance with an alliance agreement
but financial outcomes are rarely shared equally between the Owner and
the Non-Owner Participants (NOP) (Department of Infrastructure and
Regional Development, 2015a). The Productivity Commission (2014)
during its inquiry into ways to encourage private financing and funding
for major infrastructure projects, including issues related to high costs
and long lead times noted:
“Alliances may work well in some circumstances but recent practice
has been increasingly wary of the model due to uncertainty about the
overall cost of construction and potential to put off rather than deal with
risk issues early (chapter 12). Alliances may nevertheless still have their
place. In particular, they may offer value in specific circumstances
where projects must proceed out of necessity, but where substantial risk
difficult to identify and quantify or there is disagreement over the price
(p.122)”.
Fig. 1 illustrates a risk and reward model typically adopted by alli­
ances. While there is potential for an owner to acquire cost savings, there
is no guarantee that an alliance will deliver a project at a lower cost than
P.E.D. Love et al.
Fig. 1. Risk and reward model: Cap on NOP pain-share
would have been the case with the use of a traditional approach (i.e.,
design-bid-construct).
The public sector should “undertake a thorough risk analysis of the
alliance project at the pre-tender stage to gain a better understanding of
the risks they face” (Department of Infrastructure and Regional Devel­
opment, 2015a). The successful allocation of risk burdens “requires
analysis of all of them and the design of contractual arrangements prior
to competitive tendering” (Grimsey & Lewis, 2002, p. 111). We question
the appropriateness of competitive tendering and the non-involvement
of concessionaires and/or contractors to assist with the identification
of design and construction risks as well as the anticipated risks that
might materialise during the procurement of large-scale transport pro­
jects. Immediately, this raises issues surrounding the selection of a
concessionaire/contractor, but we will address this matter in Section 5.3
below.
In the meantime, however, by excluding the concessionaires and/or
contractors from the risk identification process, the public sector puts
itself in a position of: (1) placing too much risk on parties, which often
occurs in the case of PPP projects; and (2) accepting risks that it does not
fully understand and is unable to manage, which happens with alliances.
In Fig. 2, we show how design and construction risks are generally
allocated for the procurement methods used to deliver large-scale
transport projects in Australia.
3.1.2. Value-for-money and risk
It is widely acknowledged that PPPs can provide the public sector
with value-for-money. Still, they have also been criticised for being
opportunistic entities and failing to meet a project’s contractual needs
and requirements. The concept of value-for-money “requires equitable
allocation of risk between the public and private sector partners”
(Grimsey & Lewis, 2002, p. 109). The term ‘partnership’ is supposed to
be more than a contractual arrangement for sharing risks. It should, as
Fig. 2. Design and construction risks for large-scale transport projects
4
Research in Transportation Economics xxx (xxxx) xxx
cogently pointed out by Castellucci (2013) drive collaboration between
the public and private sectors, whereby parties acknowledge and accept
each other’s capabilities and respective needs and constraints as well as
work together to provide better quality services to citizens.
Often there exists an inherent tension between the public sector’s
requirement to demonstrate value-for-money versus the private sector’s
imperative to generate robust revenue streams to support its financing
arrangements (Grimsey & Graham, 1997; Matinheikki et al., 2019). It is
these very tensions that form the basis for moral hazards8 to develop,
which have partially contributed to the failure of several PPPs due to
inaccurate traffic forecasts. Germane examples include Brisbane’s CLEM
7 and Sydney’s Cross Harbour and Lane Cove Tunnels (O’Sullivan, 2013;
Sullivan, 2018). In these projects, forecasted demand and revenues were
significantly higher than those that transpired, which eroded their
financial viability and placed them in a receivership situation with
crippling debts. The customary explanations for underestimation in
demand forecasts are optimism bias and/or strategic misrepresentation
(i.e., lying) (Flyvbjerg et al., 2003; Jones & Euske, 1991; Næss et al.,
2015).
Evidently, proving that a lie has taken place in the context of traffic
demand forecasts is problematic. As pointed out by Love and
Ahiaga-Dagbui (2018) “a lie is a false statement that is deliberately
created by someone to intentionally deceive others; deception requires
justification. There needs to be a motivation to enact a lie” (p:365). The
Sydney Cross Harbour and Lane Cove Tunnels demand forecasts had
been suspected to have both succumbed to optimism bias (Robbins,
2008; Tatnell, 2010); but in the case of Brisbane CLEM-79 Tunnel stra­
tegic misrepresentation was found to have occurred as a result of a class
action lawsuit. Within the first month the CLEM-7 opening it was fore­
casted to acquire an annual average traffic (total) of 60451 but the
actual average daily traffic was 59109. Within 18 months it was ex­
pected to be 100284, but the actual traffic volume diminished to be
22781. The plaintiff who raised the class action was successful and ac­
quired compensation for shortfalls in revenues.
