08/08/2014 - 15:58

Report calls for transparency in public projects

08/08/2014 - 15:58

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The Civil Contractors Federation Western Australia has backed a Productivity Commission report recommending large infrastructure projects be unbundled into smaller packages to encourage competition among contractors.

Report calls for transparency in public projects
Costs on the Perth Arena project blew out from an initial estimate of $150 million to about $550 million.

The Civil Contractors Federation Western Australia has backed a Productivity Commission report recommending large infrastructure projects be unbundled into smaller packages to encourage competition among contractors.

The recent commission report from an inquiry on public infrastructure also highlighted a need for more transparent cost-benefit analysis at the early stage of planning major projects, which has been an area of state Labor attacks on the Barnett government.

Civil Contractors Federation WA chief executive Jeff Miller said two planned mega projects – NorthLinkWA and the Perth Freight Link – were ideal candidates to be unbundled into four or five packages.

“The Productivity Commission makes the valid point that if projects are too large or complex, only a very few suppliers have the capacity to bid,” Mr Miller said.

The wide-ranging report found there was an urgent need to comprehensively overhaul how public infrastructure projects are assessed and developed.

“Unbundling is win win,” Mr Miller said.

“It leads to greater value for money for taxpayers and helps ensure a healthy, competitive and sustainable civil contracting sector.”

The report also noted that 90 per cent of the cost variation of the top 20 non-residential capital works projects completed in WA by 2012 was due to early estimation errors.

It recommended governments subject all public infrastructure investment proposals above $50 million to rigorous cost-benefit analyses to be publicly released and made available for due diligence by bidders.

The state opposition has been a strident critic of what it claims is the Barnett government’s failure to ensure adequate cost-benefit analyses are undertaken on major projects.

Opposition transport spokesman Ken Travers said the use of cost-benefit ratios and greater transparency surrounding them was a significant issue in WA.

“The most glaring recent example is the government’s decision to choose the airport rail over the MAX light rail project,” Mr Travers said.

“Both projects have a similar capital cost but the government has been unable to explain why the airport line was chosen ahead of the MAX project.

“It is clear the government made the decision without any detailed cost-benefit ratio for the airport line.”

A Treasury spokesperson said the government was looking at the Productivity Commission report to identify opportunities for further reform of procurement practices and process improvements to reduce costs of major projects.

“However, it is noted that many of the recommendations already reflect best practice in Western Australia, such as the Strategic Asset Management Framework requiring an economic evaluation in business cases for all investment proposals in excess of $1 million, and large projects being subject to rigorous scope definition and cost estimation,” the spokesperson said.

Mr Travers said a more rigorous implementation of the Strategic Asset Management Framework was needed.

During a budget estimates hearing he chaired last month it was revealed seven of the 15 highest value government agencies did not have to comply with SAMF regulations, and a decreasing number of agencies were complying with the framework.

It was also revealed the government had decided upon timeframes for the MAX light rail project without a completed project definition plan.

“How can there be a decision about proceeding with procurement and construction if there is not a completed project definition plan and at the same time comply with the Strategic Asset Management Framework,” Mr Travers said.

Department of Treasury executive director strategic projects Richard Mann said it was hoped enhanced mandatory guidelines relating to the SAMF would be implemented during the 2014-15 financial year.

Also during the hearing it was revealed the government did not know how much it would cost to relocate the Supreme Court Civil, State Administrative Tribunal and justice administration facilities to the Cathedral and Treasury Precinct, even though it had authorised the move.

“How does that occur, that you actually take a decision to relocate to a new building but not know what the full costs are,” Mr Travers said.

Acting under-treasurer Michael Barnes said there were unresolved issues around how many corporate services staff would be moving, and this had been flagged as a risk.

“All I can say is that things change over time, and in this particular case the issue is that we are trying to confirm the numbers of staff,” he said.

Mr Barnes said Treasury would be recommending to government that all agencies be required to comply with SAMF.

“It is clear that we need better compliance against the strategic asset management framework,” he said.

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