Inquiry into the Victorian Building and Construction Industry

Final Report and Report on the BLF Assets - October 1994

CHAIRMAN'S INTRODUCTION

This is the sixth and final report of the Economic Development Committee. This report addresses the issue of the Builders Labourers Federation (BLF) assets currently held by the custodian Dr Ian Sharp AO, who was appointed pursuant to the BLF (De-Recognition) Act 1985 (Vic) to administer the funds.

The Committee recommended in its third report that these assets be released for the benefit of the Victorian building and construction industry.

The Construction Forestry Mining Energy Union (CFMEU) has lodged a claim for the assets which is currently the subject of proceedings in the Industrial Relations Court in Sydney. It is anticipated by the Committee that these proceedings will continue for some time - possibly years - and therefore the Committee has resolved not to pursue the matter further or indeed make any recommendations on the disbursement of the funds.

The Committee has thus far tabled five reports in response to its terms of reference.

The first report into "Corruption of the Tendering Process" revealed widespread collusion and other forms of corruption in the tendering practices for Victorian government works and services. The second report titled "Evidentiary Powers of Parliamentary Committees" identified the problems encountered by this Committee in exercising it's powers to obtain evidence, and made recommendations to alleviate the difficulties faced by Parliamentary Committees in conducting inquiries.

The third report on "Productivity" examined issues such as those relating to restrictive work practices and poor management practices, which adversely affect productivity and retard the development of the VBCI.

In its fourth report titled "Code of Tendering" the Committee addressed some of the problems identified in its first report and introduced initiatives to reduce the incidence of collusive tendering practices and improve State public sector tendering outcomes. The Committee also identified the need to examine the purchasing practices of all State government departments and agencies in the procurement of non-building and construction goods and services. This issue has subsequently been addressed by the Auditor-General and Minister for Finance.

In this regard, the Auditor-General in his Special Report No. 31 "Purchasing Practices" (May 1994) identified serious deficiencies in State public sector purchasing and recommended the creation of a Government Purchasing Board to correct these deficiencies. The Auditor-General has also held discussions with the Public Accounts and Estimates Committee about the need to further review all aspects of government purchasing. This review has already been initiated by the Department of Finance which has taken into consideration some of the findings of the Economic Development Committee's Report into tendering practices. The findings of this review are now being implemented.

The Committee's fifth report into "Security of Payments" reviewed the case for secure, long-term, guaranteed arrangements for payment for work performed by participants in the building and construction industry.

As this is the final report of the Committee's inquiry into the Victorian Building and Construction Industry it is worth noting that the Committee received 89 formal submissions, held 10 public hearings, met formally on 48 occasions and held 34 subcommittee meetings. In addition committee members met informally on a significant number of occasions.

The work load associated with the conduct of this reference has been high and the issues at times difficult to identify and resolve. It is therefore incumbent on me to thank all the research staff and the committee members for their contributions in bringing the reference to a close.

The outcome and implementation of our reports and recommendations to the Parliament now rest with the Government of Victoria.

The Honourable Gerald Ashman, MLC
Chairman
Economic Development Committee

Security of Payments - September 1994

CHAIRMAN'S INTRODUCTION

This is the fifth report of the Economic Development Committee. It continues to investigate issues relating to the Committee's current reference to inquire into the Victorian building and construction industry.

The title of this Report, Security of Payments, reviews an on-going question within the building and construction industry as to the need for secure, long-term, guaranteed arrangements for payment for work performed.

Security of payment has been the subject of significant debate and research both within the Australian construction industry and overseas. It has been a subject of significant debate and research and it is clear to the Committee that there is little consensus, not only as to the scope of the problem but also the most effective solutions for overcoming it.

The Committee reviewed statistics in insolvencies and attempted to assess within the industry and compare them both within and in relation to other industry sectors. It looked at data, information and conclusions reached by CIDA, as well as various reports and studies carried out in other states. It also undertook its own survey to assess the extent of the problem in Victoria. Having done this it has been unable to confirm claims that the problem is extensive or serious, and has generally concluded there is insufficient evidence, to justify any special legislation or government intervention to address it.

The Committee notes that security of payment is a very complex and interwoven issue; and it acknowledges there have been a number of small firms and individuals who have suffered hardship as a result of the financial collapse of other players in the contractual chain. It also acknowledges however, that a significant proportion of these problems have arisen because of an unwillingness or inability on the part of the parties affected to protect their own interests.