The public sector often disproportionately offloads risks onto the
private sector. The public sector uses a PPP as a contract for acquiring
private sector investment and allocating risks between parties, but the
partnership aspect is often disregarded (Castellucci, 2013). Affirming
this view, the Productivity Commission (2014), referring to a submission
to its inquiry by the University of New South Wales, states “PPPs are
partnerships in name only and that a risk-transfer culture often results in
the inappropriate transfer of risk. This results in higher costs and
increased likelihood of project failure as risks are passed down the
contract chain to subcontractors that cannot manage them” (p.133).
The hallmarks of collaboration, gain-share/pain-share regime,
cooperation, commitment to no disputes, best-for-project decision-
making, no-fault-no-blame culture, transparency and joint leadership/
management epitomise alliance-based procurement (MacDonald et al.,
2013; Walker and Lloyd-Walker, 2015,2020). While alliances provide a
mechanism to genuinely foster partnerships in projects, they are only
appropriate for procuring transport assets funded by taxes (i.e., the
government pays) rather than user charges. Despite the pervasive ben­
efits of alliances (Cheng et al., 2004; Walker & Lloyd-Walker, 2015),
they have been heavily criticised for not being able to provide
value-for-money (Davis, 2007; Hayman, 2018). Putting aside this criti­
cism, alliances have proven to be a great success for delivering transport
projects in Australia, for example, the $705 million New Bunbury-Perth
8
Moral hazard is the risk that a party has not entered into a contract in ‘good
faith’ or has provided misleading information about its assets, liabilities, or
credit capacity. Also, it can refer to a party that has an incentive to take unusual
risks in an attempt to earn a profit before a contract is settled.
9
Maurice Blackburn representing The Hopkins Superannuation Fund (2014:
p.9–12). The Federal Court of Australia, New South Wales Registry, General
Division, No: NSD757/2012.
P.E.D. Love et al.
High delivered under budget (ACAA, 2010), to name one of a few. This
project has been heralded as being ‘best practice due to its (Department
of Infrastructure and Regional Development, 2015a):
•well-informed and engaged stakeholders who were actively
involved in the project’s planning and development;
•early contractor involvement that ensured commitment to the
project from outset; and
•the involvement of a material supplier as a member of the alliance
rather than a traditional subcontractor. The inclusion of a material
supplier meant there was increased certainty regarding the value and
supply of raw materials.
The practices adopted and implemented in the New Bunbury-Perth
Highway project demonstrate that the public sector can work with the
private sector collaboratively and embrace innovation to achieve suc­
cessful project outcomes. By and large, this has been the case with
alliance-based projects used to deliver transport projects in Australia.
Notwithstanding, the perceived stigma surrounding the inability of al­
liances to provide value-for-money has brought the public sector to
“bemoan their price uncertainty” (Hayman, 2018, p. 29). A case in point
is the Northside Storage Tunnel project in Sydney that failed to deliver
value-for-money (New South Wales Auditor General, 2003). Further­
more, alliances represent an inappropriate procurement model if a
public sector agency aims to “raise finance on a project finance basis, i.e.
where the financiers may only look to the cash flows and assets of the
project to secure repayment, and not to the balance sheet of the owner
[the public sector agency]” (Hayman, 2018, p. 27). However, this
requirement goes to the heart of the problem with PPI types of pro­
curement, as financiers have typically required the borrower to transfer
the design and construction risks (e.g., cost overruns, completion delays,
and quality) to a contractor by means of a traditional lump-sum contract
(Hayman, 2018).
We need to acknowledge that there is a no-size-fits-all-approach to
procuring transport infrastructure projects (Love et al., 2012). Still, the
need for shared risks is a consistent insight that resonates throughout the
transport procurement literature, one that emerges from best-practice
cases and is being called for by Tier one contractors. Again, risks
cannot be legitimately shared without shared leadership, and value
cannot be optimally generated if there is a contrasted focus on the lowest
cost by government and maximising profit by
concessionaires/contractors.
A sticking point for government, however, is they are “often regu­
lated in a way that makes shared value more difficult to achieve” (Porter
& Kramer, 2011, p. 5). In the case of concessionaires/contractors, they
need to look beyond their “pure economic interest” (Matinheikki et al.,
2017, p. 583). Implicitly, both the public and private sectors assume
“that the other is an obstacle to pursuing its goals” (Porter & Kramer,
2011, p. 5). Being able to reconcile the differences in goals between the
public and private sectors will necessitate fundamental changes to their
underlying value propositions. We now turn our attention to examining
the issues of shared leadership and value creation, which we believe will
form an integral part of a new value proposition model for procuring
large-scale transport projects.
