NUGENT, Mr Brendan, Director, Business Strategy and Performance, Transport for New South Wales; and Member, Capability Task Force, Austroads

CHAIR: I welcome Mr Brendan Nugent from Transport for New South Wales, representing Austroads. I remind witnesses that the Senate has resolved that an officer of a department of the Commonwealth or a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy. It does not preclude questions asking for explanations of policy or factual questions about when or how policies were adopted. Mr Nugent, the committee has your submission, for which I thank you. Would you like to make a brief opening statement?

Mr Nugent : Yes. I am the director of business strategy and performance in transport for New South Wales. I am also a member of the capability task force of Austroads and have been a member for six years. I make this submission on behalf of the chair, Mr Peter Mitchem from VicRoads, the chair of the capability taskforce, and for Austroads. A lot of the information in the presentation to the committee is based on research done by BIS Shrapnel for Austroad's capability task force. I was the project leader and project manager for the two pieces of research, the initial one in 2006 and the one in 2009. I also represent Austroads on the World Road Association technical committees on good governance of roads administration and the performance of transport administrations. In that role, I have performed for the last four years case study research on human resources for the future and technical capability within the road sector.

Austroads is the association of Australian and New Zealand road transport and traffic authorities. It represents all of the six states and two territories, the federal Department of Infrastructure and Transport, the Australian Local Government Association and Transport for New South Wales. It is a broad collaborative group. In terms of the scale of the work and the impact of this information and the subject of the senate's inquiry, the Austroads membership manage 825,000 kilometres of roads valued at over $200 billion, representing the single largest community asset in Australia and New Zealand. We spend in excess of $16 billion a year in roads across those governments. Austroads does work on a collaborate process to try to get together technical people who are working in key areas like asset management, capability, network optimisation, registration and licensing, road safety and technology. The capability task force is a mix of engineering, human resources and strategy professionals who are interested in identifying any skills gap and building capability responses across government.

In the submission there are several areas about the capability analysis, which I think you might be interested in, and some broader capability issues. In the interests of time and your questions, I might go straight to the research that was done by BIS Shrapnel. The skills gap concept is literally that supply less demand equals whether there is a skill gap positive or negative. The supply is made up of fairly rudimentary information because of the data sets and the information you can gather together. But BIS Shrapnel basically looked at the current skilled road sector labour force across government and the private sector, through looking at ABS statistics. They forecast the labour inputs—mainly graduates. The evolution is to get better and better data sets that will talk about migration and other components that contribute to our forecast labour inputs and to have less attrition—literally the retirement statistics across the road sectors. Demand is basically a demand forecast based on the forecast roads activity that we have across the sector, either through long-term planning documents that the road authorities issue, like total asset management approaches and strategies, but also through the forecast that BIS Shrapnel does at an industry level as probably one of the industry leaders in forecasting construction in all sectors, particularly in the roads sector.

I am going to focus on the initial research and then on the 2009 to 2019 10-year research. The key finding was that, through to 2014, the supply of skilled engineering labour in the road sector will be adequate to meet our needs, despite attrition associated with an ageing workforce. This has not held for some specialist areas. There are definitely significant gaps right now in certain areas—like bridge engineering, for example—but this is the holistic view. From about 2014, new skilled labour supply—that is, new graduates—will not be sufficient to meet the forecast gap in labour demand and the size of the existing workforce in the sector. The report, which I think is quite a sophistication evolution, recognises also that there will be no true observable capability shortfall, because supply and demand will be met. That is, we will either defer programs of works because we cannot get the resourcing in to do it or we will basically have to import those skills from other countries, either through consortia or through migration or some other process. But one thing that we would actually like to quantify is: what is the cost of the deferral of these projects, particularly in terms of economic development, when you have to put off something because you do not have the labour supply?

Senator MARSHALL: There are also some projects that simply fail altogether as well.

