CCF SA Advocacy - Charter of Corporate Behaviour (OUT FOR CONSULTATION!)

CCF SA ADVOCACY

“It is not just the amount of capital spend on infrastructure, but the way that the spending is distributed. There needs to be varying project sizes, not an aggregatation of projects into a much larger project package. The benefit to South Australia extends well beyond a project. The project in many respects is often the vehicle or mechanism to generate economic activity and jobs growth.”

South Australia’s economy is driven by small businesses, with over 90% in the SME category. SMEs are collectively the largest employer in SA, and will be into the future. It is for that reason that the government acknowledged the need for improved communication between government purchasers and potential providers, active collaboration between businesses, review of current systems and removal of process barriers, in establishing the Industry Advocate.

The State can benefit from growing Australian companies by creating competition and more capability that is South-Australian controlled. Local companies need to be able to work on complex projects to develop world-class skills and remain competitive in the market.

There needs to be active collaboration across State Government agencies, firms, and industries to ensure the objectives of local businesses winning State Government contracts are met. It is important that government procurement processes do not create unnecessary barriers that would deter SMEs from competing for contracts, tendering, or growing and gaining experience.

The process for delivery needs to be simplified to make them more efficient, as many of the current requirements are unnecessary and actually go against what the government is trying to achieve (e.g. some safety documents actually make projects less safe as they can be too prescriptive and make people complacent and not think for themselves).

Improved regulations for mandating local employment in projects is required. While what constitutes a ‘local company’ may be difficult to define, it needs to be better thought out because greater involvement of mid-tier construction companies leads to savings in public spending by fostering greater competition.

CCF SA made several recommendations to the South Australian Parliamentary Inquiry into the State Procurement Board, that specifically dealt with procurement matters. Reforms must be streamlined and designed to be incorporated into existing procurement and industry participation policies, and utilise the efficient structure and capabilities of the Office of the Industry Advocate. The CCF SA also provided an extensive list of factors to be incorporated into a state government SME procurement policy to apply to all state government departments, public authorities and local councils.

The Productivity Commission has undertaken an Inquiry into Government Procurement, and the findings from this should inform Infrastructure SA’s processes to deliver a more coherent and streamlined framework.

Once procurement policy is established, compliance should be the primary responsibility of the procurement officer, the CEO, and the relevant Minister. The Office of the Industry Advocate should have the power and role to investigate issues raised by the industry in relation to the content and application of procurement policies.

It is not just the amount of capital spend on infrastructure, but the way that the spending is distributed. There needs to be varying project sizes, not an aggregatation of projects into a much larger project package. The benefit to South Australia extends well beyond a project. The project in many respects is often the vehicle or mechanism to generate economic activity and jobs growth.

CCF SA Members have expressed concern that over time, bundled projects will become beyond the reach of SME civil contractors, and sub-contractors will be beholden to a handful of large contractors for work. This creation of monopoly ownership of major civil infrastructure projects threatens the viability of local small and medium-sized civil contracting companies – that offer ongoing local employment opportunities – and undermines quality as it decreases open market competition.

SA Water has procurement arrangements that are largely directed at a few large contractors which have the benefit of long-term contracts. This work is either self-performed or sub-contracted to smaller subcontractors at the discretion of the head contractor. There is very little monitoring or auditing of these sub-contracting arrangements initiated by the head contractor. SA Water, as the major state owned water utility, is very well placed to have a highly targeted procurement program and we encouraged them to do so.

Terms of tenders need to be improved to create a level playing field. Many small to medium businesses in the infrastructure sector are struggling to stay in business when sub-contracting. The terms of contracts need to be much more transparent to protect subcontractors, particularly in terms of timely payments, and distribution of risk. With the growing preference of the Government to package infrastructure jobs, the distribution of risk needs to be looked at much more closely and made transparent. Many SMEs feel that they are being put in a position of ‘gambling’ their futures because of high risk. Also, while smaller businesses bring in their IP to deliver projects, they do not get credited with the ‘runs on the board’ to win future projects. The Government needs to value the Intellectual Property of SMEs – they have significant local experience, and quality of personnel that has been built up.

