APAC megaprojects: Six trends in contracting, supply chains and skills

How are macro-economic factors affecting the construction schedules of megaprojects in APAC, and which strategies are professionals using to avoid project delays and cost overruns? We share the findings of our recent webinar.

Growing investment in semiconductors, data centres and batteries in India

Described as complex ventures that typically cost 1bn USD or more, megaprojects take many years to build and involve multiple public and private stakeholders. Typically, these can be highspeed rail lines, ports and airports. The Olympics and high energy particle accelerators are also megaprojects, explains Craig Rimmer MRICS, Director, ConnellGriffin, the webinar’s moderator.

In India, for example, the government’s infrastructure expenditure is poised to double between 2024–2030, including new and emerging sectors such as semiconductors, batteries and data centres, states Ameya Gumaste FRICS, Executive Director and Country Head – India, Linesight.

Singapore’s 50-year plans prevent megaprojects overheating their economy

‘These are projects that not only make an impact on the ecosystem of construction, but on the overall economy’, continues Ameya. Supply chain issues, commodity prices and inflation are all macro-economic factors that impact on megaproject schedules and pipelines.

‘With these kinds of megaprojects, we’re actually asking the supply chain to form a supply chain’, says Liam Bray MRICS, Director, Portfolio Management – Asia, Turner & Townsend. Megaprojects are an economy in themselves.

From a demand side, megaprojects can cannibalise the local market and ultimately overheat it. Professionals working on these projects must consider the long-term outlook on how to smooth demand, he says. For example, Singapore imports the bulk of its construction materials, placing a priority on building longer term strategic partnerships with the supply chain. With its 50-year plan, Singapore is way ahead in long term planning and efficiency, explains Liam Bray.

India construction forecasts a large skills shortage

‘The construction industry contributes roughly 10% of GDP in India, growing to 14% by 2030’, outlines Sobha Rani FRICS, Founder and Managing Director, Veadik Consulting Solutions/Estareal Solutions Pvt Ltd. Increased labour costs, quality and safety are the main concerns relating to increasing demand for construction skills in the region, she says, but this will impact every aspect of construction. Shortages are forecasted from engineering to project managers, quantity surveyors, and skilled trades.

Calls for a green collar workforce

There are two clear trends emerging when it comes to skills, states Ameya. ‘One in decarbonisation, and the other is digitisation. As per a report from Deloitte, 40% of the APAC workforce is employed in industries that are under threat of climate change. For megaprojects, we need digitisation specialists and a ‘green collar workforce’.’

Aside from supply chain issues, governance and environmental regulatory approvals and natural disasters are other sources of delays in megaprojects in Australia, says Marc Allen MRICS, Director and National Service Line Lead – Commercial Advisory, RPS (Australia Asia Pacific). ‘Managing these factors is about planning and preparation, but this ultimately comes down to having the right expertise in your team. By having people that can advise on government requirements and regulations, you set yourself up to succeed’.

Managing material inflation and resource challenges in Australia

Australia is experiencing lots of different megaprojects at the moment, he explains. ‘City metro, hopefully Melbourne metro, inland rail, highspeed rail, airports and the Brisbane Olympics in 2032 are coming up’.

In the post-pandemic era, material inflation costs have caused several organisations to close. ‘We’ve dealt with that through moving from fixed price contracts into collaborative contracts’, he says. ‘We have alliancing, where both parties to the contract have a say in what happens and how the project gets delivered. A lot of organisations are using an incentivised target cost contract, which shares risks and rewards’. He continues, ‘I am pleased to see that some clients in Australia are taking the lead and using NEC, such as Sydney Water, with other projects in Queensland using NEC4’.

‘Despite inflation being around 4% in Australia, there are reports of wage increases at nearly 8% and above, putting pressure on all our megaprojects’, says Marc. ‘Something that we’re passionate about in Australia is trying to keep everything Australian. We have requirements in how we deliver megaprojects, where we must produce an Australian industry participation plan. We also try to expand the workforce by working with indigenous organisations’, he explains.

COP28 and the global stock take will promote greater accountability

We need to track carbon emissions alongside cost from concept stage to completion, states Sobha. Alongside manufacturers, we’re working on an Environmental Product Declaration (EPD) database for the natural materials that are available in India, she explains. This database can help projects in India track materials and can help project managers understand what they are going to buy and how they will use the materials.

‘The Paris agreement says we should cut emissions by close to half by 2030, but global CO₂ emissions continued to grow despite a brief decline in 2020’, says Ameya. With the COP28 global stock take due to be repeated every five years, there is more accountability and thought about how we transition away from fossil fuels. In construction, he explains, this could be how we look at EPDs, the supply chain and scope 3 carbon reductions. The World Green Building Council is looking at how to advance net zero, while some companies have said they want to be carbon negative by 2030. Ameya continues, ‘the construction industry has a big role to play. From that perspective, COP28 has been a good driver for us. With the next global stock take forecast in five years, there is more onerous on us as an industry to manage carbon and drive sustainability’.