Mr Nugent : Fail because of the skill set? Yes, some just do not get up. If you think about the pipeline process, while we talk about major capital projects and things, a lot of the work—the design and planning processes—has to be done in the advanced stages. This really just looks at the shovel-ready sort of projects. It does not look at the fact that we have shortages right now in design professionals across transport sectors as well. They were not asked, as I say, to quantify the shortfall at that stage. They have put down the number, based on the assumptions that they have made in terms of the model, that in the public roads sector alone, the workforce gap will grow quickly, from 2013 and 2014, to approximately 3,300 persons. As an example, it is more than half of the current people who are working in all the state jurisdictions right now in road based, technical capable jobs based on their assumptions of the workforce and what people are doing.

The gap will need to be met by, as I say, an increasing supply from either new graduates, net migration or net transfer of skills from other industries. Given the high level of demand across the economy in the resource sector, we see that being a major problem in the road sector. Because of our ability to pay the competition in terms of the cost of labour, we cannot pay what the mining industry pay. Given the time required to obtain primary engineering or associated qualifications and then to develop new graduates to a point of reasonable competence, which we would say is four to five years, the Capability Task Force and the report basically say that our supply of engineering skills needs to be developed and implemented very quickly. An issue with the model is that retirement does not take into account that it is 20, 30 and 40 years of experience retiring. It is just like one in, one out sort of thing. The capability component is quite significant.

Some of the related capability issues that we mentioned include the booming mining sector and urban growth nationally. These things will also overstretch our supply. But there is also a significant decline in the number of students choosing maths and science. This limits the available option of the students, but it also means that we are poaching from the same pool. The chief scientist appeared just before. The people whom we are trying to get to do engineering courses are the same people we are trying to get to do science, health and all the other maths and science skills as well. A part of the issue is across the maths and science pool. We are all trying to poach people across the different competing resource areas. Also, engineering courses experience a very high drop-out rate. There is a figure here: 40 per cent of enrolled students drop out prior to the end of their course. We need to understand why that is and what we can do to amend that. My figure here is that only 6.5 per cent of engineering students are female. Such a low level of women training as engineers is also a significant issue for us and a skills shortage issue. We need to understand and apply countermeasures for that.

Also, a significant percentage of the women who are qualified are underutilised so that, in many instances, working conditions and employer expectations do not encourage high levels of participation amongst women. So we need to look at the development of more family-friendly orientated work areas. That has quite often been the public sector's value proposition. You will get flexibility working within the public sector in these sorts of jobs, but there has to be a bit of a quantum shift if we are also going to bring it into the private sector and increase participation of women.

There is no silver bullet. In the submission we talk about the things we need to do regarding further issues in government, the education sector and employers. Examples such as the Capability Task Force of Austroads, I think, are useful examples to illustrate, because we have understood that there was a lack of empirical data and the evidence base was not there for policy decision making. We did the individual research together, rather than doing it separately. From there we have also done research into skills gaps, marketing campaigns and we have done the joint national campaign to try at least to increase the awareness of roads based technical skills and work. If we do not basically pool our resources in some way based on the evidence that we have, we will all be trying to fight the same battles on different fronts.

Senator MARSHALL: Of the $16 billion, and I am just looking for a rough breakdown here, what percentage of that money is used to actually purchase services from the private sector and what proportion is actually used to support your own direct building of roads?

Mr Nugent : That would vary across each state and territory. Each of the jurisdictions would have a different proportion and mix. In New South Wales where I come from, public-private partnerships and procuring from the private sector is quite high but using private funds to do road based projects is not as high as in other states that are more comfortable with PPPs.

Senator MARSHALL: The reason I wanted to ask is to do with your members' perception of their own in-house ability to be an informed purchaser of the services. In any case whether it is PPPs or not in effect you are actually purchasing the provision of services. What is the level of in-house capability to do the first level of tender evaluation and then through to the evaluation of the work performed to ensure that it is performed to specifications if the specifications were correct in the first place?

Mr Nugent : I would say it is very high. The level of capability within the roads area is because we do have people long term with lots of experience who remain in their job in the public sector for some time. The informed purchaser process is very important but that is why also the model that we used was broader than just road based engineering skills. It was about project and construction management, design and those implementation phases so that we were seeing the whole picture rather than just talking about the people who were putting up the bridge for example.

