The NSW Government’s Construction Leadership Group (CLG) has released a construction-focused action plan, including its 10 point commitment to the construction sector. The plan aims to assist the industry in meeting future demand, reduce costs and down-time through greater efficiency in Government procurement processes and foster collaboration between the public and private sectors.
In this article, we will outline the plan. In our next article, we will share our views around the commitment and what steps could be taken to better deliver projects, and the problems we think arise with the CLG’s approach.
The 10 step plan proposed by the CLG aims to achieve the following:
- Procure and manage projects in a more collaborative way
The CLG plans to do this by implementing early market engagement to determine the industry’s views on the best method of procurement with respect to each major project.
The CLG has proposed a move away from the standard lengthy, fixed price, lump sum procurement methods to implement contracting models that are more appropriate to the parties involved, including;
- Implementing speedier engagement processes like Early Contractor Involvement;
- Developing, in partnership with industry participants, simple “best practice” guidelines for each of the major procurement methods; and
- Ensuring that once awarded, contracts are more closely monitored.
- Adopt partnership-based approaches to risk allocation
The CLG has proposed that risk allocation must be undertaken with a greater focus on the partnership of the contracting parties. It plans to achieve this by:
- Identifying those risks that cannot be appropriately assessed, priced, managed or absorbed by the private sector, ensuring that as a matter of principle, risks are managed by the party best able to manage them;
- Seeking the industry’s views;
- Developing standardised contractual risk-sharing mechanisms; and
- Implementing senior level dispute avoidance forums on major projects, as a means of identifying and resolving potential issues before they escalate into disputes.
- Standardise contract and procurement methods
The CLG has identified the need for greater standardisation of contracts in the construction industry and is looking to industry players to have a meaningful impact on the standardisation process. The CLG plans to achieve this by:
- Comparing NSW’s standardised contracts with international construction contracting approaches, which is also aimed at increasing the participation of international firms in the NSW construction market;
- Publishing guidance materials on the key procurement and contract delivery approached such as ECI and alliancing; and
- Publishing regular background briefings for smaller scale contractors to ensure an understanding of the key terms and operation of standard contracts.
- Develop and promote a transparent pipeline of projects
The CLG plans to notify the industry of upcoming projects far more regularly and in a more accessible manner by publishing a major project pipeline document at least once every six months, with detailed updates on the upcoming or planned projects over the following 3-5 years.
The CLG aims to establish more widely attended market engagement forums to elicit industry feedback on the market’s capacity to deliver the anticipated pipeline of major projects.
Importantly, the CLG plans to ensure projects are offered to the market in packages ranging in size, so that small and medium sized firms may bid for contracts which match their capacity.
- Reduce the cost of bidding
The CLG’s 10 step plan aims to reduce industry down time by:
- Selecting shortlists of no more than three firms for each major contract, so as to streamline the tender process;
- Minimising the length of time unsuccessful bidders are required to remain on “hot standby” pending the award of a contract to the successful bidder; and
- Publishing data on average approval timeframes.
The removal of red tape to reduce administrative bureaucracy and improve clarity and consistency across the industry are the other cost-based goals of the CLG’s plans.
- Establish a consistent NSW Government policy on bid cost contributions
The CLG plans to partially reimburse unsuccessful bidders costs in order to foster competition in the market. This is to ensure firms don’t shy away from projects simply because they are concerned about the prospect of losing the cost of bidding.
- Monitor and reward high performance
Bid evaluation will focus heavily on collaborative behaviour, capability and performance based on the bidder’s track record, with consistently high-performing firms being rewarded with opportunities to win repeat work.
These standards are to be measured against published practice notes on the key behaviours and values expected of clients and contractors.
- Improve the security and timeliness of contract payments
The establishment of industry specific escrow arrangements and a complete review of the Building and Construction Industry (Security of Payment Act) 1999 (NSW) are identified as important steps to ensure smaller subcontractors are afforded improved security of payment.
- Improve skills and training
The implementation of minimum levels of training in all major Government construction contract at a level consistent with the Infrastructure Skills Legacy Program, including:
- 20% of all labour on a project to be ‘learning workers’; and
- 20% of all labour on a project to be apprentices.
The adoption of tender evaluation criteria which benefits firms with a strong skills and training focus is another important part of the forward thinking approach the Government is promoting.
- Increase industry diversity
The final step the CLG aims to achieve is an increase in industry diversity, with targets set at:
- doubling the number of women in trade related work;
- meeting the requirements for Aboriginal participation in NSW Government construction contracts as set out in the recent publication “Aboriginal Participation in Construction”;
- employing workers under 25 as at least 8% of total project workforce; and
- aiming to include as many local workers in each project as possible.
Through these ten steps, focused around collaborative contracting, forward thinking skills development and the reduction in administrative hurdles, the NSW Government aims to be a “best in class” client for the construction industry.
Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.