The problem also appears to have resulted partly from informal cultural practices in the industry and partly from a lack of understanding and competence in business and financial management.

This report examines major causal factors and existing remedies to achieve security of payment and outlines additional potential remedies that could be pursued. It finds that the public sector can assist in improving security of payment problems by using appropriate contractual conditions and methods of ensuring the commitment of participants in that process. It also makes recommendations designed to encourage changes in cultural practices such as increased industry training opportunities.

Finally it seeks to provide further means of enforcing its recommendations by using purchasing power, not only to improve security of payment in public sector projects, but also as a way of achieving a flow on of reforms to contractual relationships in the private sector.

The Honourable Gerald Ashman, MLC
Chairman
Economic Development Committee


FINDINGS

    • The Committee finds that security of payment is an on-going issue within the building and construction industry and that a small number of individuals and firms, in particular subcontractors and consultants, have suffered financial hardship as a result of contractor losses further up the contractual chain.

      The Committee also finds however, that there is insufficient evidence and a lack of conclusive data to substantiate the problem or to justify the introduction of a substantive or costly scheme to address it.

      The Committee finds that its investigations on security of payment have been severely hampered by the lack of statistical data to assess and compare financial losses, insolvencies and other relevant information to quantify the extent of the problem both within the building and construction industry and on an industry wide basis.

      • subcontractors and consultants are the worst affected
      • small firms are usually more affected than large ones
      • many of these are less likely to have entered into formal or enforceable contractual arrangements
      • those experiencing problems are often highly geared
      • many have poor records of collecting receivables; and
      • a substantial proportion has poor skills in cash flow management.
    • The Committee finds that the issue of security payments has at its root a variety of casual factors which are interwoven and complex; and which identify problems in the areas of contract management, business and financial management, tendering procedures, risk management, and business ethics.

      The Committee notes that on the available evidence:

      The Committee also finds that a substantial proportion of these problems are the result of the informal culture underlying the way business is conducted and that many of them can be resolved by a change in business practices by the various parties affected. In particular it is of the opinion that subcontractors and small firms most vulnerable to the problem must take greater responsibility to protect their own interest by adopting a more business-like approach to entering into contracts; and by allocating sufficient time to improve their understanding of how to manage their finances.

      The Committee finds there is a need for more financial and business management training by all participants and across all sectors of the Victorian building and construction industry as a means of changing cultural attitudes which discourage the use of more professional business practices.

      The Committee further finds that industry training boards and accredited training providers have neither identified nor vigorously pursued this need, and this has contributed to an ongoing problem where many subcontractors and small firms have insufficient knowledge and understanding of the basic financial and cash management skills needed to run a business.

      • (i) the use of standard contracts with special provisions designed to improve security of payment such as proof of payment clauses and statutory declarations; and
      • (ii) the use of enforceable codes of tendering and practice.

        The Committee also finds that security of payment issues can in part be addressed through the development and use of project specific and general selection criteria in the tendering selection process.

    • The Committee finds that the most cost effective solutions to the problems of security of payment are:

      Finding 3.2

      • The Committee recommends that the Victorian Government urge the Australian Bureau of Statistics to collect and publish comprehensive and meaningful data on financial losses; and the number and proportion of insolvencies and business closures for all industry groups and all sectors within the building and construction industry.

        • that industry training boards be strongly advised to include financial and business management training and ethics as a mandatory component of all courses in building and construction within Victorian TAFE and tertiary institutions;
        • that other accredited training providers be strongly encouraged to follow the example in Victorian TAFE and tertiary institutions; and
        • that industry associations increase their efforts to actively promote the need for training in basic cash management and accounting, business ethics, and the use and importance of contracts.
      • The Committee recommends that the following measures be taken to help individuals and small firms to better protect their own interests, and to influence cultural attitudes in the industry which discourage the use of more professional ways of doing business:

        The Committee further recommends that the Minister for Housing review the Building Act (1993) and consider an amendment requiring mandatory training for new entrants to the industry in the aforementioned areas as a precursor to registration in any trade in the Victorian building and construction industry.

