Infrastructure and construction projects are key to stabilising and growing economies, a fact recognised by the federal government in permitting the industry to continue working during lockdown. In addition, some of the states and territories have also issued ministerial orders and amended legislation to allow construction sites to work extended and antisocial hours to better implement the social distancing requirements. Despite the industry being 'open', the economic ramifications of the restrictions on movement are far reaching with the IMF forecasting that real GDP will shrink by 7.2% through 2020.

The Prime Minister has stressed the important role that construction and infrastructure will play in stimulating the economy, but what kinds of projects should the states and territories focus on, and why would this be advantageous to economic recovery?

Types of projects

Infrastructure spending tends to focus on large scale projects, but getting such projects to market can take many months allowing for the multiplicity of planning and procurement requirements and timeframes.

In these periods, focus should shift to smaller projects that:

• Can be undertaken by smaller contractors;
• Promote short term spending;
• Have shorter procurement times;
• Can take advantage of the restrictions currently in place.

Examples of the types of work which emphasise these points are the repair, renewal and maintenance of existing assets and buildings. 

It is well known that Australia has a maintenance backlog. Notwithstanding this, of the 147 nationwide priority and high priority projects and initiatives listed on Infrastructure Australia's Infrastructure Priority List, only two are listed under asset renewal.

What are the benefits from focussing on these types of projects?

We can take advantage of the situation

The current restrictions on movement are hugely beneficial for undertaking maintenance and repair work. With far less pressure on the road and rail networks, routes can be closed more easily, with less impact on commuters and the surrounding communities. Limited pupils in schools, colleges and universities means essential works can be undertaken during term time. Further, inspections can be easily carried out on all types of existing assets in order to establish preemptive maintenance for now and the future.

There is also the potential to finish projects at a speed than would otherwise have been possible. Whilst the restrictions have not been credited as the reason for the early completion of the Toorak level crossing removal in Victoria, there is a reason why road and rail maintenance is often scheduled for off-peak periods – currently, every day is off peak.

The benefits will be realised earlier

Large scale infrastructure projects establish thousands of jobs and enhance supply chains, however the delay in bringing them to market can mean that the positive economic impact is not immediately realised. Small scale projects have faster procurement, allowing job creation to occur earlier. The projects themselves are less complex and can be completed more quickly and easily. This allows communities and others to reap the rewards sooner.

Keeps it local

Governments are increasingly turning to international contractors on large infrastructure projects. Focussing funds on smaller projects can ensure that the work is allocated to smaller contractors utilising local workforces, in both skilled and unskilled trades.

Less red tape

In some states, certain works do not require contractors to obtain permissions before building work can commence. For instance, in Victoria, repairs and alterations which do not affect the structure, foundations or size of the existing building are exempt from obtaining a building permit. In New South Wales, certain repair work and alterations are either exempt or fall within the fast track pathway to development approval. Such types of work have fewer compliance and regulatory hurdles to contend with, thereby speeding up their delivery.

A potential model for achieving large volume maintenance and repair

Framework Agreements (or panel arrangements) provide a good means for public bodies to inject money into a large volume of smaller activities while reducing procurement costs.

Framework Agreements, also known as Standing Offer Agreements, apply for an agreed period of time and set out the terms under which a contractor can be engaged for specific jobs or tasks during the term of the agreement. Once the Framework Agreement is in place, the contractor can be engaged in a streamlined process with pre-agreed terms without the need to go to tender or enter into a separate contract for each job. The Framework Agreement will set out the general conditions which will apply to the contractor’s work, as well as pre-agreed rates and prices and/or the procedures to be used for pricing a job.

This 'certainty' saves time and cost for all parties and improves working relationships with the parties collaborating over the term of the agreement, leading to improved efficiencies and better value for money.

Contractors are often engaged under Framework Agreements as part of a panel arrangement whereby a number of contractors are appointed to a panel and can all be engaged on generally the same terms. This retains a competitive environment as contractors need to perform at a high standard to secure further work. While additional procurement costs may be involved in establishing a panel arrangement, the downstream benefits will usually far outweigh this.

Framework Agreements can be particularly useful for road or other asset maintenance works where standard rates for different types of work can be applied, low value activities are often required and work can be procured in an ad hoc fashion as necessary.

An alternative option for maintenance and repair

Public bodies (including councils) which already have in place maintenance contracts with particular contractors may be able to utilise the variation provisions to quickly mobilise additional maintenance and repairs. Depending on the specific wording of the provision, variations could be issued to vary the type or scale of the work to be undertaken. Where the 'works under contract' are defined broadly or generally (for example, in relation to a region of buildings or a road network), a variation may even be possible to vary or extend the location of the works.

Most provisions prescribe only a very short period of time in which the variation is requested and then valued - usually 14 days or so – before the work can start. Some contracts allow for the works to commence before the valuation of the variation has been finalised. In such situations, interim payments would be made, protecting the rights of the contractor whilst allowing the works to start as quickly as possible.

What should all states and territories be doing now?

With some states and territories are deferring the publication of their 2020-2021 budgets until later this year, governments should publicly earmark funds to bring transparency and clarity as to what projects are to be prioritised. So far, the ACT, NSW and South Australian governments have all committed packages for the maintenance and repair of roads, housing, schools and other government owned buildings. This is welcome news, with other states and territories potentially following suit.

To ensure the effects of the stimulus packages can be felt as quickly as possible, states and territories should use their powers to issue special orders and directions to remove or reduce any remaining procurement requirements for repair and renewal works, in order to hasten the process.

In order to allow the provision of large volumes of smaller works, public bodies should consider:

• Establishing panels and Framework Agreements to streamline the rollout of these projects;
• Using existing Framework Agreements / panel arrangements to undertake maintenance and repair work; or
• Using the variation mechanism in existing maintenance contracts.

The federal government was recently presented with two recovery plans, one of which will see restrictions being maintained well into June 2020. This could be the once in a life time opportunity that governments have to proactively deal with their maintenance backlogs, address the current needs of the country and start to stimulate the economy in the shortest time possible.