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Progress on resolving construction contracting issues

Progress on resolving construction contracting issues

Means of achieving successful outcomes in government construction projects through improved tendering processes and fair and balanced contracts are being advanced in ongoing talks between the Construction Strategy Group (CSG) and the MBIE procurement unit.

CSG Chairman Geoff Hunt said today CSG had warned both the previous and current government of the issues that have led to the recent series of construction contractor liquidations and initiated talks with the unit to resolve them.

“As a result of these discussions new all of government guidelines for better processes in tendering were set for state agencies but some agencies along with private procurers have since continued to opt for bespoke contracts with a high degree of risk transfer across to contractors.

“Our aim in the current talks is to settle procedures which will secure a shift in public sector tendering. The aim is to achieve equitable processes that will lead to less uncertainty about on time, within budget project delivery and a fair margin return to construction contractors and better long term value to the government agencies.

“I want to stress that the creep of undue risk allocation to contractors is not simply evident in government contracting. It applies equally in the private sector. But a better balance of risk allocation in state and local government tendering will influence trends in the private sector by offering alternatives to contracts unduly weighted in favour of project commissioners.”

Mr Hunt said the CSG and MBIE Procurement were in agreement that risk allocation should be identified early in contract negotiations, defined and apportioned to the party best suited to handle them. The balance of the contract should reflect the agreed risk framework.

“It is essential that all parties understand clearly what the commissioner of the project is trying to achieve, including, initial cost, whole of life cost and timetable.

“We believe the goodwill reflected in the talks to date suggests the outcome will be a better framework for successful major project construction that will benefit both industry and the state sector.”

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