4. Shared leadership and shared value creation
Leadership in large-scale transport projects has “traditionally
focused on the behaviour of an appointed/elected leader” (Serban &
Roberts, 2016, p. 181). Here project leadership is centralised, and there
is a single point of responsibility that tends to focus on task completion
within given constraints (ACA, 2017; Müller et al., 2018; Pearce &
Conger, 2003). While this narrow conception of leadership pervades
practice in organisations and teams, the literature is, however, replete
with studies questioning its effectiveness (e.g., Hans & Gupta, 2018;
Müller et al., 2018; Serban & Roberts, 2016; Wang et al. 2014). The ACA
5
Research in Transportation Economics xxx (xxxx) xxx
(2017) suggests a centralised project leader in large-scale projects is not
a viable option as “there are just too many variables and interfaces. Their
role needs to change to one of enabling leadership rather than acting as
the choke point for decisions” (p.25).
Most conventional leadership styles (e.g., charismatic, trans­
formational or transactional) consider leadership to be unidirectional
and a top-down influencing process (Pearce & Conger, 2003; Tams,
2018). Under the umbrella of traditional leadership styles, we construe a
leader as an active subject, the doer, and the person “who envisions the
future, defines and communicates strategy, inspires and motivates fol­
lowers, assigns roles, evaluates and rewards performance” (Tams,
2018). The upshot is that leaders influence followers by using their
personality traits, charisma or through contingent reinforcement10.
Questions, however, have surrounded the effectiveness of the vertical
influence process of leadership to initiate and sustain a change man­
agement program and harness a project team’s creativity, knowledge,
and expertise and ensure positive outcomes (Müller et al., 2018; Wu
et al., 2018).
We often read and hear that the challenges of change management
for leaders is persuading employees that there is a need for change. In
the main, change is often pushed onto employees, as they become the
implementers. When a change is not going as directed, it is often
convenient for leaders to suggest that employees are reluctant to engage
with new work practice, as they are complacent with the status quo
(Garvin and Roberto, 2005). Put differently, there is a belief that people
are incapable of committing to change. This belief directs leaders to
lecture and motivate followers to do so. Naturally, if people feel they do
not have a ‘voice’ (i.e., being able to ‘speak-up’ and challenge the status
quo without fear of retribution or humiliation) and an input into the
change process, then they will become disengaged and disinclined,
particularly if “an organisation has had a succession of leaders”, to
embrace proposed new ways of working (Garvin and Roberto, 2005:
p.106).
There is general agreement that contingent reinforcement by leaders
can adversely influence divergent thinking (Amabile et al., 1986;
Eisenberger et al., 1999; Wu et al., 2018). The absence of divergent
thinking and the inability of project leaders in construction organisa­
tions to provide their employees and subcontractors with a voice has
stymied their ability to learn and innovate (Love et al., 2019). Repeat­
edly, construction organisations make the same mistakes time and time
again in their projects (Love et al., 2018). While lessons learned are
regularly undertaken when a project is completed, seldom, are changes
to practice and improvements made. Thus, a cycle of repeated mistakes
befalls. Stopping this regrettable cycle is akin to breaking bad habits.
Changes in behaviour are required to break bad habits. In the case of a
construction organisation, attention should focus on leadership at the
corporate and project levels to ensure modifications to practice are
ensued (Love, 2020).
A single appointed leader is unlikely to bring about the necessary
change within a construction organisation where decentralised teams
are temporarily formed to deliver a project. Thus, an organisation needs
to draw on the leadership, skills, knowledge, and expertise of its business
units and teams to drive the change in the projects they are tasked to
deliver. Equally, the public sector is confronted with a leadership choice
in the context of the procurement of a large-scale transport asset, as a
series of agencies need to form a project team (e.g., planning, finance,
10
The American Psychology Association dictionary of psychology defines
contingent reinforcement as “the process or circumstances in which the delivery
of positive stimulus events (e.g., material goods, verbal praise) and, more
rarely, the elimination of negative stimulus events (e.g., penalties) depend on
the performance of desired behaviour. In leadership and management, the term
is applied to any approach in which a leader relies on rewards and penalties to
motivate his or her followers” (see https://dictionary.apa.org/contingent-rein
forcement).
P.E.D. Love et al.
and environment). This team, or parts thereof, should work in collabo­
ration with the selected concessionaire/contractor. Again, a single
appointed project leader for the public sector may bureaucratize and
frustrate timely decision-making.
4.1. Shared leadership
Shared leadership (also referred to as distributed or collective lead­
ership) is an appealing perspective to apply to decentralised structures
such as large-scale transport projects where interfaces abound (Müller
et al., 2018; Wu et al., 2018). Bergman et al. (2012) reveal that “shared
leadership occurs when two members or more engage in the leadership
team in an effort to influence and direct fellowship members to maxi­
mise team effectiveness” (p.18). As an influencing process, shared
leadership is “multidirectional, dynamic, simultaneous and on-going”
(Bergman et al., 2012, p. 18).
Shared leadership is also characterised by “serial emergence” (Peloza
& Falkenberg, 2009: p.18) whereby two members or more interact with
one another to become multiple leaders that influence a project team
over its life (Denis et al., 2012). At this point, we hasten to note that
there is a need to make clear the difference between shared and team
leadership. In essence, shared leadership occurs when a group of in­
dividuals lead each other to achieve successful outcomes rather than the
concept of a team that relies on the influence of a specific leader (Carson
et al., 2007).
