Australia: A new framework for traditional contracting in infrastructure procurement – exposure drafts released

Last Updated: 12 August 2013
Article by Ashley Cahif and Sarah Flynn

On 29 April 2013, the Victorian Department of Treasury and Finance released Exposure Drafts of the National Framework for Traditional Contracting of Infrastructure (National Framework). The National Framework is designed to be a best practice resource to assist governments in developing policy and guidelines for infrastructure contracting.

The National Framework is made up of five documents, including four topic-specific guides:

  • Good Practice and Commercial Principles for Traditional Contracting
  • Topic Specific Guide 1: Project Definition and Tendering
  • Topic Specific Guide 2: Development of Project Budgets in Business Cases
  • Topic Specific Guide 3: Governance and Contract Management, and
  • Topic Specific Guide 4: Performance and Continuous Improvement.

The National Framework has been developed based on research undertaken and reported in 2011 and 2012 to improve delivery outcomes in design and construct infrastructure projects. At a high level it seeks to:

  • provide a resource of best practice for traditional contracting of infrastructure to improve productivity in the planning and contracting phase of major projects
  • establish a common set of best practice principles that each jurisdiction can use as a basis for development of their own policy and practices for traditional contracting, and
  • promote good practice and commercial principles to ensure the public sector becomes an "intelligent client". This will assist governments to achieve competitive tender prices, high quality project delivery outcomes that meet the expectations of government, and improvements in industry productivity and sustainability.

The National Framework acknowledges that each jurisdiction may have its own guidelines and policies for traditional contracting of infrastructure and makes it clear that where there is conflict between the two, the jurisdiction's position will take precedence.

Exposure drafts

Each of the documents comprising the National Framework focuses on an identified "opportunity for improvement" that research suggests would provide governments with the most benefit and improvement in delivery outcomes.

Good Practice and Commercial Principles for Traditional Contracting This guide is the overarching document of the National Framework and sets out the framework's purpose, how it should be used and who should use it. This document provides high-level guidance about selected good practice and commercial principles for traditional contacting. It also provides an overview of the key concepts of traditional contracting and discusses the role of the "intelligent client" and the benefits for project and delivery outcomes.

Topic Specific Guide 1: Project Definition and Tendering

This guide identifies the principles and practices needed to support a consistent national approach to developing the project definition, which is important because:

  • it underpins the project budget that is approved for the business case
  • it forms the basis of the tender documentation issued to suppliers
  • poorly undertaken and inadequate project definition is a common cause of project failure, and
  • research reveals that significant improvements can be made in project outcomes by improving the standard of project definition.

The document provides guidance about the development of a project definition, including the identification of project risks and opportunities.

Topic Specific Guide 2: Development of Project Budgets in Business Cases

The purpose of this guide is to provide guidance about project budget estimation and to support greater accuracy in the provision of estimates. The guide focuses on the principles and practices for project budget preparation, including:

  • preparing capital budgets
  • transparency and accountability in managing capital budgets
  • the obligation to achieve a best value for money outcome, and
  • implementing governance arrangements for managing project contingencies.

Topic Specific Guide 3: Governance and contract management

This document provides practical guidance about governance and contract management with an emphasis on the relationship between the client and the supplier. The guide focuses on two main issues:

  • reducing the "expectation gap" between the client and the supplier (at contract award), and
  • the concept of the "intelligent client" as a way of reducing the expectation gap.

The guide outlines that the role of the intelligent client is to:

  • ensure the client and supplier properly understand the service and project requirements and the agreed contract terms and conditions
  • provide active leadership and establish a high-performance collaborative culture, and
  • assume individual responsibility for the mutual success of the project.

Topic Specific Guide 4: Performance and continuous improvement

This goal of this guide is provide advice about assessing project performance to promote continuous improvements in project delivery. To achieve this, this guide focuses on:

  • developing performance measurement tools to capture data on tender and project performance, and
  • using the data for contract management decisions, evaluating tenders and promoting continuous improvement across industry.

Next steps

The Government invited comment on the National Framework, which closed on 28 June 2013.

What this means for agencies

Although the National Framework was released by the Victorian Department of Treasury and Finance, the steering committee that developed it comprised members from the Commonwealth, Victoria, NSW, Queensland and Western Australian Governments. Accordingly, while it acknowledges that governments in each jurisdiction retain the ability to have their own policies and procedures, it is likely that there will be a continuing move to a uniform national approach to infrastructure contracting policy and reflect the position as set out in the National Framework.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Ashley Cahif
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