A Look Back at the BER Implementation Review 1

Wednesday, April 22nd, 2015
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It’s been nearly four years since the BER Implementation Review Taskforce reported to the Federal government on school complaints, value for money and related matters.

The Taskforce’s three reports received a mixed reaction at the time, and it’s easy to wonder what happened to the one-time data set collected by the Taskforce to provide a unique insight into construction delivery methods and performances for over 10,000 projects nationally.

The Taskforce’s recommendations are a matter of record, though they are hard to dig up these days. The economic stimulus delivered a $14 billion injection into the Australian economy at the height of the Global Financial Crisis.

Three states – NSW, Victoria and Western Australia – accounted for $6.4 billion of the stimulus and 4,627 of the projects. That $6.4 billion figure is close to the projected value of Barangaroo, a single project in Sydney which is also seen as having a major economic stimulus in the NSW economy following the mining boom. It too looks like an expensive proposition with long-term consequences.

While there was conjecture over the Taskforce’s calculation of how each of the 22 state and independent school jurisdictions performed in delivering value for money, it was hard to ignore the average cost of construction achieved for the delivery of school halls, libraries and classrooms. The respective performances of NSW, Victoria and WA were $3,488 per square metre, $3,075 per square metre and $1,980 per square metre. This compared to an average regionally adjusted cost for all schools of $2,333 per square metre.

In NSW, the Government used a managing contractor (MC) delivery model involving mostly Tier 1 contractors who engaged smaller Tier 2 and 3 firms to perform the direct construction works. The NSW government used template designs which had been previously used by NSW Commerce. These designs were only made available to the MC consortia in a schematic form with each MC needing to develop their own tender and for construction documentation. There was, as a result, considerable variation and duplication in this method. There were notable shortcomings and expense as well.

In Victoria, the government outsourced the entire program management to a single firm, with that firm in turn engaging a number of project manager consortia to oversee the siting, bundling and construction of the works to builders. The Victorian government used untested template designs with many consequences, including poor functionalities, poor siting and compromised quality.

In WA, the government managed the program in-house using external project managers as an internal resource to help co-ordinate logistics but with no specific delivery involvement. The WA government used well developed template designs for their buildings. These had established costings, and except for site specific costs the government was able to leverage its informed buyer knowledge to achieve what was the best construction cost and value performance nationally in either the public or private jurisdictions.

WA achieved 74 per cent more construction than NSW and 55 per cent more than Victoria, and the state delivered at a rate approximately 18 per cent better than the average cost per square metre for the entire program.

The Taskforce provided extensive briefings to the industry about what it observed.

The Taskforce described how the WA government used fixed price AS2124 contracts. Architects were engaged to resolve the design and siting of the standard template designs and to prepare site specific tender documents.

These architects worked closely with the schools and this process achieved positive feedback from school communities. They then superintended the contracts and were responsible for overseeing compliance and quality of the work performed. The projects were of universally high quality and completed with minor variation or cost creep. This achievement, as was the case across most of the independent school projects, demonstrated the benefits of resolved designs, fixed construction prices and the role of independent architects for projects of this scale.

There were protestations in NSW and Victoria about these findings and the merit of one delivery method over another. A common defence was the need to roll out the program quickly which was achieved in NSW, but at some expense when compared to peers.

In Victoria, both time and quality performances were often poor. There, the performances of the program manager, project manager consortia and builders were mixed, with little accountability for the results.

In South Australia, the Government used a hybrid of the WA model, where once the design and siting for school buildings was achieved, architects were novated to builder consortia for the completion of documentation and oversight during construction using a design and construct contract form.

There was evidence that when an architect is novated across to builders using a design construct contract, the architect loses independence and influence in overseeing the completion of design and the performance of the works. Again, the South Australian builders were not pleased with this view.

It is instructive to further regard the NSW use of the MC delivery model and the state’s GC21 form of lump sum construction contract. GC21 is a defensive form of procurement arrangement which superseded the use of older contracts such as NPWC3. These older forms of lump sum contract had brought with them increasing contractual disputes and disruption as a result of variations arising out of client changes and poor or incomplete documentation.

