New South Wales infrastructure plans need backed up by action

Sydney-based Rob Buchanan of Pinsent Masons, the law firm behind Out-Law.com, challenged government agencies in NSW "to do more than just pay lip service" to the state’s newly published ten-point plan for infrastructure procurement.

Central to the proposals is a move towards greater collaboration between contracting authorities in NSW and industry.

Would-be suppliers would be given greater scope to shape the procurement process before it begins, and "collaborative contracting models like alliancing" could be explored in place of "fixed price, lump sum procurement methods".

Collaboration is also envisaged in the way risks would be managed in public infrastructure projects. The plan acknowledged that "not all risks are capable of being fully assessed, priced, managed or absorbed by the private sector", and stated that, in future, "risks should be managed by the party best able to manage them, and should be shared where necessary".

Buchanan said NSW premier Gladys Berejiklian "will need to wield a firm hand" to ensure that the plan's aims are "not eroded to nothing in the next round of infrastructure procurement".

"As well as collaboration, government needs an audit trail to prove best value to the public," Buchanan said. "An amorphous cost-plus approach won’t work, so it’s a bit of a tightrope." 

"This is a step change for government contracting in Australia. It will require all involved to adopt different commercial behaviours during the delivery phase of major infrastructure. The new approach acknowledges the difficulties which result from pushing unmanageable risk onto the contractors. It advocates collaboration in an environment where the risk is borne by the person best able to manage it. However, this often-stated mantra is rarely followed, particularly by the banks," he said.

"If a risk is pushed onto the contractor that it can’t manage, things will deteriorate badly if that risk crystalises, simply because the risk is unmanageable. If contractors are burned so badly that they decide Australia is too risky a market, they will work elsewhere. That will leave a small set of contractors in Australia, dominant in the market, not incentivised to innovate their delivery, and naming their own price for work. An example of this in action is Stage 3 of the Westconnex project where the government received only one bid from the private sector, which was rejected," Buchanan said.

Buchanan said that plans to move to more collaborative contracting models will allow the supply chain to form proper cohesive relationships.

"If the plan becomes more than lip service, the contracting community will become healthier, new entrants will invest rather than doing a few projects and going home, and there will be more innovation and better value for the taxpayer," Buchanan said.