        • that project specific and general tender selection criteria be used to assess and select consultants, contractors and subcontractors;
        • that the project specific criteria are used to assess financial and technical capabilities as well as quality assurance; availability of insurance; and information on company directors, management personnel and project management capabilities;
        • that the general criteria are used to assess past history of performance in meeting financial obligations, project quality standards and other project specific criteria; and,
        • that the Australian Standard Contract AS2124 (with appropriate special conditions of contract), be used by all government departments and agencies.
        • include clauses specifying timely realistic progress payments; equitable allocation of risk and measures designed to provide optimum protection for the client from head contractor default;
        • include clauses specifying that a contractor shall not subcontract or allow a subcontractor to assign or subcontract any work under that contract unless

            (i) the value of the contract work is less than $50,000; or

            (ii) such subcontractors are nominated in writing by the client and subcontract documents used which incorporate AS2545 as the general conditions of contract;

        • include proof of payment clauses that require the use of mandatory standardised statutory declarations; and
        • not include clauses that refer to the postment of payments such as "pay if paid" and "pay when paid".
      • The Committee recommends:

        The Committee further recommends that all government departments and agencies be required to use Australian Standard Contract AS2124 and that such contract:

        • to enforce the use of standard contracts in all contractor, sub-contractor and consultant relationships involving public building and construction works; and
        • to ensure that all contractors tendering for or engaged in public works projects are complying with the proposed Victorian Code of Tendering and Practice.
      • The Committee recommends that government departments and agencies use their purchasing power:

        The Committee recommends that all government agencies and departments engaged in building and construction be required to comply with uniform codes of tendering and practice that reflect the objectives, findings and recommendations of this and other Economic Development Committee reports.

        The Committee recommends that all industry associations be encouraged to promote the use of standard documentation and the proposed Victorian Code of Tendering and Practice as a means of addressing security of payment problems.

        • (i) that all government departments and agencies be required to monitor the use of statutory declarations throughout the contractual process, and to satisfy themselves as to the integrity of such declarations before any payments are made. Where any inconsistencies are detected, the reasons should be determined, and if it is believed a declaration may be false, this should be referred to the Building Industry Task Force for further investigation; and

          (ii) that the Auditor General be required to monitor and conduct random audits of the use and integrity of statutory declarations made to government departments and agencies, and where any evidence of inconsistencies or false declarations is found, this be referred to the Building Industry Task Force for further investigation; and

          (iii) that the Building Industry Task Force under the Attorney-General be required to investigate any matter or inconsistencies referred to it concerning the use of statutory declarations contained in contract documentation; and where appropriate, institute legal action under the Evidence Act or other relevant Acts.

      • The Committee recommends:

    • Recommendation 1.1

      Recommendation 2.1

      Recommendation 3.1

      Recommendation 3.2

      Recommendation 3.3

      Recommendation 3.4

      Recommendation 3.5

  • Finding 1.1

    Finding 1.2

    Finding 2.1

    Finding 2.2

    Finding 3.1

    RECOMMENDATIONS

Productivity - April 1994

CHAIRMAN'S INTRODUCTION

This is the third report of the Economic Development Committee of the Parliament of Victoria which, under its current Terms of Reference, is conducting an inquiry into the Victorian building and construction industry.

The Terms of Reference are broad and far-reaching and are outlined in the body of this Report.

The first Report dealt with corruption in the tendering process. The second, with the evidentiary powers of Parliamentary committees. This Report concentrates on that part of the reference requiring the Committee to investigate and where appropriate, recommend changes to improve productivity in the industry. Subsequent reports on tendering and security of payment are also in the process of being prepared.

The scope and complexity of this aspect of Reference has proved difficult to manage, research and draw a conclusion. This is evidenced by the fact the Committee divided along party lines on most issues throughout the preparation of the report.

With the different political, philosophical and ideological positions of members on the Committee, this divergence of view was not unexpected, nevertheless it was disappointing that members were unable to reach common ground on any issue.

At an early stage of the inquiry the Committee noted there was no definition of productivity which could be agreed upon by all participants in the industry. Indeed, productivity is defined differently by almost every group involved or having an interest in the industry and is dictated by their own particular objectives.

It is generally recognised that the building and construction industry is vulnerable to severe economic swings. This has produced a 'hothouse' culture in which the interests of employers, clients, employees and developers are often at odds. In the ensuing conflicts, each of the parties has sought to maximise the return for itself. Unfortunately it appears, each has detracted significantly from the long term well-being of the industry; and this in turn has had a counter productive effect on the Victorian economy.

