Builders who apply for work on government construction projects in Western Australia may be closer to receiving fairer contracting and selection processes after the government in that state agreed to work with industry on potential procurement reforms.

In its latest announcement, the Western Australian Government said it has reached an agreement with the Master Builders Association WA (MBAWA) to establish a joint working group to examine recommendations to improve procurement methods for government work and to establish fairer and better contracting practices.

Specifically, the group will examine recommendations contained in the WA Building Industry Reform Package 2022 report which the MBAWA published last year.

According that that report, current procurement approaches often lack transparency and are based on a ‘lowest price wins’ scenario.

This has driven a race to the bottom, unsustainable margins and has contributed to builder insolvencies.

In addition, the report says that contracts often transfer too much risk onto contractors and fail to achieve an equitable risk sharing approach.

In response, the report made eighteen recommendations across three areas.

These included:

• Moving procurement models away from lowest cost and toward a focus on value and risk management.
• Implementing a balanced tender assessment process which involves a comprehensive and fair assessment of both quantitative and qualitative criteria which are considered of equal value.
• Using standard form contracts and subcontracts which have been worked through with industry and reflect suitable and equitable risk sharing between the parties.
• A range of recommendations on fair contracting particulars (see report), including provisions for price escalation and enabling contracts to be amended to cover unforeseen events.
• Measures to improve the state’s workforce capacity and wellbeing. These include incentive s for employers hiring workers (including from interstate) and introduction of a 5-day per week works program.

Whilst some recommendations have already been adopted, the working group will explore areas where structural changes can be made to the way government does business with industry.

To be made up of eight representatives across MBAWA and the Department of Finance, the group will draw on the experiences of experts and other stakeholders as it looks at opportunities for reform.

Its establishment will help to facilitate a collaborative approach to improving contracting practices on non-residential construction projects.

WA Commerce Minister Sue Ellery welcomed the latest announcement.

“Ensuring the ongoing stability of the building industry is a key priority for the McGowan Government,” Ellery said.

“We have received consistent feedback from industry, including MBAWA, that global supply challenges and skills shortages continue to impact project costs and timeframes across a range of developments, from residential dwellings through to major public infrastructure.

“The establishment of this industry working group is an important milestone for the Government’s work to test and progress appropriate reforms identified by MBAWA.

“Examining and resolving the remaining recommendations that have not yet been adopted by government is a critical step in supporting the future of the building and construction industry in Western Australia, and I look forward to the working group’s first meeting.”

Master Builders Association WA Executive Director John Gelavis said the organisation welcomed the opportunity to partner with the government to advance the reform package.

“The industry has been heavily impacted by massive price escalations, material and supply shortages, skilled labour limitations, and global supply chain disruptions,” Gelavis said.

“These factors, coupled with the imbalanced contractual risks of modern contracts, are causing builders to be extremely cautious engaging in future contracts in both the public and private sector.

“In consultation with its members, Master Builders has released a bold vision for the sector, including a series of reforms with 18 recommendations designed to create a more sustainable and diverse building and construction industry in WA.

“Master Builders is pleased the McGowan Government, as the State’s largest developer and Principal, is working closely with us to build a stronger and more sustainable industry for all including Principals, builders, subcontractors, suppliers and workers.

“We look forward to progressing our recommendations with the McGowan Government, to ensure we bring stability to the industry now and into the future.”

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