On Tuesday last, under pressure from Senator Nick Xenophon, the Australian Government committed to overhaul rules about how it spends its annual $60 billion procurement bill to maximise local content.The new rules will take effect from March next year. Under the changes, bidders for government projects worth more than $4 million will need to show:
- How much locally-produced material they will source
- How they are contributing to local employment
- How they are growing local skills
- The whole-of-life cost of the project, not just the build cost
- That the materials they use comply with Australian product standards
The fact that these changes were needed, and that they were resisted for so long, throws doubt on the long held popular notion that infrastructure ‘creates jobs’ and, by implication, Australian jobs. Now there is more chance that they will. The use of local labour and materials and increase in local skills will also improve our ability and reduce costs needed to maintain the new infrastructure.
But, perhaps the most interesting of the new requirements is the requirement for ‘whole-of-life’ cost of the project which will require assessment of the anticipated life of the project, and, hopefully, public discussion of what determines the useful life in a world of rapidly changing opportunities, demands and technologies.
I would like to see an additional requirement – designers and planners should be expected to show how they are actively minimising whole-of-life, or lifecycle, costs.
What do you like – or dislike – about Xenophon’s proposals?
What other additions might improve our approach to infrastructure?
For fear of sounding like I support Donald Trump (which I absolutely don’t), I have been concerned for some time about the lack of manufacturing policy at government level. How many steel fabrication shops in Australia are lying idle with Australian iron ore turned into steel in China and fabricated into the components there instead of here?
There seems to be two answers: Find other industries like medical technology for the affected industries to branch into, or introduce tariffs to make Australian manufacturing more competitive. The second is absolutely against current government policy (free trade agreements being the flavor of the month), and the first is too hard. The possibility of up-skilling a boilermaker to a machinist is daunting, but not necessarily impossible.
The Xenophon proposals seem to be a compromise without teeth. Tenderers can happily show how little they are contributing to the Australian economy and still win the job because they have the lowest price. Qualitative rather that quantitative tender analyses are needed to make the proposals work.
The other concern is the question of materials standards. Projects in South Australia and Western Australia have shown a lack of adherence to Australian standards in Chinese manufactured building products, both materials and processes. This will always be a bar to true free trade unless China rigidly adheres to International standards. Mind you, standards are the minimum acceptable in the industry. How often in infrastructure are we asking for above standard materials? At present the only way to be sure is local manufacture, and even then there are some dodgy manufacturers.
This is not an easy area to find answers. Every argument brings up more questions. Suffice it to say that unless the Xenophon proposals have teeth and can be rigidly enforced, we won’t have moved at all.