In Fig. 3 we present the building blocks required to create a collective
team environment for procuring large-scale transport projects. We
suggest a number of external factors influence the procurement of large-
scale infrastructure projects, which include:
•political, regulatory and legal (e.g., finance/credit, budget deficit,
and procurement policy);
•environmental (e.g., climate change, COVID-19, contamination,
and pollution);
•socio-economic (e.g., productivity, congestion, and population
growth); and
•technological (e.g., electric cars, smart freeways, and 5G)
To effectively address these influences through a shared leadership
environment requires the following cornerstones to be in place (Carson
et al., 2007):
Fig. 3. Building-blocks for a collective project team
6
Research in Transportation Economics xxx (xxxx) xxx
•Shared purpose –team members understand the aim and objectives
of the project and collectively strive to achieve them;
•Social support – team members provide emotional support to each
other by recognising the contributions of individuals and providing
encouragement; and
•Voice – team members feel accepted and respected and are
encouraged to ‘speak out’ as their contribution is valued.
Putting in place an environment for shared leadership to thrive does
not mean that vertical leadership is discarded as someone needs to be
ultimately accountable within a project (Hoch & Dulebohn, 2013). Thus,
we suggest that leaders within both public and private sectors need to
foster an environment of cohesiveness within their teams and between
themselves, understand the project’s goals and be supportive of one
another before fostering shared leadership.
Shared leadership has been empirically demonstrated to improve
team and organisational outcomes in a range of different settings in the
presence of other forms of leadership (Carson et al., 2007; Ensley et al.,
2006; Hoch & Dulebohn, 2013; Müller et al., 2018). Large-scale trans­
port projects are composed of skilled and knowledgeable people whose
tasks are complex and interdependent. Such people are required to
engage in a high level of coordination and integrate and share their
knowledge and expertise. Structural supports such as resources, re­
wards, and assignment of formal positions need to be in place to enable
shared leadership to flourish. People assigned to formal positions should
display visionary and empowering behaviours (Hoch & Dulebohn, 2013;
Müller et al., 2018).
Leadership behaviours that are required to support shared leadership
are honesty, transparency (Hoch & Dulebohn, 2013) and boundary
spanning (i.e., “being able to influence how a team must operate within
its organisational context to be effective”) (Bergman et al., 2012, p. 19).
In light of these supports, we are immediately drawn to authentic
leadership, which has been identified by Lloyd-Walker and Walker
(2011) as being an influential leadership style to support the establish­
ment of trust and commitment needed to manage projects in the 21st
century.
Within an alliance, for example, a dedicated alliance leadership team
(ALT) is established, which forms part of its governance structure. The
ALT is responsible for the delivery of the project and provides a forum
for accountability, decision-making, dispute resolution, and information
dissemination. The ALT’s responsibilities include ensuring the alliance’s
priorities are understood and aligned with a project’s deliverables,
bolstering innovative thinking, reviewing project progress, sharing les­
sons learnt and resolving emerging problems. Beneath the ALT sits the
alliance manager (AM) and their team who are charged with delivering
the project and ensuring the ALT’s decisions are effectively executed.
According to Lloyd-Walker and Walker (2011), authentic leadership
is pivotal for ensuring the success of a project and for engendering a
culture that influences “shared leadership ideals” at all levels within an
alliance (p.386). Echoing this view, Love et al. (2015) observed in their
study of rework mitigation in projects that an ALT’s authentic leadership
style can provide a platform to engender collaborative decision-making,
enact the sharing of responsibility for outcomes, and enable a collective
learning environment to form. In this collective learning environment,
an attitude towards embracing not reducing uncertainty can prevail
(ACA, 2017), requisite imagination11 can prosper with an effective
anticipation of what might go wrong, collective learning from failure
and success can happen, and thus the alliance can better adapt and
respond to unwelcomed challenges (Love & Matthews, 2020).
11
“The ability to imagine key aspects of the future we are planning (Westrum,
1991: p.195).
P.E.D. Love et al.
4.2. Shared value creation
The strategic decision-making and actions of both the public and
private sectors can harm the performance of transport projects and the
wider community, particularly when an asset’s quality and its envi­
ronmental impact comes into question. Profit generation has been the
sole driver for many contractors. Consequently, with this mode of
behaviour, which is underpinned by free-market capitalism (i.e.,
through tendering where the forces of supply and demand create price
signals), we have witnessed winners and losers. That is, some firms make
significant margins from projects. In contrast, others struggle to stay
afloat or even become insolvent as a result of submitting low bids and
having an insufficient cash flow to sustain their business.