Conflict between various vested interests in the industry is rooted historically in poor management and work practices, and the impact this has had on costing and pricing (ie economic affordability). Clearly, both employers and unions must take responsibility for this situation. On the one hand there has been a lack of commitment by employers to a rigorous and ongoing strategy to address their own management shortcomings and eliminate opportunities for poor work practices; and on the other, there has been a failure by union interests to sustain any commitment to remove such practices. This has allowed poor work practices to become entrenched, encouraging disruption on building sites either to extend the life of a job, or alternatively to gain benefits which are unjustified in productivity terms.

The practice of "No Ticket, No Start" is a useful example of the tenacity of such practices. Whilst this has been removed from the Victorian Building Industry Agreement, it is widely acknowledged throughout the industry that the practice still continues on commercial and industrial building sites, and it is understood is now spreading to the housing sector.

It appears that these work practices are underpinned by fort-like, indiscriminate and often stubbornly defensive attitudes, and if anticipated these may well shape the content of the Minority Report which will attach to this Report. If this is the case it serves only to highlight how far the community and industry has yet to travel in achieving any real gains in productivity.

In its investigations the Committee was constantly frustrated by a prevailing fear of union retribution that permeates the industry. In the course of the Inquiry, a number of Committee members received information on a strictly confidential basis of threats and intimidation, of 'closed shop' deals, and of threats to freeze out companies or sabotage their jobs.

Regrettably, members receiving this information were unable to provide sufficient assurances to the informants that would have enabled them to present their evidence to a public hearing.

A number of witnesses initially agreed to provide evidence but subsequently withdrew or failed to appear on the scheduled hearing day. The Committee was therefore forced to rely on information and evidence from industry organisations such as the ACTU, VCTU, MBAV and a small number of individuals. It is grateful to those individuals and organisations who co-operated with the Committee in the production of this Report. The level of assistance provided from individual companies and unions, and individual unionists and workers has been disappointing, however, given the damning anecdotal evidence provided confidentially to some Committee members, their reticence is understandable.

The Committee has received evidence to suggest that work practices and the overall behaviour of the Victorian building and construction industry has cost private clients and Victorian taxpayers thousands, possibly millions of dollars over recent years. Such a situation cannot be allowed to continue.

It is clear from the evidence that the recent merging of a number of building unions to form the CFMEU has not yet impacted on productivity in the industry nor resolved the various demarcation disputes which continue to disrupt the industry. Indeed it would appear that the level of minor disputation is on the increase as various union members and organisations vie for official positions and control of the union.

In tabling this Report, I would like to recognise the support and effort of the Committee staff and acknowledge that whilst Committee members were not unanimous on their findings, there was a level of co-operation throughout the inquiry process.

The Honourable Gerald Ashman, MLC
Chairman
Economic Development Committee


FINDINGS AND RECOMMENDATIONS

    • The Committee finds that an atmosphere of uncertainty and fear of retribution operates within the Victorian building and construction industry, creating a culture that accepts inefficient and corrupt practices as the norm.

      The Committee finds that the Victorian building and construction industry is critically divided on what the basic productivity objectives are and how to achieve such objectives.

      The Committee finds that improvements in levels of disputation and lost time are due primarily to economic conditions and there has been no significant change in performance across the bulk of the industry over the past five years.

      The Committee also finds that one-off clients or developers have little or no interest in industry reforms; while major developers and owners are tolerating inefficient work practices and/or repeatedly agreeing to unrealistic union demands for the sake of their short term financial survival.

      The Committee finds this situation, together with unsatisfactory contractual relationships between building owners, developers and contractors, is one of the root causes of problems facing the industry and has led to increased costs for both public and private sector clients.

      • there is intimidation of employers in regards to the use of non-unionised labour, supply of goods and materials, the appointment of shop stewards and job delegates and adherence to conditions such as site allowances and inspection of company records;
      • corruption exists within the balloting process of union elections;
      • there is an abuse of employers' rights to hire and fire.
    • The Committee finds that in relation to the activities of the trade union movement and their role in the Victorian building industry:

      The Committee also finds that trade union amalgamations have not significantly alleviated demarcation disputation.

      The Committee finds that the employment of ex-B.L.F. officials within the Construction, Forestry, Mining and Energy Union is of serious concern and has the potential to destabilise the industry with subsequent effects on productivity gains.

