infrastructure-agreements-negotiating-right-deal

Infrastructure Agreements: Negotiating the Right Deal.

By Andrew Hunter, Civil Engineer at PEAKURBAN

Negotiating the right deal in an Infrastructure Agreement (IA) is critical in ensuring the commercial viability of a project. On too many occasions we have seen IA’s that are one sided, impose excessive infrastructure standards and as a consequence result in works or financial contributions that stall projects for long periods of time. The last few IA’s we have seen are unnecessarily complex and in our view, if executed as proposed would be an implementation nightmare.

So why do IA’s need to be so complex? We don’t think they need to be and have a few key principles that we found useful in simplifying them.

  • Experience Matters: it’s essential that you have an experienced team undertaking the negotiations. Limit the number of people as too many at the table usually means more time and a “process” focus as opposed to an “outcomes” one. Assembling an experienced team means a greater pool of knowledge from which to draw from. Understanding what’s worked and what hasn’t in previous deals is critical in overcoming impasses and reaching agreement, and to keep the focus firmly on the outcomes. Breaking the negotiations down “network by network” helps to isolate and resolve key issues.
  • Set the Ground Rules Upfront: right at the outset be very clear about what a successful negotiation looks like. Is there a maximum contribution or charge that renders the project unviable? What’s acceptable from a development timing perspective? Establish the rules that define trunk and non-trunk infrastructure. Is trunk infrastructure to be based on size and function? Or size only? Agreeing the principles of an infrastructure agreement early prevents negotiations becoming derailed.
  • Establish the Desired Standards of Service: too often agreeing the desired standard of service is neglected or left too late in the negotiation and “gold plated” infrastructure / solutions become the standard. Gold plating results in excessive costs. For example, does a collector road external to the site and performing a movement function, require parking lanes or a 2.5m wide footpath on both sides of the road? Why not use land more efficiently and negotiate to have WSUD form a key part of the open space strategy? Seek to negotiate ‘fit for purpose’ infrastructure solutions commensurate with the underlying economics of the project (particularly with respect to the sale price of the land!).
  • Adopt an Iterative Process: the most successful IA outcomes usually involve an iterative process. There are often several infrastructure solutions available for each of the key infrastructure networks (roads, drainage, water and sewerage) and it’s important that options are developed, costed and refined to achieve an acceptable ‘value for money’ solution. It’s important to properly plan, design and cost all trunk infrastructure items so that risk can be quantified and minimised and costs not artificially inflated through the adoption of high contingencies and other excessive risk allowances.
  • Consider Land Fragmentation and Multiple Owners: the best technical solutions mean nothing if you are delayed or prevented from constructing infrastructure by not obtaining right of access consent from downstream owners. When there are multiple land owners and where practical, develop infrastructure solutions that locate key infrastructure so that each site can be delivered separately. Where this isn’t possible and especially if the site forms part of a larger structure plan area, ensure that appropriate provisions are included in the IA that allows for right of access through downstream properties.
  • Focus on  Ease of Implementation: Simplicity should be a key design principle. Introduce regular “simplicity” checks for readability and usability. You shouldn’t need 5 planners, 4 engineers or a Doctorate of Law to implement an IA. If you do, it’s way too complex. In our view, implementing an IA shouldn’t revolve around the ongoing involvement of 1 or 2 people. Administering an IA should be possible even when those people who developed the framework and agreed to it are no longer around.

The above are a few key principles that we’ve found assist in IA negotiations. Get the right team, agree the rules up front, establish the objectives and standards of service then employ an iterative process to work towards what was agreed.

This should help in simplifying IAs and not wasting many months of negotiation only to arrive at an overly complex, unviable commercial agreement.

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Infrastructure Agreements: Negotiating the Right Deal.

By Andrew Hunter, Civil Engineer at PEAKURBAN Negotiating the right deal in an Infrastructure Agreement (IA) is critical in ensuring the commercial viability of a project. On too many occasions we have seen IA’s that are one sided, impose excessive infrastructure standards and as a consequence result in works or financial contributions that stall projects … Continue reading Infrastructure Agreements: Negotiating the Right Deal.

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