As we have mentioned, Tier one contractors involved with con­
structing large-scale transport assets have been suffering financially as a
result of bearing too much risk. Explicitly, the procurement strategy,
which has been adopted by public agencies, in some Australian states,
has been ineffective for PPI projects. If strides are to be made to remedy
the procurement process, then both the public and private sectors need
to re-calibrate their mindsets away from pure fiscal drivers to one where
the “creation of shared value” manifests (Porter & Kramer, 2011, p. 4).
Here the creation of economic value will not only directly benefit the
public and private sectors but also “society by addressing its needs
challenges” (Porter & Kramer, 2011, p. 4). The creation of such a
mindset “requires profound changes in the dominant profit-centric
business logic” of organisations (Matinheikki et al., 2017: p.S83). In
this case, the private sector organisation should transform its business
into a self-resourcing value creation model designed to solve social
challenges that materialise during the procurement of the transport asset
itself rather than relying on the government.
By the same token, the public sector should also adopt a shared value
perspective. It can enable and promote shared value policies and prin­
ciples by forming private sector partnerships. In doing so, the public
sector needs to re-examine their regulatory frameworks and therefore
de-risk the processes that can thwart partnership formation. The public
sector can use levers, such as regulatory reforms and tax reliefs as in­
centives for the private sector to address societal issues (Porter &
Kramer, 2011). However, the private sector generates wealth, whereas
the public re-distributes it to its citizens. Beyond the use of shared value
being used as a tool by the public sector, it can help them understand
and re-define its role in the delivery of large-scale transport infrastruc­
ture assets. Particularly at a time where there exists a great deal of
scepticism surrounding the integrity and trustworthiness of politicians’
decisions about which projects are constructed.
By taking a shared value perspective in the context of large-scale
transport projects, economic value can be created by the private sector
in three distinct ways (Porter & Kramer, 2011):
1. Reconceiving products, services and markets to serve societal needs.
For example, sustainable building materials, prefabrication to minimise
waste, energy-efficient solutions (e.g., solar), rainwater harvesting and
using new technologies to manage and operate networks and systems
and to keep the community abreast with an asset’s functioning.
2. Redefining productivity in the value chain to serve society by accessing
and using resources, energy, suppliers, logistics and employees differently and
productively. For example, digital technologies, particularly those built
on a bedrock of artificial intelligence, can be used to automate payments
to subcontractors and suppliers using blockchain. Building information
modelling (BIM) is changing the way information is created, shared and
managed in transport projects. Efficiencies in design, construction, op­
erations and maintenance are being realised (Love & Matthews, 2019).
As a result of COVID-19, the workforce is adapting to new modes of
working (i.e., virtually from home). Naturally, levels of congestion and
pollution have significantly declined. Perhaps, will the modes of work­
ing adopted in response to COVID-19 become the ‘new normal’ in the
future?
3. Enabling local cluster development where there resides a focus on
7
Research in Transportation Economics xxx (xxxx) xxx
improving the local operating environment by supporting skill development
and capacity building to become sustainable. The coronavirus pandemic
has highlighted the sheer vulnerability of the global supply chain. Many
companies, once reliant on raw materials and parts from Asia to make
their own products, are finding it difficult to cope with supply chain
constraints. The productivity of a contractor is highly dependent on its
subcontracted workforce, its supply chain and relations with the broader
community. Examples of enabling cluster development can be found in
construction. Within alliances, for instance, employing local sub­
contractors and sourcing local materials often form part of their remit
(Department of Infrastructure & Transport, 2012; Love et al., 2015;
Walker & Lloyd-Walker, 2015). The public sector has a role to play in
stimulating economic value by requiring their contractors, as part of a
contractual requirement, to build capacity within a geographical region.
The benefits of shared value include self-sustaining purpose and
profitability, resilience against external threats (i.e. risks and un­
certainties), higher advocacy, and retention and productivity among
employees and credibility.
4.2.1. Social context
The creation of shared value requires profound inter-organisational
collaboration between the public and private sectors (Peloza and Fal­
kneburg, 2009; Porter & Kramer, 2011). In the case of a PPI project,
which may be in operation up to 25 or 30 years, the concessionaire
would have the responsibility to align itself, with input from the public
sector, to ensure that not only “advances in its own economic well-being
but also creates value to the community” (Matinheikki et al., 2017: p.
S85).
Here, we need to be cognisant that “social context matters for col­
lective action” and that it plays a key role in creating a social vision
(Rudd, 2000, p. 132). Social relationships not only “constitute resources
that individuals can appropriate to assist them in increasing their
well-being” but also the “development of norms of trust and reciprocity
that have spill-over effects – positive social externalities” – for project’s
immediate stakeholders and the wider community (Rudd, 2000, p. 132).
We suggest that shared leadership can foster the collective action needed
to inhibit short-term “self-interested behaviour via a self-reinforcing
cycle of trust and reciprocity” from manifesting in projects (Rudd,
2000, p. 133). It then follows that supporting a social vision with shared
leadership enables individuals and their teams to create a reputation due
to the norms of trust and reciprocity, which in turn can reduce trans­
action costs associated with situations where information asymmetry
occurs in projects (Ostrom, 1998).
