Victorias new framework for public construction procurement Industry

Victoria’s new framework for public construction procurement Industry briefing - October 2018

The new framework • Overarching governance framework for public construction in Victoria • Commenced on 1 July 2018 • The new framework is innovative, relevant and responsive • principles-based and outcomes-focussed • flexible and scalable to support diverse procurement profile • The new framework assists Government to: • capitalise on its unprecedented infrastructure investment • be nationally and globally competitive

New construction procurement principles • Agencies must act consistent with the principles: • ensuring appropriate competition and contestability • using the appropriate procurement model and processes taking account of complexity, value and supplier market capability • appropriately planning and managing the procurement to deliver the objectives • reducing unnecessary burden for all parties • encouraging appropriate innovation and responsiveness in the supplier market • fostering continuous improvement and building appropriate skills and capability • conducting in an open and transparent manner • treating all tender participants fairly and equally • conducting in an efficient and timely manner • undertaking in accordance with the relevant legislation, policy, guidance and any mandatory requirements

The outcome of extensive reforms • In 2016, the Government committed to review its framework • Key drivers: Reforming public construction • respond to opportunities raised by industry • efficient delivery of the infrastructure pipeline • old framework significantly out of date • Demonstrates the Government’s commitment to: • reduce unnecessary time and cost in construction procurement • provide a fair, transparent and openly competitive environment for government work

Government infrastructure investment

Industry is a vital partner • An open and responsive partnership maximises opportunities • Targeted consultation with industry • Identified three areas to focus reform: 1. greater standardisation of procurement processes across government 2. reducing unnecessary time and costs in tender processes 3. enhancing capability and continuous improvement for both industry and government

Areas of reforms 1. Greater standardisation • contracts • other reforms 2. Reducing unnecessary time and cost • better planning and preparation • tendering 3. Lift capability and drive continuous improvement

Benefits of greater standardisation - contracts • Reduced time and cost of legal review • Simpler and reduced contract administration • Greater certainty

Greater standardisation – contracts • Agencies must use standard forms of contract – Victorian Public Construction Contracts (VPCCs) • Commonly used VPCCs have been refreshed and enhanced: • built in flexibility for commonly varied commercial terms and conditions • new practice notes for consistent application • Work continuing to drive further standardisation by improving the suite of VPCCs to: • improve and broaden the suite • consider adopting other contracts that are already available • retire contracts that are not fit for purpose, out of date or poorly utilised and • reduce the number of agency-specific contracts • New streamlined (internal) processes

Greater standardisation – other reforms • New comprehensive set of guidance to promote consistent: • understanding • interpretation and application • New probity requirements – promote a common sense approach • Operational enhancements to the Construction Supplier Register • new categories of activities • improved guidance to: – suppliers on the register, benefits of registration – Agencies on how to consistently use the CSR

Reducing unnecessary time and cost – better planning • Better preparation and planning will: • support greater clarity in tender documents • reduce administrative burden • reduce time to amend tender documents • Planning and preparation matched to risk and complexity • New transparency requirement for Agencies to provide forward procurement notice

Reducing unnecessary time and cost – tendering • Introduce higher value tendering thresholds • Agencies to only seek necessary information from tenderers • Agencies to set appropriate tender field sizes • Agencies to set appropriate tender open and evaluation periods • Agencies not to approach supplier without firm funding intention • Agencies to avoid asking to price multiple options

Lift capability and drive continuous improvement • New comprehensive set of guidance • More accessible procurement information and data will: • provide suppliers with better visibility of the procurement opportunities and a central reference point for key procurement information • enable Agencies to be more proactive and strategic • Better dialogue with industry: • suppliers to be promptly advised of tender outcomes and offered debriefs • suppliers invited to provide feedback • Agencies to use reporting data and information to inform future procurements • New Commercial Capability Training Program

Further information All resources and information available at: https: //www. dtf. vic. gov. au/infrastructure-investment/public-constructionpolicy-and-resources Contact us: construction. procurement@dtf. vic. gov. au 03 9651 5300

Construction Supplier Register: Planned operational changes Industry briefing – October 2018

The Construction Supplier Register (CSR) 991 - number of prequalified suppliers as at Oct 2018 The prequalification status of each supplier is reviewed and refreshed annually

Why are we making changes • To improve the consistency of how users select suppliers • To improve the consistency of user reports about supplier performance • To improve awareness and understanding of the requirements and benefits of prequalification to suppliers

Financial criteria Step 1 - the applicant must have: • • as a minimum, a current ratio of 1; and net tangible assets that are not less than 5 per cent of the applicant’s construction related turnover Step 2 - the maximum financial capacity will be based on the lesser of the following: • • • 100 per cent of the applicant’s average previous two years’ construction related turnover; or 10 times working capital in calculating the above financial criteria and maximum financial capacity, assets and liabilities will be allowed where it can be demonstrated that they can be relied upon for supporting the entity in the event of default or insolvency. Examples of these assets and liabilities may include all contingent assets, all shareholder loans, and all related entity loans Step 3 - determining the maximum pre-qualified project level or contract value: • The maximum contract value for prequalification will be determined based on the lesser of: • the highest value of any successfully completed contract; and • the contractor’s maximum financial capacity

What the changes will mean for suppliers • Improved consistency in the way government users select suppliers • Improved consistency of how project performance is reported • Reduction in requests to produce information already recorded / assessed by the CSR in the prequalification process • Reduction in time and effort to produce a submission when you are invited to tender

Contact the CSR Contact us at: • constructionsupplierregister@dtf. vic. gov. au

© State of Victoria 2018 You are free to re-use this work under a Creative Commons Attribution 4. 0 licence, provided you credit the State of Victoria (Department of Treasury and Finance) as author, indicate if changes were made and comply with the other licence terms. The licence does not apply to any branding, including Government logos. Copyright queries may be directed to IPpolicy@dtf. vic. gov. au