BITRE Road Construction Cost and Infrastructure Procurement Benchmarking

Context

Road infrastructure in Australia is funded by a mixture of federal, state, and territory funding, with state and territories responsible for provision of the infrastructure.
Monitoring and evaluation of infrastructure construction costs is essential to ensuring value-for-money in public infrastructure projects.

The Australian Government and state and territory governments were faced with the challenge of how to retain delivery knowledge of road projects and ensure price competition when separate contractors are engaged for each individual project. This approach results in a loss of project expertise and specialist knowledge due to a lack of continuity and relationships continually having to be re-established.
Additionally, achieving the Australian Government and state and territory governments’ objective of improving infrastructure required an examination of costs and a regular benchmarking of projects to ensure value-for-money in infrastructure investment.

In response to a 2014 Productivity Commission Inquiry into Public Infrastructure, the Australian Government and state and territory governments carried out a pilot cost benchmarking for road projects through the Bureau for Infrastructure, Transport and Regional Economics (BITRE) in co-operation with state and territory road agencies.
This involved creating a database of the average per lane-km construction costs of highways in Australia categorised by road class / type and jurisdiction, with data sourced from a sampling of projects from a range of road types – from urban highways to rural arterial roads – in all Australian jurisdictions.

July 2014 – Release of Productivity Commission’s Inquiry into Public Infrastructure
August 2014 – Australian Governments commit to carrying out regular cost benchmarking as one of the recommendations of the Productivity Commission inquiry
2015 – Pilot construction cost database developed
November 2015 – Pilot Infrastructure Benchmarking Report released
2015-2017 – BITRE reviewed the suitability of the pilot cost benchmarks and made recommendations for further improvement
2017 – BITRE undertook update of construction cost database
March 2018 – Updated benchmarking report released.

Creation of the database represented the first time Australian Governments had benchmarked the cost of road projects nationally. It contributed to building a body of knowledge of typical construction costs for different types of road projects which contributed to the governments’ objective of improving value-for-money in future infrastructure investments.
The key findings of the original 2015 report from a sample of 56 projects undertaken since 2010 (30 complete and 26 in delivery) from all eight states and territories included:
- The average road project costs were AUD5.1 million (USD3.8 million) per lane-km.
- Average costs vary significantly by road standard. The average cost of urban and rural freeways / highways was AUD6-6.5 million (USD4.5-4.9 million) per lane-km, while rural arteries were around AUD3 million (USD3.3 million) per lane-km.
- Project management costs typically comprise around 7% of total costs, while design and investigation costs comprise around 5-6%.
An updated report was released in 2018 which found that average road construction costs had decreased slightly, though the change was not statistically significant due to the small sample size.

The benchmarking study was found to be a useful step towards informing efficient and effective project delivery and building a reliable source of national industry-wide knowledge concerning typical project costs.
The reports found that larger projects (greater than 150 lane-km) were typically able to achieve lower costs per kilometre than smaller projects, and that there was a large variability between project costs within road classes and types (though BITRE noted this may be a consequence of a limited sample size and the qualitative nature of some information).

Last Updated: 15 October 2021