Senator MARSHALL: I am wondering whether you have done any analysis on that. It has been put to the committee that our lack of ability to be an informed purchaser as a government of varying levels or a government department adds significantly to the actual project costs but because the project costs are over there and simply are the project costs it does not really matter if you do not have the capacity in-house which then goes to recurrent expenditure and headcounts which governments at all levels get obsessed with. So is actually driving down our skill base in-house at the expense of a massive blowout of costs in the actual project and it is very much a false economy. From what you are saying you think in the roads area you have actually got that right.

Mr Nugent : I am talking about particularly New South Wales but across the sector that is not something that we have actually identified as the gap in terms of us being an informed purchaser and having in-house technical capabilities. I think in a lot of areas and again in New South Wales the efficiencies are there.

Senator MARSHALL: I am just taking a stab in the dark here because I am from Victoria but I thought I remembered—and this may be interstate rivalry—it being splashed across the front pages of newspapers on a regular basis what a complete disaster the New South Wales road building scheme was and that tunnels and roads were coming in way over budget, overpriced, under engineered and in some cases failing.

Mr Nugent : The failures have been public-private partnerships—so the Lane Cove Tunnel, the Cross City Tunnel are private companies that have failed.

Senator MARSHALL: So they have failed because of financing arrangements or—

Mr Nugent : Financing arrangements but also traffic demand modelling and the information that they relied on in terms of their economic models.

Senator MARSHALL: But that is all engineering surely?

Mr Nugent : The on-time on-budget delivery in New South Wales is excellent so of the roads—

Senator MARSHALL: I am not really wanting to have a go at New South Wales.

Mr Nugent : That is the aversion that we have to public-private partnerships—the failures of some of those economic models and the perception that those things do not work. They still deliver the infrastructure ahead of schedule on almost all occasions because in the private sector they are getting better margins, I assume, by delivering it ahead of schedule. But the failure of them predominately has been because of the forecast modelling and the traffic volumes and whether they can attract people to those pieces of infrastructure.

Senator MARSHALL: One of the things you have suggested is that a national pipeline of planned and funded infrastructure projects should be established. Of course, there is already within the federal department of infrastructure a transport and national infrastructure schedule. Do you envisage something that is in addition to that or is it something quite different that you are talking about?

Mr Nugent : It is a bit like that, but industry craves more certainty than a one-year budget and a four-year forward estimate that can move. So the ability of the sector as a whole to plan, resource and upskill their workforces to be prepared for those major projects would require further clarity about what is going to happen and where it is going to happen rather than that they have the money in this budget that comes along and then they have forward estimates for four years. We normally have 10-year capital investment strategic plans but they are not certain. Even the four years is not certain. So certainty within the industry provides their ability to upskill, to do things within procurement and to import those resources. It is also about the way that they use their fleet, infrastructure and assets. If they know that there are tunnels coming up then they can procure the appropriate fleet and the heavy machinery they need to do their work.

Senator MARSHALL: Given that your organisation also covers New Zealand, I was just wondering whether there are any specific examples in New Zealand of where they do it differently or better or worse—something that we can draw a comparison to.

Mr Nugent : As a New South Wales public servant, I would not want to say that having just one or two tiers of government is probably an advantage that they have in terms of planning and getting things done. But New Zealand also, on our information, does not necessarily have a skills gap. Part of the problem New Zealand does have is that their skilled employees will come to Australia to get work. But part of that is about their pipeline of works that they are doing.

Senator MARSHALL: So they do the pipeline better? I am happy for you to advocate for the abolition of the states!

Mr Nugent : I will definitely defer that one! New Zealand have a different system. They have centralised transport as well. They moved to the model earlier than others of super departments that deal with all the aspects of planning and delivery of transport projects across road, rail, bus and ferry. They are seen as leaders in certain areas, but they also do not have the skills gap issue that we have.

Senator MARSHALL: Do we know why that is?

Mr Nugent : No, not really. I think it is to do with the political thing of the Prime Minister knowing what the works are but also they have reduced the infrastructure projects they are delivering.

Senator McKENZIE: In your submission you mention one of the issues in attracting women to the profession of engineering is around creating family-friendly workplaces through enterprise agreements. I am just wondering if you can give us a little update or outlook on what those enterprise agreements look like now and what you think they could look like to make them more attractive to women as opposed to family-friendly enterprise agreements, which would be attractive, hopefully, to parents.