CCF SA recommended to the South Australian Parliamentary Inquiry into the State Procurement Board that “the State Government adopt a standard sub-contracting contract to be used by all Head Contractors undertaking government work using sub-contractors”. Such a document would ensure that subcontracting terms and conditions are common to all Head Contractors undertaking government projects, and that the terms and conditions of the sub-contract are regarded as fair and reasonable by the Government. For the resolution of difficulties between a sub-contractor and the head contractor, an avenue of direct communication between the sub-contractor and the client (Government) would be useful. CCF SA has developed a Charter of Corporate Behaviour that we encourage the larger contractors to use that would guide and govern the relationshsips with SME contractors down the supply chain, and minimise disputes.

CHARTER – OUT FOR CONSULTATION!

The CCF SA has developed a charter designed to guide the behaviour and relationships between a head contractor and smaller contractors down the supply chain. This is how the charter reads:

Charter of Corporate Behaviour

OUR COMMITMENT TO SMALL TO MEDIUM SIZE BUSINESSES

We want to do good business, be a good business and a model Head Contractor.

We want to do good business, be a good business and a model Head Contractor.

Our company/joint venture/alliance (our company) is committed to conducting its business ethically, fairly, reasonably and responsibly. In the conduct of our projects and day to day operations, we require our directors, managers, employees, partners and agents to conduct themselves in accordance with high standards. When working with smaller companies (small to medium size enterprises), we require that they conduct the affairs of our company in a manner described by and in the spirit of this Charter of Corporate Behaviour (Charter).

We want our state to grow and prosper for all South Australians. To achieve this, we recognise and acknowledge that:

• all businesses of all sizes, large and small, have a role to play in the construction industry;

• all businesses must work with each other on fair and reasonable terms;

• where disagreements and/or disputes occur, these must be resolved fairly and expeditiously; and

• the overriding objective must be to find a solution rather than apportion blame.

Only when the above principles are adhered to will all businesses within the supply chain be able to profit from their endeavours.

The Contractual documents ordinarily set out the legal rights and obligations for each of the parties for the agreed scope of works. This Charter is a companion document that defines the behaviours required by those representing our company. This Charter also governs the way we will enter and conduct our business relationships with our subcontractors. We consider this Charter to be binding on us and you may rely on it.

This Charter does not purport to set out an exhaustive list of rules. It is a guide for the types of reasonable and responsible behaviours we expect of our employees and representatives. Where situations arise not directly considered by the Charter, we expect our employees, partners, and representatives to exercise fair and reasonable judgement consistent with the spirit and intent of this Charter.

Where a subcontractor believes that there has been non-compliance with the Charter, a complaint can be reported to _______________________ in the company. Complaints will remain confidential and treated seriously and discreetly. Our company will not allow retaliation for complaints made in good faith.

Any amendments to or waiver of this Charter shall be made only by our company.

(To be signed by the most senior manager(s)__________________________________

This document has been prepared by the Civil Contractors Federation South Australia for consultation purposes.

OUR COMMITMENT

In the spirit of wanting to be a good business and do good business and be a model Head Contractor we make this commitment to you:

1. We will treat you with respect and courtesy.

2. We will not use our size and market power to intimidate or impose requirements on you.

3. Contract terms will be negotiated by reference to principles of equity and reasonable risk allocation. We will not knowingly require your agreement to terms that may unreasonably put your business assets at risk.

4. Our company supports, and will continue to support, the Local Industry Participation Policies and Laws of the State Government, and compliance with our Industry Participation Plans (IPP).

5. All procurement and contractual documents will be in plain English.

6. We will not request that you perform works that are unlawful or require you to agree to unlawful terms and conditions.

7. The scope of works and pricing and payment terms will be clearly defined and agreed with you contractually. You will be paid, including for variations and emergency works and progress payments, strictly in accordance with our agreed contract terms. The timing of contracted payment(s) will be reasonable and will take into consideration the importance of cash flow to a small to medium size business. In some circumstances, in order to support a small to medium size business, we will consider an up-front progress payment.

8. We will not without good cause, and only on the authority of a senior manager, withhold payments to you. The payment withheld, or portion thereof, will relate to the works in dispute only.

9. A dispute resolution process will be included in our contract with you. While we strongly encourage you to use this process and/or bring matters of concern to us in the first instance, we will respect your right to appeal directly to our client and/or to seek the assistance of the Civil Contractors Federation, Small Business Commissioner and/or Industry Advocate. We will participate in good faith in any dispute resolution process.

10. Any security requirements will not be blanket or one size fits all. Requirements will be commensurate with the risk associated with the works or activity the subject of the contract. Your business circumstances will be taken into consideration.

11. We will not poach or headhunt your employees.