New South Wales will change the way it develops tenders for major infrastructure projects, with Premier Gladys Berejiklian today announcing plans for a more “collaborative” approach.
The announcement comes as the NSW Government faces a major dispute over the Sydney CBD & South East Light Rail Project, with key contractor Acciona reportedly seeking over $1 billion in extra fees after it was tasked with utilities relocation work – an expensive role it says it was not told about before the contract was signed.
“Fortunately, I’ve been around long enough to know the life cycle of projects,” Berejiklian told the AFR National Infrastructure Summit on Tuesday, June 5. “Every major project has its challenges. Sometimes you might slip on a milestone by a few months, but then make that time up further downstream.
Berejiklian was unable to say when the light rail project will be complete. ALTRAC has told the Government it will be ready by March 2020, but Berejiklian says she’s told the consortium, “You can do better than that”.
The new scheme for major projects, outlined by the premier, will look to have a more collaborative relationship with contractors throughout the tender process, and should move away from contracts based around a fixed price, and lump sum payments.
“If we can work harder, collaboratively, to improve the interface between government, industry and all the major parties in a project, then of course we should do that,” the premier said.
The premier addressed the Sydney conference a day after John Holland chief executive Joe Barr said contractors were too often being lumped with all the risk in major infrastructure projects.
Barr, responding to a question about the light rail project in question – but without directly referencing it himself – said underground utilities are a good example of a project component which remains largely unknown to all parties, until the project is underway, so it’s only fair that at least some of the risk would be shared in that case.
Barr’s comments echoed those of Aecom risk boss Regis Damour in April.
Damour told the AFR the NSW and Victorian Governments, specifically, have grown too fond of lumping their private sector partners with the bulk of the risk in major projects.
“The current model is not in the best interest of the taxpayers,” Damour was quoted as saying. “When you end up with projects with a billion dollar claim, how can that be good for anybody? An adversarial-type approach is always making only lawyers rich.
“Nobody is going to convince me that using an adversarial model with full risk transfer can be the right approach because nobody has any clue what’s underground.”
Transport for NSW secretary Rodd Staples, speaking on June 4, conceded governments “make mistakes” at times when it comes to risk allocation. He said utilities operators have, understandably, become more protective of their networks, and stricter about how they are managed.