The importance of understanding a project’s social structure and
making sense of its organizing process and how actions can reshape old
configurations and create new ones has received ubiquitous attention
(Söderlund et al., 2017; Aaltonen & Turkulainen, 2018; Matinheikki
et al., 2019). Indeed, the difficulties associated with begetting coordi­
nation and collaboration in large-scale projects are not only attributable
to their structural complexity but also their socio-political complexity
including “institutional differences such as the divergent perceptions
regarding the legitimate means and ends of a project” (Matinheikki
et al., 2019, p. 299).
To accommodate these difficulties requires a balance between formal
contractual and relational and social mechanisms when procuring pro­
jects (Benítez-Ávila et al., 2018; Matinheikki et al., 2019; Walker &
Lloyd-Walker, 2015). Institutional tensions often arise during the de­
livery of large-scale transport projects as they “must comply with the
operating logics of government bureaucracies and business firms and
achieve legitimacy in the eyes of diverse stakeholders” (Matinheikki
et al., 2019, p. 299). In the context of large-scale transport infrastruc­
ture, different procurement strategies can be used to respond to the
multiple logics and risks that prevail in projects. As we noted in Fig. 2,
various organisational forms of PPI (e.g. PPPs) and alliances can be
adopted to synergise multiple and often competing logics. The choice of
organisational form, however, will be dependent on whether the asset to
P.E.D. Love et al. Research in Transportation Economics xxx (xxxx) xxx

deliver will be a user-pay service or not.

5. Re-calibrating the process of procurement

In response to the appeal from the Australian Contractors Association

(ACA, 2017) and the burgeoning adverse impact of COVID-19, we sug­
gest that the public and private sectors should collectively modify their
actions and behaviours to future-proof transport assets. In doing so, the
public sector needs to vigorously engage with the private sector to
jointly focus on engendering and enacting shared leadership, value
creation and risks in its project; that is, the creation of a collective
procurement environment.
Alliances are a robust procurement approach that has been widely
used by the public sector for risky or uncertain projects or those with
uncertain or changing scope. However, price certainty and cost overrun
risks represent the ‘Achilles Heel’ of the public sector. When the private
sector is tasked to do work for a fixed price as a result of engaging in a
competitive bidding process, problems can arise as it is “financially
motivated to minimise the cost of performing its obligations, in order to
maximise its profit margin” (Peloza & Falkenberg, 2009: p.2). Govern­
ments have already had to intervene and provide significant financial
assistance to businesses and individuals in response to the coronavirus
outbreak.
Fig. 4. A theoretical hybrid alliance-PPI framework for user-charge
In the aftermath of COVID-19, the public sector will without doubt
be confronted with fiscal constraints and no longer be able to absorb the
price, fixed time contract” (Hayford, 2018: p. 27). Obtaining project
risks of cost blowouts on its large-scale transport projects. Instead, it
finance is a challenge when integrating an alliance within PPI projects.
needs to step up its investment in transport infrastructure to stimulate
But, with a focus on shared value and generating both economic and
the economy’s recovery post-COVID-19. Something, such as a budget
societal benefits, financiers are likely to see healthier returns as we will
contingency, therefore, must be put in place to mitigate the burden of
see “whole new avenues of revenue open-up” (Porter & Kramer, 2011, p.
cost blowouts having to be borne by the public sector. The financial and
7).
payment structure of alliances, therefore, may well need to be re-
Governments are striving to improve relations with the business
evaluated to accommodate a changed risk profile. Organisations
sector, and they expect them to show leadership and help solve social
within the construction sector have had to lay off and/or furlough staff
issues. They are investing considerable effort into forming partnerships
due to falling revenues. We, therefore, anticipate that contractors will no
to deliver services (Kearney, 2019). As a result, the public sector may
longer be in a position to guarantee fixed-price contracts.
have to look at ways of conducting their business differently to create
By inculcating the necessity of shared value and embedding it into
economic value. Normally, a cost-benefit analysis is used to determine
the process of procurement, we turn on its head neoclassical economic
the economic benefits of projects, with social and environmental cost
thinking, which has been the mainstay of the private sector (Porter &
and benefits treated as secondary considerations, despite their central
Kramer, 2011). Providing social and environmental benefits should no
value to citizens and the community as a whole (Dobes et al., 2016).
longer be considered a constraint and cost for contractors but instead an
Thus, in line with our shared value thinking, we suggest treating equally
opportunity to create differentiation, redefine and expand their markets.
social and environmental costs and benefits along with those of an
We have identified in Section 4.2 how social and economic benefits can
economic nature, an approach which we call ‘Social Cost Benefit Anal­
be simultaneously obtained. We have proposed that a collective envi­
ysis Writ Large’.