Mr Nugent : I will take that one on notice, because my expertise is not in that industrial area. The thing that I said—you were not here, Senator—was that it is partly also about the value proposition that the public sector offers: family friendly workplaces and those sort of processes. That is something that attracted women to the public sector. To increase that representation, it needs to happen more broadly across the private sector. I think the reference to 'enterprise agreements' would have been referring to the enterprise agreements within the public sector or to the membership of the capability taskforce, rather than being a broader comment on enterprise agreements and how you do that.

Senator McKENZIE: Yes, please take that on notice. I do appreciate I have come in halfway through. Education, government and industry all have a role to play in promoting engineering as a career. Where do you see the role of government in that proposition?

Mr Nugent : It is a complete pipeline—in education, in sending engineers into schools to help curriculum development and in trying to increase the level of attractiveness of maths and science to students full stop—but particularly to women students—using that role-modelling process at the very early end. Doing, as we have—

Senator McKENZIE: Sorry, why would that be government and not industry?

Mr Nugent : I think it should be done jointly. I think the capability taskforce and Austroads have worked with Engineers Australia as part of the process and with the Australian Road Research Board private area as well—talking to them about how we would do it jointly. Part of the issue is just literally the value proposition again—that you get more bang for your buck if we all do it together. It is about increasing the pool, because otherwise we are just poaching from that maths and science pool against the professions like health and other areas. In education, we are trying to steal the same people. If we boost the pool collectively, we get more to steal from.

We are running a generic national skills marketing campaign that does not just say, 'Come and work for roads industries.' It does have that leaning, but it is about educating people from year 11 through to first year university that there are broader engineering markets than just the big firms. We find a lot of competition with consulting firms who try to take engineering students after they get 18 months or two years into their course. Those firms say: 'Do generic subjects. Come and work for us for a lot of money. We just want problem solvers. You do not necessarily need to be engineers.' As I have said in the submission, this leads to students coming out with a very generic engineering degree that does not get applied to any real technical skill—for example, roads based civil engineering. They become problem-solving consultants.

Senator McKENZIE: Is that a problem?

Mr Nugent : It is a problem in that there is a huge pool of people who are engineers but who are not necessarily using their engineering skills. There is also an issue with international students who return home. Of the pool of people who are graduating, our ability to then use them within our sectors is reduced. That is just a competition as well. I am not saying that you need to do anything to say, 'People cannot choose where they work or what type of work they want to get into.' It is about that marketing of both what we say is our value proposition: very highly transferable skills that give you the ability to work internationally and corporate social responsibility—giving back to something. That latter point appeals very much to younger people particularly. In terms of the public sector, we say that you also get a flexible work-life balance. Even though private companies might be delivering projects, the entire process is overseen by public sector engineers.

Senator McKENZIE: Can you comment broadly on the effect of attracting engineers to rural and regional areas? Are there any specific issues in doing that or strategies to achieve it?

Mr Nugent : Yes. Getting people to rural areas is a major issue—particularly, as you say, the mining sector can get them because it pays huge amounts of money and certainly within the public sector we cannot do that. We have a couple of strategies that are about graduate programs. As part of graduate programs for engineers, we have an obligation when they sign up that they go out to rural and remote areas of the states to do some work. That exposure alone sometimes leads them to understand that it is very interesting work. There is a diverse work range in rural and remote areas and it opens them up to an entirely different perspective. We do it through that process.

Senator McKENZIE: Is that always fully subscribed?

Mr Nugent : I know that within New South Wales, as part of the two-year program, you must spend a six-month regional placement before you can apply for a permanent job. If you have not done a regional placement—

Senator McKENZIE: As part of your university qualifications?

Mr Nugent : As part of the graduate program of first-intake engineers.

Senator McKENZIE: Is New South Wales the only jurisdiction that has that sort of program?

Mr Nugent : No, I believe other jurisdictions have that approach. We also, as part of the capability task force, are looking at different ways and approaches in the same way of marketing and getting people to understand the attractions of rural and remote areas. We are looking at different ways whereby we might have a national program as well. It is part of our work program but we have not completed that.

CHAIR: If I can stay with the rural roads, are you aware of the report of the Australian Rural Road Group, Going Nowhere: the rural local road crisis its national significance and proposed reforms?

