Recent letter to Hon Stephan Knoll MP about unbundling of major projects

“BUNDLING MAY BE EXPEDIENT FOR DPTI BUT DOES NOT MAXIMISE THE PROVEN JOBS GROWTH AND ECONOMIC STIMULUS POTENTIAL POSSIBLE THROUGH PUBLIC INVESTMENT IN INFRASTRUCTURE.”

Hon Stephan Knoll MPMinister for Transport, Infrastructure and Local GovernmentGPO Box 1533, SA, 5000

Dear Minister,

It has been brought to our attention that the Department of Planning, Transport and Infrastructure (DPTI) is recommending that the planned Joy Baluch Bridge upgrade ($160m) and duplication of the Pt Wakefield Road (through Pt Wakefield) and the associated construction of an overpass at the intersection of the Copper Coast and Augusta Highways ($90m) be combined/aggregated/bundled into one large contract with preference for an alliance delivery model.

This recommendation does not carry the support of the Civil Contractors Federation – South Australia (CCF SA). The delivery model proposed flies in the face of stated government policy prior to the election and subsequent to that. We also welcomed your personal commitment to the CCF SA, made at our meeting at Parliament House on 25 July 2018 that the previous government’s policy of bundling of projects would not only stop but that there would be a move to a process of disaggregation of government projects and works where possible. We are aware that this was an election promise.

We don’t have to remind you that in the South Australian social and economic context the bundling of capital projects and other works into larger and larger contracts makes these attractive to larger and larger companies, including those with an international footprint. In this environment small to medium size South Australian firms, which dominate the South Australian market, simply cannot compete or gain the experience to grow and prosper. These companies are destined, at best, to always be the sub-contractor. There are local civil construction firms with the capacity, singularly or with others, ready, willing and available to execute the proposed works, primarily that proposed at Pt Wakefield.

Bundling may be expedient for DPTI but does not maximise the proven jobs growth and economic stimulus potential possible through public investment in infrastructure. Similarly, bundling does nothing to grow capacity in the South Australian Civil Construction Sector. It is very disappointing and alarming that the Government’s primary construction delivery agency (DPTI) does not appear to fully understand that much more can be achieved for South Australia by a disaggregated approach to project execution.

Commendably your Government is developing an industry policy to drive the new economy and create opportunities for businesses to start, and existing businesses to grow in an evolving and increasingly competitive global marketplace. Bundling is entirely inconsistent with this and also does not comply with the Government’s Industry Participation Policy and Guidelines that have as objectives, increasing the number and diversity of locally based businesses winning work, driving local investment and creating strong value chains from the State’s portfolio of major projects.

On most metrics any suggestion that bundling projects will be less expensive for the tax payer cannot be sustained. Best price, defined by Government procurement protocols is not necessarily best value. Government has the duty to leverage public investment to grow jobs, stimulate the economy, grow businesses, and allow businesses to gain experience, be creative and innovative and improve their systems and processes. Public investment in transport and other infrastructure is a primary economic driver that must not be constrained or diluted – by any agency or Government.

If DPTI doesn’t have the in-house capacity to cope with the workload or manage large capital projects then the expertise can be purchased (contracted in) on a project by project basis if need be. There are South Australian engineering consulting firms, contract management firms and project management firms, ready, willing and available to fill any gap in DPTI capacity. This approach would present a further opportunity to reinvest tax payer money back into the South Australian economy, including supporting the development of the consulting and affiliated services sector.

There is widespread concern in our Industry about the recommendation the subject of this letter. We would welcome your early advice that for all of the very good reasons articulated in this letter you do not intend to approve any recommendation that would result in the planned Joy Baluch Bridge upgrade and duplication of the Pt Wakefield Road (through Pt Wakefield) and the associated construction of an overpass at the intersection of the Copper Coast and Augusta Highways being combined/aggregated/bundled into one large contract.

Yours sincerely

Phillip SutherlandChief Executive Officer15 February 2019