ronment should underpin the basis for procuring large-scale transport
Decision-makers within the public sector are fully aware of the dif­
projects. We assume that the public and private sectors have integrated
ficulty of monetising social and environmental impacts so to ensure like-
shared value into their strategy. Our collective approach can be readily
for-like comparison with economic consequences. However, such an
integrated within an alliance structure. In the case where there is a need
analysis could be undertaken in collaboration with potential conces­
for a PPI, we propose an innovative procurement approach that caters to
sionaires/contractors once the need for a project is identified. In this
the benefits of alliances.
instance, concessionaires/contractors can work with the public sector to
We present our theoretical framework for a hybrid alliance-PPI with
define project objectives, requirements and specifications, and propose
user-charge assets in Fig. 4. We note that there has been a paucity of
solutions to ensure not only service outcomes and economic benefits can
studies that have examined the integration of alliances within PPI ini­
be met but also those of a societal nature.
tiatives, though it has been acknowledged that service outcomes can be
improved through their integration (Clifton & Duffield, 2006; Walker &
Jacobsson, 2014). The integration of these concepts can provide a 5.2. Bi-partisan financial support
“flexible structure for the management of change” and a “mechanism for
managing long-term outcomes while maintaining the original com­ By governments including the private sector into the investment
mercial intent” (Clifton & Duffield, 2006, p. 582). justification process, a more realistic picture of project costs and benefits
can be attained, and optimism bias minimised, particularly when a
5.1. Social Cost Benefit Analysis Writ Large process of requisite imagination is enacted. Yet, existing procurement
policies are not working, as there have been countless numbers of
Financiers have generally been reluctant to accept the risk profile of transport projects whose costs have been significantly higher than pro­
a full alliance regime (Clifton & Duffield, 2006; Hayman, 2018). jected or promised benefits did not materialise. However, this trend is
Traditionally, project financiers have required a project own­ economically unsustainable as governments will need to focus on
er/borrower to “transfer the risk of cost increases, delays, and quality servicing the debt created by having propped up the economy due to
shortfalls to a creditworthy head contractor via a conventional fixed COVID-19.

8
P.E.D. Love et al.
Cognisant of the negative impact that COVID-19 will have on the
private’s sector ability to source project finance (e.g., commercial banks,
institutional investors, multilateral agencies, and capital markets), we
propose a bi-partisan approach toward funding a project in a context
where interest rates are at an all-time low. It is outside the scope of this
paper to examine the topic of project finance. However, financiers may
require that equity investors in the special purpose vehicle (SPV) pro­
vide equity upfront (Hayman, 2018). In our theoretical model, we sug­
gest that the public sector forms part of the SPV and thus would be able
to provide the upfront equity. Equally, insurance policies (e.g., profes­
sional indemnity) should be tailored to meet the ‘no blame, no dispute’
regime embedded within an alliance’s sphere of activity (Hayman,
2018). Policies tailored for alliances will no doubt be expensive and
their cost will be dependent on the complexity and size of the project and
the insurers’ risk assessment (Clifton & Duffield, 2006; Hayman, 2018).
5.3. Selection and price determination
Seeking the input of the private sector during the cost and social
benefit analysis would provide a realistic assessment of the project’s
feasibility. Solutions to stimulate social and economic benefits as well as
an estimate of project costs should be sought from the private sector. In
this instance, not only would a representative estimate of the project’s
likely costs based on market conditions be provided but also innovative
solutions to deliver societal benefits. A differentiating factor that could
be used as part of the selection process of a concessionaire/contractor
would be the innovations proposed to produce societal benefits over the
life of the project and beyond. At this point, we suggest a fee to be paid to
the losing bidder for the services it provided. Noteworthy, the unsuc­
cessful bidder would be assured that their intellectual property would
not be used. Soliciting bids for a large-scale transport project is a costly
exercise for the concessionaires/contractors, especially as losing bidders
are likely to receive no fee for their submission. For projects over $500
million, the cost to submit a bid can range from 3% to 5% of a project’s
value, which represents a significant cash investment for the chance of
winning a project (Productivity Commission, 2014, p. 452).
A substantial change in PPP policy has occurred in the treatment of
bid costs, which in the past was a marketing cost borne by bidders. For
example, in 2013, the Victorian Government foreshadowed part or full
reimbursement of bid costs for future PPP projects, albeit for losing
syndicates responding to invitations for a request for tender. Similarly,
the New South Wales Government (NSW) for projects over $100 million
will consider contributing eligible unsuccessful bidders of up to 50% of
the expected bid cost (NSW New South Wales Treasury, 2018). Irre­
spective of the level of contribution to bidding costs, unsuccessful con­
cessionaires/contractors not only lose money, but it also puts a strain on
resources. Furthermore, there is no guarantee that the successful bidder
can provide value-for-money.
In the case of large-scale transport projects, we, therefore, recom­
mend that the public-sector eschew competitive tendering – it is a
wasteful process in our view. There is only a handful of contractors in
the Australian marketplace who have the experience and expertise to
deliver large-scale transport projects. In fact, the shortlists of contractors
for large projects tend to include the same Tier ones and an international
organisation (or consortium) (Productivity Commission, 2014, p. 423).