      • such assets are of little advantage to ex-members of the B.L.F. or the building industry in general whilst they remain frozen in trust;
      • it is, after a seven year lapse, extremely difficult to locate the beneficiaries of the trust and further impossible to fairly apportion the equity between any such beneficiaries; and
      • such assets as remain should be utilised for the benefit of the Victorian building and construction industry.
    • The Committee finds that in regard to the assets of the Builders Labourers Federation, that:

      The Committee finds that there is considerable confusion amongst contractors as to the relationship between Federal awards, State legislation and State agreements and as to what is legal activity and what is entrenched custom or practice.

      The Committee further finds that existing provisions concerning inclement weather and no ticket/ no start currently contained within the Victorian Building Industry Agreement are subject to abuse by Victorian unions.

      • intimidation of contractors and government officials by C.F.M.E.U. union officials;
      • collusive practices extending to the cost of labour and the letting of tenders for public works which may be in breach of the Collusive Practices Act; and
      • possible illegal collection of monies by individuals, the C.F.M.E.U. and V.A.R.I.C.C.
    • In relation to asbestos removal, the Committee finds from its investigations to date, there is evidence of:

      The Committee finds that to date the small number federal enterprise agreements operating within the industry have demonstrated some productivity gains but that such gains are difficult to measure and in many cases technologically driven and do not afford any significant and productivity benefits to the Victorian building industry or the Victorian taxpayer.

      The Committee finds that the Victorian Building Industry Agreement has in part assisted in achieving a reduction in disputes, however, the Agreement includes clauses that are in breach of the Employment Relations Act 1992; and contains dispute settling procedures that promote a centralised and standard approach to disputation.

      The Committee finds that the Victorian Government should be able to use its purchasing power to ensure that the recommendations in the Committee's first report and subsequent reports are enforced in public sector construction.

  • Finding 1.1

    Finding 1.2

    Finding 1.3

    Finding 2.1

    Finding 2.2

    Finding 2.3

    Finding 2.4

    Finding 2.5

    Finding 2.6

    Finding 3.1

    Finding 3.2

    Finding 4.1

Recommendations

    • The Committee recommends that the Building Industry Taskforce be required to investigate and monitor the activities of the Victorian branch of the Construction, Forestry, Mining and Energy Union to determine any illegality or criminal activity relating to the intimidation of Victorian employers in relation to placement of shop stewards, employment of labour, inspection of records and supply of goods.

      The Committee recommends that the Building Industry Taskforce monitor the performance within Victoria of ex-Builders Labourers Federation members now employed by the C.F.M.E.U. and report regularly on this performance to the relevant Minister and if deemed necessary by that Minister, to the Parliament.

      The Committee recommends that legislation concerning the former assets of the Builders Labourers Federation be amended to release such assets for the benefit of the Victorian building and construction industry.

      The Committee reports it will undertake a thorough investigation of the uses of such assets and issue a definitive statement regarding such assets by the commencement of the 1994 Spring session of Parliament.

      • to act as a reference and resource centre for employers and employees in respect of industry conditions and allowances; and
      • to take on an educative role in the industry with regard to interpretation of current legislative provisions and alerting employers within the Victorian building industry to the consequences of short-term expediency and acquiescence to inappropriate union demands.
    • The Committee recommends that the Department of Industry Services allocate sufficient resources

      • to inspect and investigate any public or private sector works projects where there is evidence or any suggestion of unlawful demands being made on either employers or employees. (The Committee does not envisage that the Task Force would involve itself in industrial matters generally covered by the Department of Industry Services);
      • to investigate breaches of the Collusive Practices Act, Restrictive Trade Practices Act or the Crimes Act by V.A.R.I.C.C. and its relationship with the C.F.M.E.U. (formerly the B.W.I.U.) and by the Bricklayers and Plasterers Division of the V.S.B.T.U.; and
      • to investigate the letting of government contracts for asbestos removal, bricklaying, plasterwork and roof tiling over the last five years.
    • The Committee recommends that the Building Industry Taskforce undertake a monitoring and auditing role within the industry including the authority:-

      The Committee recommends that the services of the Building Industry Taskforce be expanded and resourced to undertake the role and tasks recommended in this and other reports.

      The Committee recommends that where appropriate and necessary the Victorian Government legislate to enable use of its purchasing power to enforce recommendations contained in this and other Economic Development Committee Reports concerning public sector construction.

    • Peter Batchelor, MP
    • Michael Leighton, MP
    • Brian Mier, MLC
    • Pat Power, MLC
    • The lack of courtesy and proper formalities extended to various witnesses.
    • The repeated failure of the Government appointed chairperson to convene meetings and conduct proceedings in a spirit of bi-partisan co-operation.

