Public Works and Procurement in the NSW Department of Finance and Services

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-By Aleisha Parr

As a service provider, regulator and central agency of government, the NSW Department of Finance and Services is responsible for supporting sustainable government finances, major public works and maintenance programs, government procurement, information and communications technology, corporate and shared services, consumer protection, workplace relations, administration of State taxation and revenue collection, NSW land and property administration services and metropolitan water policy. Within this, the Public Works and Procurement departments work collectively to ensure the highest calibre of construction service is at all times upheld in all other NSW government procurement projects.

Primarily, the Procurement Department is responsible for managing accreditation of agencies in NSW to carry out the planning and delivery phases of construction in their own right. The department is also responsible for activities supporting the procurement system for construction which it provides, including such areas as the Security of Payment Act, the Contractor’s Debts Act, the Architects’ Act and a handful of other areas for which the Minister of Finance and Services is responsible.

Says Stuart Wood, Senior Manager, Policy Support Services at NSW Department of Finance and Services, “It links perfectly with our role to provide the procurement system for construction, within which a fundamental aspect is the interconnected nature of things such as pre-qualifications for builders, consultants, and technical service providers such as architects, engineers, surveyors and the like.”

Whilst the peak aspect of pre-qualification is the Best Practice scheme for builders, it is also intimately linked with ‘selective tendering.’ Explains Mr Wood, “This is where we use the pre-qualified panels to work with agencies to make choices about which builders are given opportunities to tender for the agency-specific work.”

Linked with that is a robust performance management system, through which feedback on the performance of the builders is regularly obtained via detailed feedback forms distributed to Project Managers and relevant agencies. The information obtained through these forms is then entered into a database which is used to generate reports for the next major capital works project tendering selection process.

A notable aspect of that system is a series of contract forms based around cooperative contracting principles – principles of high-level corporations, communication, early warning principals, commitment to complete work without defects, etc.

“There are a series of links that all work together to provide feedback into our system,” says Mr Wood, “which helps to actually improve the working relationship between the parties. Now this is where the Best Practices scheme actually comes into play – it goes beyond ordinary principals of pre-qualification.”

With pre-qualification, the department typically will look at fairly straightforward capabilities such as a builder’s performance history, its resources, its management systems, and its insurances and financial capability. With Best Practice accreditation, the department will go into more detail as to how a builder manages itself and its subcontractors and suppliers in areas such as OH&S management, industrial relations, and quality management.

“Best Practice takes us to the end of the realm of relationships. We test the contractors on how they’ve actually performed over a period of time. We test them on their experiences within communities around their projects; we test them on their building relationships with their clients – their short and long term relationships. It’s not just about this contract; it’s about how they’re going to behave in the next contract and the contract thereafter.”

“To actually become Best Practice accredited is quite a process; we do acknowledge that we put the builders through some serious hoops. The benefit to builders is that once they become Best Practice accredited, agencies will tend to give them a large number of tender opportunities for their projects. The ratios are quite significant; Best Practice accredited builders will tend to get about five times more tender opportunities than an ordinary pre-qualified builder.”

Typically, the better performing contractors who are Best Practice accredited not only get more tender opportunities, but also ultimately win more work.

Perhaps one of the most important aspects of the accreditation process is the assessment of a builder’s relationships with the communities in which it works. Testimonials are sought as well as documentation from local community groups on how well the organisation performed for the community.

“It is a major point for us – we look for evidence of the sort of plans they produced to engage with the local community, what actual employment and training opportunities were provided for the young people – and not just young male people either in the construction industry; there is actually a strong focus on encouraging a lot more young females in the building and construction industry.”

For example, explains Mr Wood, with certain builders working in NSW where there is a large Indigenous population, the department is looking to see how the builder forged relationships with residents in that particular area.

Already, this positive reinforcement has heeded some success.

Recounts Mr Wood: “We’re actually finding with particular Best Practice contractors that the rate of employment of Aboriginal people on many of their projects now has gone from three to five per cent or more – and I’m not just talking about Western NSW; we’ve seen this happen in other areas of NSW including the Sydney Metropolitan area.”

This process of reports and monitoring continues throughout the lifetime of a builder’s accreditation, ensuring a constant level of performance excellence by each and every Best Practice accredited builder. “We’re looking for them to achieve a high level of performance every single time they’re in contract and therefore every single performance report we get.”

Although for many agencies working with the department, Best Practice accreditation is not mandatory, more than half of those agencies choose to work within the department’s system anyhow, proving in practical terms just how valuable the system truly is. In fact, in many respects, it has become something of a self-supporting system, encouraging self-regulated peak performance throughout the construction industry.

“It’s a beautiful cycle,” says Mr Wood. “I’m often proud to report the statistics up to our executives because it really strongly supports the system that we have in place. Ultimately, the better performing contractors tend to become the Best Practice accredited contractors and – because of the efficiencies that they have in place brought about by becoming Best Practice accredited – they actually are able to price work competitively and win more contracts.”

He adds, “One of the other real benefits to this is that a number of the builders have actually proudly come in and sat down with us and demonstrated how becoming Best Practice accredited and implementing with their private sector clients the methodologies that have been required – literally, implementing the culture that’s required – has enabled them to actually grow their business overall.”

While the application rate of builders to this accreditation program has maintained its strength over time, due to the strict requirements implemented, only forty-two builders are currently Best Practice accredited through the NSW Department of Finance and Services. However, Stuart Wood is quick to note that with the recent tightening of these requirements over the past five or so years alongside the introduction of the selective tendering process, the performance rates overall have increased to the point where the department is currently looking to implement even stricter performance monitoring guidelines.

Another encouraging result of the scheme has been its adaptation into a national context, in what is now referred to as the National Pre-Qualification System, which promotes a slightly restricted version of the NSW scheme. To bring this about, Stuart Wood has been working diligently with the Australian Procurement Construction Council to bring together representation from all of Australia’s states in order to achieve a more harmonised approach to contractor pre-qualification standards.

At present, the National System only applies to building work worth over fifteen million dollars, though it has allowed the NSW department to transfer over its contractors who do that level of work into that scheme very quickly.

Explains Mr Wood, “What we’ve actually done now is just make the national scheme part of our business as usual pre-qualification schemes arrangement, so they are immediately nationally accredited if they get into the NSW scheme. This makes it easier for the builders to get in and work nationally, and we’ve also found a couple of the builders from other states who haven’t normally done business with us are working through the process right now to gain that level of accreditation.”

Ultimately, the scheme has provided a pool of very capable and ready builders who are willing to get in and do work with NSW government agencies and communities, bringing with them a very high level of knowledge, skills and unique experience, whilst affording those same experiences to NSW builders throughout the nation.

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August 18, 2022, 8:42 PM AEST