Proponents of neoclassical thinking will no doubt argue that such a
non-competitive market can lead to an unbalanced allocation of goods
and services contracts and result in a Pareto inefficiency (Kaufman,
2011).
The formed partnership between the public and private sectors
should commence early in the project’s life with underlying principles of
the alliance used to develop norms of trust and reciprocity. The early
involvement of a concessionaire/contractor into the design process can
enable a project’s scope to be fully developed and issues surrounding
constructability resolved. Once the design is completed, the cost of
construction is re-examined, profit agreed and then re-evaluated by a
9
Research in Transportation Economics xxx (xxxx) xxx
third party. Risks would not be jointly managed but rather shared; that
is, design and construction costs. If there are cost savings at the end of
construction, then these would be split 50:50.
5.4. Performance management
Performance management can help align the collective team, re­
sources and systems to meet the project’s strategic objectives. We can
use a performance management dashboard to unearth potential prob­
lems and thus enable managers to make the necessary adjustments as a
result of regular performance-review cadences. There has however been
a propensity for PPI projects to only monitor time, cost, quality and
safety up until construction is completed (Liu et al., 2018; Liu et al.,
2019).
We therefore suggest that there is a need to establish a series of Key
Result Areas juxtaposed with whole metrics (i.e. to ensure the perfor­
mance required is realistic, transparent and meaningful), which cas­
cades down to daily activities for those who are operating at the coalface
of construction. With shared leadership in place, managers can use
performance management to ensure everyone is pulling in the same
direction throughout the project’s entire life. Incentives are seldom
provided to subcontractors. If, however, shared value is to be genuinely
practised and promoted, then incentives should be provided to sub­
contractors, and their performance managed, particularly when there is
a drive to future-proof transport assets through learning and innovation.
6. Conclusion
Uncertainty and unprecedented challenges face Australia and the
global economy in the quest to adapt and respond to the impact of
COVID-19. Before COVID-19, Australia was in the midst of a transport
infrastructure boom spurred by population growth, increasing levels of
pollution, and low productivity. Unemployment levels hovered around
the 5% level, but gross domestic product (GDP)12 was waning. While
investment in infrastructure was intended to boost productivity, stim­
ulate growth in GDP and innovation, it paradoxically had the opposite of
the desired effect. The demands on concessionaires/contractors for
fixed-price contractors placed undue risk upon them. As a result, many
who were capable of delivering large-scale transport projects fell on the
verge of insolvency. Also, cost blowouts had become a pervasive chal­
lenge and thus adversely impacted the productivity of both the public
and private sectors.
Drawing on the wise words of Socrates presented at the
commencement of our paper, we call for out-of-the-box-thinking to
move transport infrastructure procurement policy forward and chal­
lenge the prevailing neoclassical thinking that underpins the selection of
those organisations capable of delivering projects. By taking on this
challenge, we proffer that the public and private sectors should work
together to ensure that much-needed transport infrastructure can create
economic value throughout society. We have therefore suggested that a
collective environment centred on shared leadership, value creation and
risks is needed to transition to a new procurement paradigm that goes
beyond producing economic benefits but also includes those of a social
and environmental nature.
Our collective approach can be used for both user and non-user
charge transport projects. In the context of PPI, we propose a hybrid
model of procurement that can exacerbate the collective’s resolve to
generate economic, social and environmental value. Our model remains
theoretical, and only future work in direct liaison with the public and
private sectors will determine its viability. We remain steadfast in our
opinion that at a time of complexity and uncertainty, we must challenge
existing practices and develop creative solutions to be able to produce
and future-proof large-scale infrastructure assets.
12
See Austin (2019).
P.E.D. Love et al. Research in Transportation Economics xxx (xxxx) xxx

CRediT authorship contribution statement Denis, J.-L., Langley, A., & Sergi, V. (2012). Leadership in the plural. The Academy of
Management Annals, 6(1), 211–283. https://doi.org/10.5465/
19416520.2012.667612
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Writing - original draft. Lavagnon Ika: Writing - review & editing, contracting guidelines: Guide to alliance contracting. Canberra: September,
Writing - original draft. Jane Matthews: Writing - review & editing, Commonwealth of Australia, ISBN 978-1-925216-66-0. Available at: https://www.
infrastructure.gov.au/infrastructure/ngpd/files/NACG_GN1.pdf Accessed 28th
Writing - original draft. Weili Fang: Writing - review & editing, Writing March 2020.
- original draft. Department of Infrastructure, & Regional Development. (2015b). National alliance
contracting guidelines: Guidance note 1 language in alliance contracting – a short analysis
of common terminology. Canberra: September, Commonwealth of Australia, ISBN
Acknowledgments 978-1-925216-67-7. Available at: https://www.infrastructure.gov.au/infrastructu
re/ngpd/files/National_Guide_to_Alliance_Contracting.pdf Accessed 28th March
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