By Alex McLeod and Goran Gelic, DWF Australia
Government procurement in Australia has undergone significant changes in recent years. The new year seems to be firming up the procurement trends that materialised in 2018 – or earlier – and are expected to gain further momentum in the coming months. Here are the top five procurement trends to look out for in 2019.
For many years now, the rise of collaborative contracting and its positive impact on the procurement process has been projected as a procurement trend. In 2018, we saw the NSW Government release its 10 Point Action Plan for the construction industry. Importantly, the plan encourages NSW state agencies to procure and manage projects in a more collaborative way. This means moving away from a reliance on fixed price and lump sum procurement methods and be more open to collaborative contracting models such as alliancing.
Similarly, we have seen local councils be more open to collaborative contracting and seeking to adopt more collaborative contracting models to procure their major infrastructure. For example, two major councils in NSW procured major waste infrastructure for the state by adopting the Public Private Partnership (PPP) delivery model. We anticipate local councils will continue to adopt more collaborative delivery models moving forward, given collaborative delivery models can achieve better project outcomes as opposed to traditional delivery models.
2. Digital technology
Similar to collaborative contracting, the adoption of digital technologies by governments to assist in the procurement of government infrastructure has been projected as a procurement trend. In particular, the use of Building Information Modelling (BIM) is starting to gain traction. For example, in 2018, we saw the Queensland Government release a policy that mandates the use of BIM on major projects with a capital cost in excess of $50 million. Similarly, local councils are beginning to embrace BIM and are beginning to become more open to the use of BIM on major projects.
3. Waste-to-energy projects
We’re also seeing greater adoption of ‘waste-to-energy’ projects by local councils. In short, waste to energy is the conversion of waste to energy products such as diesel, biomass and other related fuels. For many years now, local councils have looked to reduce the amount of waste being diverted to landfill; using waste to generate energy is an ideal way to achieve this. For example, local councils have commenced procuring waste to energy projects whereby household waste is converted to fuels. We have seen projects of this kind being procured (currently in the market) under bespoke build own operate transfer (BOOT) delivery models. We anticipate this trend to continue in 2019 and in future years.
4. Skills and training
Another major trend to look out for in 2019 is the increased focus on skills and training by government. In particular, we have seen state governments become more focused on developing skills and training for projects. This is supported by the NSW Government Action Plan, which seeks to mandate minimum levels of training in all major government construction contracts at levels consistent with the targets of the Infrastructure Skills Legacy Program. For example, the Gosford Hospital Redevelopment saw Lendlease and Darkinjung Local Aboriginal Land Council sign a memorandum of understanding to acknowledge a commitment to Indigenous participation on the $348 million Gosford Hospital Redevelopment.
Similarly, in 2018, we saw the Office of Local Government rollout the NSW Local Government Skills Strategy across local councils in its jurisdiction. The strategy is designed to assist existing council employees improve their skills and also gives local councils better access to quality professional training to assist them meet the demands of a modern local government environment.
5. Outcome-based procurement
Finally, there has been a shift toward outcome-based procurement by government. This means governments are focusing more on project outcomes as opposed to process. There is a growing view that government procurement must better focus on achieving desired project outcomes rather than following process for the sake of following process. This does not mean government is not required to follow its own procurement process, but rather that government becoming more open to innovation and diversity in its procurement approach. A good illustration of this is the rise of non-complying bids in government procurement (and government generally becoming more open to exploring non-complying bids as part of the procurement process). In short, a non-complying bid is a bid that does not strictly comply with the prescribed tender requirements. Non-complying bids can be significant in achieving better project outcomes as the private sector may submit non-complying bids to meet a project design outcome in an innovative or unanticipated manner.
This is shaping up to be a great year for government procurement – it will likely be a year of ongoing change and innovation. It will be important to watch this space.
This article was first published in the March/April edition of inspire magazine. You can read the original and many more here.