A key infrastructure report calls for significant reforms to public sector procurement practices and culture, including the creation of nationally consistent contract forms and a decision-making tool.
Infrastructure Australia’s 15-year roadmap says despite major changes in international practices, commercial arrangements in Australia’s infrastructure sector have remained stubbornly resistant to change.
However, it says Australian governments can create a more attractive infrastructure market and add long-term value to projects via reform of procurement practices.
Reform can also drive cultural change around poor risk management and contracting practices, as well as upending assumptions that the commercial relationship between government and industry is inherently adversarial.
The report recommends implementing nationally consistent contracts and calls for Commonwealth Procurement Guidelines to be updated to provide clearer definitions of value for money.
“Far too often there’s a lack of clarity of objectives that are trying to be delivered through a project,” Infrasture Australia director of policy and research Peter Colacino told Government News.
“As a result people revert what is the most easily defensible decision, which is lowest cost rather than thinking about the more challenging notion of value for money and public value.”
One area where procurement reform can make a difference is in supporting a circular economy, Infrastructure Australia says.
“Governments have an important role to play in initiating and embedding the different phases of a circular economy,” the report says.
“Setting procurement targets for sustainable and net zero emissions materials in construction would be an effective method for governments to reduce emissions and ensure broad sustainability outcomes.”
Embedding sustainability goals in all infrastructure procurement could result in a 55 per cent reduction in carbon emissions, Infrastructure Australia says.
Procurement targets and standards are also effective ways of supporting new industries or markets or incentivising businesses to develop new materials.
For example, electrifying government fleets are a way of kick-starting the Australian EV market.
Mr Colacino says public sector procurement needs to consider the “quadruple bottom line”, which refers to economic, environmental, social and governance outcomes.
“The government needs to make a call about whether these sorts of objectives, whether its supporting sustainability or diversity or Indigenous engagement,” he says.
“Ultimately government needs to identify what its priorities are and how they can be pursued through procurement.”
The report does note that change has already begun, with recycled materials being used in infrastructure projects overseen by many jurisdictions, including Transport for NSW and the Queensland Department of Transport and Main Roads.
The National Waste Policy Action Plan 2019 also emphasises the importance of governments using their purchasing power to address barriers to the adoption of a circular economy, and the Department of Agriculture, Water and the Environment has recently released the Sustainable Procurement Guide for Commonwealth Agencies.
The report also calls for a review of the Private Public Partnership (PPP) model, which has been declining because of industry concerns around risk and complexity.
“The reduction in the use of the model could have the undesirable impact of reducing opportunities for private investment, thereby reducing overall investment or increasing costs to taxpayers,” the report says.
“A reinvigorated PPP model that establishes genuine delivery partnerships through greater sharing of risk and reward will increase the accessibility of this model for smaller projects and deliver more projects overall.”
Mr Colacino says Australia once led the world in infrastructure procurement thanks largely to the PPP model, but it’s now time for PPP 2.0.
“The model needs to evolve so it can support higher levels of collaboration and greater opportunities for supply chain enablement and integration,” he said.
“There’s also an opportunity for us to broaden our choice across the full range of procurement models and choose models that are right for the project, not because it’s the way we’ve always done it.”
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