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AFL:Quality Infrastructure Improves Standard Of Living

AFL:Quality Infrastructure Improves Standard Of Living
AFL
September 19
13:11 2016

Infrastructure upgrades that are delivered with quality, improve the standard of living of all Fijians.

This was highlighted by the Airports Fiji Limited executive chairman, Faiz Khan at the joint conference of Fiji Australia New Zealand Business Councils at The Pearl in Pacific Harbour on Friday.

Mr Khan was speaking on the topic “Improving Productivity Through Infrastructure Upgrades” sharing his experience in Nadi Airport Terminal Modernization Upgrade.

He said Rotuma, Matei, Koro, Vanuabalavu and Nausori upgrades were in the pipeline.

“Imagine the impact to economic growth and the lives of Fijian people by better connecting them all over Fiji if we are able to deliver upgrades with quality and value.

“Investment in capital logically creates economic growth and improves productivity.”

Importantly, Mr Khan said people’s standard of living is increased through capital investments.

“However, it is important to understand that we can only achieve higher standards of living if we carry out infrastructure upgrades with a focus on ‘quality’.

“For example, if a $100 million is spent with poor outcomes people’s standard of living may in fact go down rather than going up.

“A bad capital investment is a burden whilst a good capital investment is an asset.”

Mr Khan added one must also understand that quality considerations do not exist in isolation of costs.

“We cannot say that just because we want to achieve quality we keep an open cheque book policy where costs end up doubling. We need to find ways to achieve best value outcomes.”

He focused on three things that are important in qualitatively upgrading infrastructure.

“Upgrading an existing building or roads, particularly if they are 60-70 years old means you will face many unknowns and unforeseen through the upgrade process.”

For example, he said at Nadi International Airport when they opened ceilings, found beams cut to allow downpipes or other services to run. The structural integrity of the beams were lost.

“We couldn’t just put a coat of paint and put the ceiling back but had to fix these. Typically we also found around 200 cables and wires running through any ceiling when only 10 were required.

“When we dug through sub-ground surfaces we found undocumented services. You cannot plan for what you cannot see – the unknowns.”

First, Mr Khan said they created ‘rigorous transparent processes’ to deal with variations and changes in scope.

“With literally thousands of variations coming from the unknowns, as a State Owned Enterprise with stringent governance procedures, we added a number of additional layers of checks and balances through client side proactive participation.

“This was done to facilitate quick transparent actions rather than hinder progress.

“With rigorous transparent processes we managed to build an open book happy relationship with our contractors.

“We did this by creating smaller positive frictions that are designed to avoid bigger disputes.”

He went further to add they also openly share their knowledge of risks of the project with the contractor to avoid surprises and disappointments.

“The hide and seek approach that many like to follow to gain an advantage with a building contractor usually provides a short-term false sense of victory. At the end you will be worse off with a hide and seek approach.

“Thus, the work of the principal or client does not stop after running the base tender process and signing the contract document.

“Don’t leave everything to consultants whose objectives will never perfectly align to the principals. The unknowns of an upgrade require active client side participation throughout the construction phase that is best achieved through rigorous transparent processes.

Second he pointed out one needs to ensure that they have cash flow and funding in order.

“Contractors need to be paid on time. Delays in payments causes loss of reputation and results in the contractors pricing the delay risk to the contract price.

“AFL has become highly cash flow positive through its successful revenue restructure that allows us to undertake these important capital projects for the national good.

“With the cash flow positivity we have also improvised a number of processes to our advantage.

“Before budgets were approved prior to tendering. If the budget was wrongly inflated bidders inevitably put in bids close to the budget. That is business psychology.

“With the comfort of cash flow positivity, we do not finalize our construction budgets until after closing the tender bids.”

Mr Khan stressed with this change in approach they have been able to truly test the market.

“We have real examples of halving capital costs compared to the budgets set 5-8 years ago on the exact same scope of works.

“There are numerous advantages of being known in the market to be a good player. You better position yourself to push value outcomes.”

And thirdly he said, there were many challenges in any infrastructure upgrade.

“For example, the fact that we rely on importing almost all building materials means that timely delivery of cargo is a key risk to any project.”

However, Mr Khan added one needs to proactively identify theirrisks and mitigate them.

“It is easy to blame and talk about problems.

“However to successfully carry out upgrades you need to find solutions to the many challenges.”

Feedback:  farzana .nisha@fijisun.com.fj

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