Australia: NSW Government Bulletin - 22 August 2018

Last Updated: 28 August 2018
Article by Scott Alden, Christopher Yong and Julia Gitonga
Most Read Contributor in Australia, September 2018

Update – NSW Government Action Plan: A ten point commitment to the construction sector

With the objective of becoming a "best in class" client, the Construction Leadership Group (CLG) has developed an Action Plan for the construction sector. The CLG represents all key NSW Government agencies involved the delivery of major infrastructure projects. The Action Plan is designed to:

  • support the capacity of the "supply side" in the sector
  • increase efficiencies and drive down costs in the sector
  • develop the skills, capability and capacity of the sector's workforce
  • encourage diversity within the sector's workforce and suppliers
  • support innovation by increasing collaboration between public and private stakeholders in the sector.

The Action Plan reinforces the CLG's efforts to sustainably achieve quality, innovation and cost effectiveness in the sector. The CLG's member agencies have committed to:

  • Procuring and managing projects in a more collaborative way
    Member agencies are encouraged to consider collaborative contracting models such as alliancing, and utilise interactive sessions prior to the finalisation of tender documents to increase transparency with bidders. Once contracts are awarded, member agencies should host workshops to ensure that parties work towards a common objective.
  • Adopting partnership-based approaches to risk allocation
    Risks should be managed by the party that are best positioned to manage them. Risk should be shared between parties only when necessary. By consulting with industry, risks relating to utilities, planning approvals, and latent conditions, including those that are difficult to investigate and forecast, may be better identified. Ultimately, member agencies are working towards developing standard contractual risk-sharing mechanisms.
  • Standardising contracts and procurement methods
    In order to encourage international participation in the NSW construction market, NSW standard contracts are being reviewed in order to increase harmonisation with international contract practices. By consulting with industry, member agencies are aiming to achieve greater standardisation of contract terms across projects, agencies and infrastructure sectors.
  • Developing and promoting a transparent pipeline of projects
    Every six months, the NSW Government should publish a document detailing works in the major project pipeline in the next three to five years. Through interactive briefings with industry, member agencies can gain feedback and identify the capacity of the industry to compete for and deliver contracts.
  • Reducing the cost of bidding
    Member agencies are working towards reducing industry 'down time' by limiting the number of parties shortlisted to two to three candidates depending on the amount of security provided, and by minimising the time that unsuccessful bidders are placed on 'hot standby'. Administrative bureaucracy is being reduced by minimising the design requirements imposed on bidders and reducing the documentary requirements expected of bidders. The NSW Government is encouraged to clearly communicate their real priorities so that bidders can appropriately allocate resources.
  • Establishing a consistent NSW Government policy on bid cost contributions
    Where it is necessary to secure competition in the construction market, the NSW Government will partially reimburse unsuccessful bidders' costs. To assist, the NSW Government is developing a policy position on bid cost contributions.
  • Monitoring and rewarding high performance
    Member agencies will publish practice notes on benchmark behaviours and values expected of good clients and bidders, and when assessing bids, give weight to collaborative behaviour, capability and performance. Bidders who consistently demonstrate best practice procedure should also be awarded repeat work.
  • Improving the security and timeliness of contract payments
    Member agencies will establish benchmark performance standards by measuring and publishing agency performance data in relation to timeliness of payments. Further, security of payment will be improved by introducing industry-specific escrow arrangements, and reviewing the Building and Construction Industry Security of Payment Act 1999 (NSW) and standard contracts.
  • Improving skills and training
    By fostering relationships with industry, member agencies aim to identify, measure and report on current and emerging skills gaps in the sector. Construction contracts should promote on-site training, and ensure the total workforce is comprised of at least 20% learning workers such as trainees and at least 20% apprentices.
  • Increasing industry diversity
    Member agencies will work with industry to identify, measure and report on diversity in the sector. There is a target to increase the number of women in trade related work from the NSW average of 1% to 2%, and ensure that construction contracts encourage participation of Aboriginal persons, individuals 25 years or less, and persons from the local region in which the project is carried out.

NSW Government agencies must be mindful of the Action Plan and take appropriate steps to ensure that all internal and external stakeholders are aligned to these values. Importantly, major construction projects should work towards the Infrastructure Skills Legacy Program's targets on skills and training, and industry diversity. Further, through increased consultation with industry, NSW Government agencies may better identify and respond to pressures in the delivery of procurement projects, especially those considered in the major project pipeline.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Scott Alden
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