Rather than address root cause, GC21 embraced a transfer of responsibility to undertake the works and complete any latent design such that the works would be fit for purpose and compliant with building codes and standards. GC21 does not offer tenderers insight into the amount of incomplete design. It’s essentially a guessing game. So too is the pricing of those guesses. It’s expensive, as evidenced.

The Taskforce concluded that there was a correlation between the poorer performance of public and private jurisdictions where a hollowing out of their informed buyer capability could be observed. It was these variations and other factors such as the observed deficiencies in the qualifications of project managers, evidence of sub-standard trade work, variable project superintendence and the certification of work, and concerns with compliance of some buildings with the Building Codes that influenced the Taskforce in its final recommendation to government that “the productivity Commission update its work on the construction industry.”

This had last been done in 1991. The Government accepted all of the Taskforce’s recommendations, but sadly this one fell by the wayside.

In NSW and Victoria, bureaucrats resolutely defended their performances. The managing contractors and project managers were also keen to see the variability of their performances played down. Changes of government soon after in both states, as well as federally, accommodated these positions out of former opposition disenchantment with the BER stimulus initiatives in principle and perceptions that the Taskforce was a puppet show contrived to hose down Labor government embarrassment with the obvious shortcomings in their performances.

In NSW, the subsequent collapse of the managing contractor Reed Constructions along with several other high profile insolvencies has added momentum to further hollow out retained government informed buyer capability and preference to increasingly outsource to blue chip construction organisations to perform their former public delivery role. The use of design and construct contracts which either include the total design service or novate them also grows.

Canvassing all of the above issues widely since the BER Taskforce completed its work, there is broad unanimity across designers, quantity surveyors, general contractors and sub-contractors that the industry is suffering as a result of these trends. There are consistent expressions of concern about the impact of engaging powerful Tier 1 contractors to assume the prime client role in the process of outsourcing public and private capital works programs. In this model, there are a number of key issues to be considered.

Firstly, an ill-informed client is exposed to the transfer increasing costs when these are explained as “well that’s what it costs, and so be it.” Examples of this are the passing on of uncontested costs from new Enterprise Bargaining Agreements, inefficient use of on-site construction infrastructure, or when sub-optimal work is covered up or ignored.

Secondly, there are clear conflicts in determining actions to be taken when public or corporate interests are involved. The latter will always be driven by minimising risk and maximising profits. Handing over the single point of project procurement creates imbalances in the key relationships of the supply chain. No one is immune from these effects, be they designers, contractors, sub-contractors or (most concerning) the wider industry, which bears the flow on costs and work practices enshrined at the top of the food chain.

Thirdly, the industry becomes normalised to the idea of just grinning and bearing it. Few are happy with the status quo, but the reality is that those affected have companies to sustain, people depending on them for jobs and overheads to meet. Most will attest to their industry representation being ineffectual as the voice of the bigger players always drowns out the smaller. They are just all too busy surviving in a market that does not need to be made tougher by protest.

My lasting observation of the BER Taskforce’s work was that of the eventual power of school communities when their concerns or preferences had been unreasonably suppressed. While they had been beaten in the process of selecting school buildings and then constructing them, they were able to fight back with genuine complaints about the waste and cost that they subsequently saw.

In the end, they were able to bring these to public attention and demand action. I personally believe that there were many school communities who did not complain due to fear of reprisal or just due to the fact that it was simpler to accept a much needed new school building despite the process. Upon reflection, it was a pity that the Taskforce did not complete some of its work around whistle blowing in this regard.

Of course, there is a point when the public interest does gather sufficient momentum to start making a difference. The wider NSW community is now feeling the effects of out of control construction costs and inefficiency. The flow on of the construction procurement and delivery practices of the Tier 1 contractors are not just driving up the costs of housing, schools, hospitals, offices and other essential infrastructure, they are ensuring households have to borrow more or pay more for services such as tolls or public transport.

If the avoidable cost of projects is still as it was found by the BER Taskforce, then the public is also being burdened by largely avoidable public debt.

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  1. Jane Bringolf

    Thank you for these reflections. I had cause to check out the housing part of the stimulus package in NSW when half way through my PhD on barriers to implementing universal design in new housing – universal design features being a necessary condition for 50% of dwellings in NSW. Since then I have often wondered how the systemic disarray of the industry is contributing to the cost of new housing. You have helped clarify. AHURI also has some papers on this topic. Thanks again.