Mr Nugent : No, I am not.

CHAIR: It is a group that seems to be mainly based on local governments around Australia but with heavy emphasis up and down your geographic area. I think the president or the mayor of the Gwydir Shire seems to be the president of this group. There are some fairly interesting but concerning figures. There is an estimate of a $2.8 billion per annum shortfall nationally in what is being invested in comparison to what the group believes is needed—more on road maintenance, I think, rather than new roads. It is disappointing that the two bodies that very much speak—Roads Australia and yourselves—are not aware of the document. Does that figure of $2.83 billion surprise you or would it be consistent with what you would believe?

Mr Nugent : It really depends on the rate of renewal of the network that they were assuming needed to happen. In road maintenance, it is basically the rate of renewal that determines the level of investment. We definitely see road maintenance across the sector as one of the most significant areas where investment has to occur. Within most states, any marginal funds that become available are pretty much turned back into road maintenance to get a sustainable outcome for the road network. I do not know about the figures particularly, but within the state of New South Wales and based on total asset management approaches, the rate of renewal of the network varies depending on the investment strategy but quite often two per cent is the rate of renewal and, in billions of dollars worth of infrastructure, it could very well be.

CHAIR: In support of what you are saying, one of the tables in fact picks out the Moree Plains Shire Council, which I cannot claim to know anything about, but they were saying that in 1983—in the table on page 24—that the road spend as a percentage of the shire's overall expenditure was 50.45 per cent. That was in 1983. By 2010 that figure was down to 19.27 per cent, which seems to me to be a remarkable decline. One of the other things—I recommend you get hold of the document—is that they have attempted to quantify the actual cost to the economy. As the most prime example, product that could not get to market. Also, they have gone into the incidence of road incidents and accidents. I seems to me to be very timely in the context of the discussion we are having here.

Mr Nugent : We do have a member of the IPWEA on the capability task force as well to represent and discuss those two council issues.

CHAIR: It is a fairly stark reminder. You mention $200 billion of value for Australia and New Zealand. I do not quite know what proportion of that would be for Australia and for New Zealand. What would it be—85:15 or 90:10?

Mr Nugent : Probably 90:10.

CHAIR: So that $2.8 billion shortfall in a $200 billion asset value starts to gel a little bit. My colleagues were asking earlier about the whole question of the informed purchaser and government provision of engineering services. It causes me to ask you: do you believe that in the public sector there is adequate skill and capacity to actually audit the progress of projects as they are being undertaken with a view to compliance with tender requirements, contractual obligations and, of course, the quality of the end product?

Mr Nugent : Yes, absolutely. We have not only the road sector that would do that level, but there are also Treasury requirements. In most states, particularly the eastern states, there is a gateway process through Treasury by which at each stage of the project's design, delivery, implementation and handover there is a fairly rigorous and independent gateway process. So yes, there is Treasury and there are road based technical experts, but there are also independent people in those processes. In New South Wales I know that those processes are checked through the phases of major investments.

CHAIR: I asked the question in the context of a discussion I had recently with a very experienced consulting engineer in the infrastructure area in Western Australia. He was talking about the level that is now factored in to tenders et cetera for anticipated litigation through the progress and at the conclusion of major projects. As one who is not a lawyer, I would take the view that any time you have to bring the legal profession into these matters it is by definition a failure. Is that a trend that you would support, from your experience on the east coast? Secondly, if it is, has it increased over time or is that not something that is evident so much here?

Mr Nugent : I am not in the development or maintenance programs of my area. Anecdotally, I would say no, it has not increased. But I could probably take that on notice.

CHAIR: If there is some background information, I would be keen for you to provide that to the committee on notice.

Mr Nugent : It is also, though, the concept that litigation denotes a failure. I do not know whether the fact that we are more litigious and we have far more legal involvement in construction and engineering processes is as much of a factor as whether there is a failure in any of the processes. You can find a reason to sue someone for almost anything nowadays, so I do not know that it necessarily points to a failure.

CHAIR: Although it is not generally the case, particularly in this world where there is so much work and everyone wants to get on to the next project. It just seems disappointing to me that we so often see lengthy and expensive litigation coming out.

