Alister Henskens portrait
Alister Henskens portrait

Procurement of Government Infrastructure Projects


Mr ALISTER HENSKENS ( Ku-ring-gai ) ( 15:26 :05 ): I speak about the report on the Committee on Transport and Infrastructure inquiry into the best practice for procurement of government infrastructure, which I tabled in the House on 23 February 2017. The strategic importance of the provision of government infrastructure to the future wellbeing of society cannot be underestimated. The committee looked into world's best practice with regard to the procurement of government infrastructure projects with particular reference to: the best process of gateway decision-making on the efficacy of public-private partnerships compared with other procurement methods; the best procurement process and documentation; the desirability of the standardisation of procurement processes and documentation; the desirability of a standard national process and documentation for the delivery of government infrastructure within a Federal structure; methods to achieve optimal contestability in tendering for the supply of services with respect to government infrastructure; and any other related matters.

From the evidence we gathered, it is fair to note that New South Wales is a leader when it comes to public-private partnership [PPP] procurement practice. Some people in our community still have apprehensions about the use by government of PPPs or privatisation. Frequently the Labor Party encourages and fuels those concerns through dishonest campaigns such as those we saw during the poles and wires 2015 election campaign. PPPs, however, have some distinct advantages over public sector infrastructure provision. PPPs involve a shifting of risk—sometimes patronage risk and sometimes other risk—to the private sector away from extra costs which may be borne by taxpayers if their government directly provides the infrastructure. PPPs are also frequently delivered more quickly and more cheaply than public sector procurement. The profit motive of the private sector facilitates these outcomes and also provides an incentive for innovation and creativity.

Another distinct advantage to PPPs is the way in which the design, construction and long-term maintenance of public assets can be bundled together. Direct procurement by government can result in a cheap up-front cost with long-term high maintenance costs. By taking a whole-of-life attitude to the procurement and maintenance of infrastructure, a lower long-term cost to the taxpayer can be achieved through PPPs. The Coalition Government has implemented positive reforms to its procurement processes and encouraged increased interest and competition in the PPP market.

However, there is always room for improvement. In particular, the committee found that while a wealth of experience and knowledge exists across the public sector, procurement practices vary by department. For this reason the committee recommended that the New South Wales Government investigates whether it should establish a centre of procurement excellence that would assist agencies in ensuring consistent procurement practices, improve the skills and knowledge by sharing lessons learned from projects and maintain best practices across the New South Wales Government.

Another area that the committee identified for improvement was the level of information required from bidders throughout the procurement process. Stakeholders offered strong evidence that many of those requirements are redundant and onerous in the early stages of the bidding process. This results in rising bid costs which, in turn, are passed on to the Government. For this reason, the committee recommended that unnecessary information should be eliminated and, where practical, procurement contracts should be reviewed and standardised. The committee made further recommendations with the aim of reducing bid costs, including the provision of a clear, consistent and transparent pipeline of infrastructure projects. Apart from minimising bid costs, this will also increase contestability in procurement.

Stakeholders provided compelling evidence that inadequate forward planning impacted directly on bid costs and a more consistent and transparent pipeline of projects would result in reduced bid costs. The committee recognises the importance of contestability relating to procurement practices. It heard from key stakeholders that the allocation of project risk may often prevent some from bidding. In response to this, the committee recommended that the NSW Public Private Partnerships Guidelines include clear principles for the allocation of project risk and, additionally, that the Government assess whether the contracting out of proportionate liability provisions should be prohibited across government contracts.

Lastly, the committee received evidence about the importance of the quality of steel used in infrastructure projects, and the impact of imported steel on the steel industry and the quality of construction. The committee considered the steel requirements in government procurement and recommended that the Government investigate the best means to ensure that steel used on government projects comply with the Australian standards. In arriving at our conclusions, we were greatly assisted by the submissions and evidence received from industry participants and government representatives from New South Wales and other jurisdictions. I thank them for their valuable time in assisting the committee with its work. I particularly thank the governments of New Zealand and Canada, as well the New South Wales Department of Treasury representatives for sharing their knowledge and practices with the committee.

I thank my fellow committee members for their dedication and collegiality. It is has been a pleasure and honour chairing our meetings, as well as working with other members and hearing their contributions while completing the report. This is my last act as the Chair of the committee. I thank the Legislative Assembly committee staff—Jason Arditi, Emma Wood, Jacqueline Linnane and Abegail Turingan for the expertise and the professionalism they applied in assisting the committee members and me.