Federal Government procurement report recommendations released

A new report on government procurement has been released following a parliamentary inquiry, with recommendations on practices moving forward.

Chair of the House of Representatives Standing Committee on Infrastructure, Transport and Cities, John Alexander, tabled the report for the committee’s inquiry into procurement practices for government-funded infrastructure.

“Since starting the inquiry last year, these issues have become even more significant and pressing,” Mr Alexander said.

“Sovereign security has in recent times become an important issue for our country, as tensions between great power competitors come into sharp focus, with real concern for the impact this has on our exports and the flow-on effects to our economy.

“Over many decades, sovereign security has been compromised due to our expedient choices in seeking the lowest price over best value for our procurement. This has diminished our capacity to deliver fit-for-purpose infrastructure and a sustainable industry.

“The lack of long-term planning has resulted in a piecemeal, ad hoc and reactive delivery process, which thwarts the development of efficiencies in the construction industry that could be attained if there was a steady pipeline of projects available. 

“Industry needs the confidence to gear up in line with the opportunities available, which would build up industry capacity and productivity.”

Mr Alexander also highlighted that, “In the 88 per cent male-dominated construction workforce, more needs to be done to address the cultural practices and norms within the construction industry that disincentivise women from entering or staying”.

The committee makes eight recommendations:

1. That the Federal Government investigate, in consultation with state, territory and local governments, and relevant industry bodies and stakeholders, how to facilitate better planning and coordination of the infrastructure pipeline.
2. That the Federal Government review the practical application of the Commonwealth Procurement Rules, with a particular focus on the extent to which factors other than price are assessed in practice.
3. That the Federal Government, in consultation with state, territory and local governments, establish a mechanism for monitoring and rating funding recipients’ performance on government-funded infrastructure projects, capturing elements of whether the project was delivered to the required standards, on time and on budget.
4. The committee recommends that state, territory and local government infrastructure projects that receive Australian Government funding should be subject to verification of value for money by the Australian Government or a specified entity. To support this, the Australian Government should establish a mechanism for assessing state, territory and local governments’ plans and performance for proposed and delivered infrastructure projects using Australian Government funds, capturing elements of project delivery to the required standards, on time and on budget.
5. To improve planning, procurement and delivery efficiencies for infrastructure projects, the committee recommends the Australian Government, in consultation with state, territory and local governments, explores opportunities for standardisation on like projects.
6. The committee sees increasing the access of tier two and three companies, and related Australian small and medium enterprises, to projects in the Australian infrastructure pipeline as key to enhancing Australia’s sovereign industry capacity. Accordingly, the committee recommends that the Australian Government examine ways to maximise developing Australia’s sovereign capacity in infrastructure delivery. 
7. The committee recognises the potential benefits for increased efficiencies and productivity through the adoption of a digital by default approach in infrastructure projects, in which governments take the lead in providing accessible digital options that can be utilised by government officials and businesses, from planning to post‐delivery assessment and, where applicable, for future application to like projects.
8. To deliver on Australia’s significant infrastructure pipeline of projects over the next decade, the committee acknowledges the importance of improving productivity in the construction industry and recommends that the Australian Government investigate how in the tender and delivery processes for government-funded infrastructure projects, firms can demonstrate their commitment to, and compliance with, modern workplace standards and their support for sector cultural reform.

The report is available on the committee’s website.

Industry responds

Australian Constructors Association (ACA) CEO, Jon Davies, said the inquiry findings support the urgent need for reform and the important role that the Federal Government can play in making this happen.

“The issues are well understood — we just need to get on with implementing the solutions,” Mr Davies said.

“The Australian Constructors Association is already progressing initiatives that directly respond to five of the eight recommendations.

“The government and industry-developed Culture Standard will go a long way in supporting cultural reform that will see the industry become an employer of choice, including for women.

“Work underway through the Construction Industry Leadership Forum is already targeting the report’s recommendations on value for money, standardisation, project packaging and adoption of digital technologies.”

While Mr Davies acknowledged the importance of state-based reforms, he said that the cornerstone of the ACA’s advocacy efforts is Federal Government involvement in the Future Australian Infrastructure Rating (FAIR).

“FAIR is the solution to the report recommendations to establish a mechanism for monitoring and rating project performance and verifying value for money,” Mr Davies said.

“FAIR would also enable sharing of best practice so the industry can continue to improve.

“In fact, FAIR provides a mechanism for the Federal Government to coordinate and incentivise most of the proposed reforms in a consistent way across state government procurement processes without the need for any major change in existing federal governance processes or for any increased Commonwealth involvement.”

The Australian Constructors Association is calling on both sides of politics to commit to implementing the FAIR initiative in the first 100 days of office if elected.

“The skills shortage is knocking at our door and it will not be fixed alone by putting people on planes or sending them to TAFE,” Mr Davies said.

“Productivity savings of more than $15 billion every year are possible and can be achieved through improvements to government procurement processes driven by implementation of FAIR.”

Chief Executive Officer of the Civil Contractors Federation National (CCF), Chris Melham, congratulated the Committee on its report and recommendations.

“The Committee’s recommendations directly address many of the key challenges and opportunities in the procurement of government funded infrastructure, and in many respects, they pick up on a number of recommendations CCF provided the Committee in our submission,” Mr Melham said.

Mr Melham said that in particular, CCF welcomed recommendation six, which outlined the Committee’s view to increase the access of tier two and three companies, and related Australian small and medium enterprises, to key infrastructure projects.

CCF also welcomed the recommendation for the Federal Government to consider:

• Providing opportunities in procurement and contracting to engage local industry and utilise local content
• Ways to break up projects into packages of less than $500 million to increase competitiveness by tier two and three companies
• Making as a condition of Australian Government funding for major infrastructure projects over $500 million industry sustainability criteria within the early stages of procurement design that encourage tier one contractors to partner/joint venture with a non‐tier one company in the head contract
• Education and training for government officials to support these objectives
• Reviewing market conditions for infrastructure insurances and the impact on small and medium enterprises

“CCF’s submission to the Committee highlighted the need for a more sustainable level of project allocation for Tier 2, 3, 4 and below, and in so doing, deliver additional benefits to the community including jobs, increased and upskilled local workforce and higher economic growth in the local community,” Mr Melham said.

“Throughout the enquiry, CCF also advocated for a more balanced approach to the tender process to support industry sustainability and the broader national interest by maximising the return to the Australian economy of taxpayer funded civil construction projects.

“CCF’s supplementary submission to the Committee stressed the need for a formal consultative mechanism involving key civil industry representative bodies, federal and state government infrastructure and policy agencies.

“As acknowledged by the Committee, there would be significant value in establishing a formal mechanism, such as a ‘Civil Infrastructure Consultative Forum’ to facilitate a two-way dialogue between industry and government on critical civil infrastructure matters such as investment, procurement and enhanced skills development and training.

“I am pleased therefore that the Committee has embraced CCF’s recommendation to improve industry and government collaboration.

“It is imperative that this report does not gather dust on the shelves like so many others that have come before it on the necessary steps to improve how government funded infrastructure is procured and delivered.”