Mr Nugent : I will take the question to be: have we increased the proportion of project costs that we would link to legal dispute?

CHAIR: I would appreciate it if you could take that on notice. Do the BIS Shrapnel figures that you have been quoting relate specifically to professional engineers, or do they relate to people who require engineering related skills including technical level skills in—

Mr Nugent : It is broad based technical skills. So it is not just civil engineering or bridge engineering skills. It is engineering project management. It is surveying and design elements. Within the report that I think was attached, there is a page that describes this, based on the Australian Bureau of Statistics list of qualifications. This is in page 9 and 10 of the report. It lists construction project managers, engineering managers, civil engineers, civil engineering associate professionals, cartographers and surveyors, and others including quantity surveyors, urban and regional planners, engineering technologists, construction estimators and building and engineering professionals not elsewhere classified.

CHAIR: So it refers also to engineering technology. I ask it in the context of what appears to be a fairly high dropout rate, which I think you mentioned, of about 40 per cent. I do not know whether that report or your own experience points you to whether or not a proportion of those people who drop out should have been guided into other areas, again, related to engineering but maybe engineering technology rather than the professional four- to five-year course. Would you have a view on that or does the report point to that?

Mr Nugent : The report does not point to that, but in the other research and work we have done in curriculum and postgraduate engineering courses and the work that the capability task force does, yes, the rigidity of some of the structures and your ability to move into other areas seems to be an issue for students, so it is the drop-out to move into something else rather than a transition that could have been facilitated.

CHAIR: It goes a bit to the objectives of government at the moment to ensure that I think 20 or 25 per cent of school leavers attend university by 2020 or 2025—a commendable objective—but it causes me to wonder whether or not we are channelling people into courses that recognise their skill levels and are more likely to cause a more successful outcome, rather than channelling them into areas where they may not have the capacity and therefore become dispirited et cetera. That is the nature of the question.

Mr Nugent : We also have the view that people, still to this day, do not understand what course they are getting involved in; some of them do not understand what engineering really is. Part of our marketing and communications is to give as much about the diversity that you can get through engineering, but they get in there and realise, 'I am good at maths and science, so I might as well do engineering,' or, 'My father or my uncle or family friend is an engineer.' Understanding what people are getting into is also part of what we need to do with year 11 and 12 and first-year university students. Particularly the roads sector is trying to show them that it is not just building bridges; it is about environmental sustainability issues, it is about congestion management and it is about freight and productivity issues as much as it is about digging ditches and—

CHAIR: This committee, in parallel to this inquiry, is also undertaking an inquiry into the agriculture and agribusiness skills gap between supply and demand, and the gap is even wider. One of the interesting things in evidence to this committee recently was advice that pupils, not students, are actually making their decisions in middle to upper primary school, or there are early indicators far earlier than we have traditionally thought. One of the recommendations to this committee in that context is that there should be more of a focus on children before they become teenagers, and that might encourage them in secondary school to go into maths and sciences, which they seem to have deserted. Does your group have any advice on recommendations we might have to try to encourage a greater emphasis back into the sciences and into mathematics?

Mr Nugent : Yes. We have also, as part of the World Road Association, done case study research of the different things—the skills attraction, retention and recruitment processes. Our research originally in the capability task force was that most students were choosing their maths and science subjects or whether they were maths and science types of people very much in years 8 and 9, but their understanding or their interest in science and maths started much earlier, as you say, in primary school. The US, Canada, South Africa, Tanzania and other countries do an RTAC, which is a program of works arranged by AASHTO in the United States, influencing curriculum and literally delivering maths and science based curriculum for schools that will increase kids' interest in those areas. It is very much practical: building bridges, maths and science sort of stuff. In our capability task force the reason that we have not gone into that area is that Engineers Australia and other volunteer organisations do a lot with the primary school area of students—the car-racing things, competitions and those sorts of processes. For us it is just a resource allocation thing; as a group we do not have the resources to allocate to major curriculum investment at the early ages. But a lot of countries are taking that track.

CHAIR: A return to Meccano sets for small children, Mr Nugent.

Mr Nugent : Yes.

CHAIR: As there are no further questions, thank you very much for your appearance before the committee today.