Engineers Australia and 13 other industry groups are calling on the Federal Government to review procurement policies around major infrastructure projects.
The government intends to invest $110 billion in infrastructure over the next decade, but some experts believe current procurement practices freeze out small and medium-sized enterprises (SMEs) and don’t adequately engage important stakeholders, such as engineers, early enough in the process.
“There’s been a lot of instability in the market because procurement practices aren’t supportive of maximising benefits and limiting risks,” Engineers Australia Senior Policy Advisor Sybilla Grady told create.
“We’ve seen a lot of major projects plagued by time delays, cost overruns and funding difficulties. Many of those issues are avoidable with best practice procurement.”
Engineers Australia and other industry bodies, including the Australian Constructors Association, Consult Australia and BuildingSMART Australasia, have submitted a joint letter to the parliamentary inquiry into procurement practices for government-funded infrastructure.
The letter outlines several issues facing the building and construction industry, including a high insolvency rate and low productivity growth. The industry is also struggling to attract and retain employees, in part due to poor gender equality and high rates of suicide within the workforce.
By reviewing tendering and procurement practices, the letter’s authors believe the government could ease some of the market instability and provide a more sustainable industry for organisations and employees.
Transparency to reduce barriers
The Federal Government is relying on infrastructure spending to assist with Australia’s post-COVID-19 economic recovery. But Grady believes current practices are ill suited to support SMEs.
“The process for procurement needs to be less complex. Often tendering and contracting issues prevent small to medium enterprises from equitable participation,” she said.
Currently, the cost of tendering outweighs the return on investment for many SMEs. However, the government doesn’t have visibility over these costs.
“We’re advocating for early engagement with the industry prior to tender,” Grady said. “That would provide an open dialogue between business and government, to create greater transparency and equitable participation.”
With better transparency, the government could explore ways of reducing these cost barriers for potential bidders.
Grady would also like to see the shortlisting process sped up so unsuitable companies are notified earlier.
Another suggestion from Engineers Australia members was to consider staged tendering for infrastructure projects.
“Instead of tendering for a huge multi-year, multi-stakeholder project, the project is split into stages that individual businesses can tender for,” Grady said.
“This helps specialised or smaller businesses get their foot in the door if they don’t have the resources to cover the entire project.”
The defence industry already uses staged tendering for some of its projects, and Grady believes there is capacity for more infrastructure projects to be handled the same way.
“SMEs often can’t justify allocation of limited resources to focus on tendering for complex, long-term projects when there is no guarantee they’ll be selected,” she said.
Although she acknowledged this may require additional administrative effort on behalf of the government or client, Grady said it would be worth it to provide greater inclusion and diversity of skills in the sector.
Engage engineers early
Lastly, reviewing the procurement process should also include encouraging projects to engage engineers earlier on.
“I’ve heard some horror stories about projects being almost finished then needing to go back and fix an issue when it’s almost completed because they didn’t engage the right people in the initial project phases,” Grady said.
“If you’ve got the appropriate technical expertise from inception to delivery, the risk of cost and time blowouts is limited.”
Truly and more than about time. Aussie work: Aussie owned firms first and foremost.
Thank you for this initiative.
I will also add that evaluation of tenders should take into consideration, in addition to price,
1. Environmental benefits (carbon pricing)
2. Safety in design
3. Robustness of solutions (eg. structural redundancy for extra safety) and
4. Life cycle costs
in a weighed, costed fashion. This would assist in obtaining best long term solution and innovation.
Currently, authorities evaluate tenders, essentially, on lowest initial tender price.
Procurement and payment processes for sub-contractors to the head contractors needs to also be made simpler. Payment processes are key as it is too often where the sub-contractor is used as the bank for the main contractor. We have regulations in place in all states to secure prompt payment of all parties in a construction project that is flaunted too often. We should be paid for our work in a prompt basis. If head contractors are paid in the regulated 15 business days as per the security of payments act and abide by their statutory declarations that they have paid all their dues to sub-contractors we will see a reduction in insolvency in the construction industry resulting in reduction of depression stress leading to suicide.
I am constantly disappointed that Engineers only think about making money and not the viability or return on investment of a Project. I realise business has to be profitable but the era of Engineering Innovation seems long gone.
It would be nice to think that this government investment into infrastructure is directly creating jobs and boosting the economy. Unfortunately this is not filtering down far enough to save Australian manufacturing. Most of Austalia’s construction related manufacturing industries are heading in the same direction as our now non-existent local automotive manufacturers. 10yrs ago there were dozens of major Austalian glazing manufacturers, but nearly all have now closed down. Australia can be proud of tryng to reduce poverty by having one of the highest minimum wage rates in the world. But the consequence is that our manufacturing industries can not compete against offshore labour who are paid a fraction of our workers and the subsequent cheap imported building materials flooding our markets. Having Australian-made building products on Australian government projects would go a long way to supporting employment in our decimated manufacturing sectors. And wouldn’t it be nice to know that our tax payers money is maximising support for local employment right down to manufacturing, instead of funding offshore, ethically-questionable factories?
There should also be consideration of the sustainability of materials in procurement where this is possible. Purchase of recycled materials where applicable is one example.
It will also be useful to check if any international form of contracts like NEC4 can be implemented in Australia. NEC contract has separate parts that can align the conditions of contract based on type and value of contract like ECI, target cost etc. There is a greater need to balance the contract for the client and the contructor so that the contractors have clarity about the conditions and the wording is not convoluted.