Government in any shape, form, colour or size is interesting at the best of times, and unbelievably frustrating in the worst of times. But if there is one thing that does trump Government in the interest stakes, it’s watching the government make a mistake and then carry on regardless.
Government operates in many spheres, including the construction and engineering space, and it cocks up just as easily here as it does elsewhere. When it does, its response - or lack thereof - to the issues caused leaves me wondering whether its tasks should not be outsourced to better and more capable players.
I’m writing in the context of the rapidly shrunken large-scale construction and infrastructure space here in WA, but one thing that has given a bit of life and hope to at least some players is the Federal Government’s spend on Department of Defence infrastructure (non-floating type.) It's an investment of around $200 million, so there is a bit of a flurry among contractors at the moment to see who can get to the bottom the quickest, something quite reminiscent of seagulls fighting over a soggy chip.
With any work comes a contract, and this project is no different. The one I’m holding is around 170 pages of the newly minted form of political correctness - risk aversion - and that’s before the annexures are attached. Somewhere in the mix of things is what they actually want done, namely to rectify a few of the existing buildings and to build a few new ones.
Being a project that will be carried out on Defence soil, in and around live Defence personnel, the contract makes specific mention of:
- The security aspect (loosely translated to mean the quality of individual employed on the project)
- The distinct possibility of live ordinance in the area surrounding the build
In true Department of Defence tradition, the document lists everything from what to wear, when to wear it, the consequences of not wearing it, right through to where to eat, what to eat, when to eat and the consequences of not eating. This is the “new look” military, as opposed to the old “hurry up and wait” one.
Notwithstanding a very strong sense of déjà vu, I applaud the Department for clearly stating that all persons employed on this project must be Australian. Bloody well done, I say! After all, we can’t have a mob of Irish backpackers and 457 applicants who have a strong work ethic, who are prepared to actually get dirty and do the work and who will accept reasonable wages with a modicum of courtesy taking positions off our local lads, now can we? I mean, consider the security aspect - we can’t have foreigners knowing about office buildings on a military base, now can we?
The only problem that I have with this clause is that the head contractors being considered for this project are all wholly or majority foreign owned companies with branch offices in Australia. So much for giving the Aussie battler a fair go.
Another laudable point in the contract is that the reinforcing steel is to be manufactured to AS/NZS 4671:2001. However, the problem with this specification, and I should insert here that it is the right and proper specification for the contract, is that the only steel mills which can be absolutely relied upon to produce steel consistently and accurately to this specification are located in Australia, yet the contract does not mention this obvious exclusion.
If the Federal Government has not instructed its own departments to ensure that the country’s industries are given first right of refusal on federally funded projects, then how can we realistically expect the contractors to make this choice on their own?
Surely even the Federal Government recognises that steelmaking is a vital industry to our country, unlike canoe design and motor vehicle assembly. Australia really can survive without building canoes and cars, but if we lose our ability to make basic steel products due to commercial non-viability, then we weaken ourselves terribly.
Also included in his contract is a dispute resolution schematic that appears to be designed to cause conflict, not resolve it. On first glance, it is completely east coast-centric despite the contract being for Western Australia. As a result, the vast majority of this clause is unenforceable as it conflicts with WA’s security of payment legislation, the Construction Contracts Act 2004.
As one delves into it, at great personal risk I might add to one’s sanity and sense of calm, a bit further into the clause, it is interesting to note that what Defence deems an arbitration clause is so ambiguous as to fail the sniff test miserably, not to mention the Supreme Court authorities on such clauses.
It eventually gets to the sub-clause relating to the Arbitration Agreement (cl. 15.2), and cites that this clause shall be in accordance with the Rules of Arbitration of the International Chamber of Commerce, that the seat of arbitration shall be Melbourne in Victoria, and that nothing in this clause modifies or varies the rights contained in the Commercial Arbitration Act 1984 (VIC).
This could well be payback for Labor’s complete failure to recognise Defence during its recent six-year rampage of the Australian economy and industrial landscape – because (in my opinion) the one good thing that Labor actually facilitated was the UNCITRAL model law which all the States and Territories embraced and converted into their respective Commercial Arbitration Acts.
Remembering that this project is in fact in Western Australia, which is part of Australia proper, surely the Commercial Arbitration Act 2012 (WA) should prevail, with the rules of arbitration being sourced from the UNCITRAL Rules of Arbitration as the Act requires, no?
The result that all this is that the proverbial effluent flows downstream, and head contractors with even less contractual nous and national pride than shown by the Department of Defence in this instance will simply put the same onerous, completely unenforceable conditions onto the subcontractors. Sadly, most of the subcontractors will accept these conditions as being normal.
So a project that should benefit Australian industry in fact damages it, and this is perpetrated by the very Department that is meant to protect us.
As always, Risk Safely!