      (1) Mr Rowan does not accept or understand the danger of asbestos and asbestos removal. Mr Rowan is not fit to be an asbestos removalist.

      (2) Mr Rowan lied in his evidence given under oath to the Committee. Additionally, his evidence is inconsistent and incoherent.

      (3) The majority of the Committee erred in accepting Mr Rowan's evidence. Consequently the findings and recommendations of the majority are fundamentally flawed.

      (4) Based on the evidence of all other witnesses, asbestos and asbestos removal are extremely dangerous and hazardous. There is a demonstrable need for properly trained, qualified and registered asbestos removalists and hygienists. The Victorian Asbestos Removal Industry Consultative Committee (VARICC) guidelines form a suitable Industry Standard.

      (1) The Attorney-General refer Mr Rowan's evidence to the Director of Public Prosecutions for consideration of perjury charges.

      (2) The Minister for Industry Services investigate the safety record and procedures of Mr Rowan and GRIME Services with a view to removing their registration.

      (3) The Minister for Industry and Employment seek Cabinet approval for an instruction to all State Government Departments and Agencies that no further State Public Sector work be given to GRIME Services.

      (4) The Minister for Industry and Employment refer to the appropriate Federal Authorities, allegations that Mr Rowan failed to forward PAYE instalments to the Australian Taxation Office.

      (5) The VARICC guidelines on asbestos removal continue to be the Industry Standard.

      (6) The State Government maintain the current level of licensing of asbestos removalists.

      (7) The State Government establish formal on-going consultation with unions and employers to continually review work practices and safety standards in the highly dangerous asbestos removal industry.

  • Recommendation 2.1

    Recommendation 2.2

    Recommendation 2.3

    Recommendation 2.4

    Recommendation 2.5

    Recommendation 4.1

    Recommendation 4.2

    MINORITY REPORT
    CHAPTER 1

    INTRODUCTION

    This Minority Report is submitted by the following members of the Economic Development Committee:

    The Majority Report of the Economic Development Committee Inquiry into the Victorian Building and Construction Industry does not meet the terms of reference of 22nd December 1992 referred to it by the Minister for Industry and Employment, The Hon. Phillip Gude MP.

    It does not include any findings or recommendations that will provide the industry with a comprehensive package of measures to lift productivity, competitiveness and standards as required by the Terms of Reference.

    The report has no vision and fails to harness and extend the skills and creativity of people working in the industry.

    The findings and recommendations have been determined by inaccurate information and at times unsubstantiated evidence.

    The Majority Report's findings in relation to what can be described as the "Asbestos Farce" and the evidence of Mr Rowan, is an example of this. Even when the evidence of unreliable witness was rebutted by expert and credible witnesses, the Majority Report still chooses to rely on discredited and unsubstantiated evidence.

    Unfortunately, the approach of the Majority Report in the "Asbestos Farce" is typical of their approach throughout their report. Rather than this being an isolated aberration, this flawed approach is repeated time and time again, whether dealing with union elections, asbestos regulations or the genuine efforts of the industry to improve productivity levels.

    The report does not take into account in any serious or adequate way the evidence provided by the Construction Industry Development Agency in relation to its work and the Building Industry Reform Strategy.

    This is particularly negligent given that this national Reform Strategy has been actively supported by the Victorian Government - which remains a signatory to the In-Principle Reform Agreement - and that the Strategy has made significant progress in facilitating workplace reform and higher levels of productivity.

    CIDA has completed Codes of Practice for contractors, sub-contractors and consultants known as the "Australian Construction Pre-Qualification Criteria" and will complete a draft report in March and a final report in June 1994 on Security of Payments.

    The CIDA work is the most comprehensive of its kind on these issues, and has been undertaken at an estimated cost of $7 million with the strong support of employers and unions in the industry.

    Despite this - and the support of the Kennett Government for the national reform Strategy - the Majority Report has refused to develop recommendations that are consistent with, and complementary to, the national Strategy. The Majority Report is clearly inconsistent with the policy position of the Victorian Government and appears to undermine its approach.

    The Economic Development Committee (EDC) has previously presented two reports to the Victorian Parliament as part of its inquiry into the Victorian Building and Construction Industry. The first report was titled "The Corruption of the Tendering Process" tabled in May 1993 and the second titled "Evidentiary Powers of Parliamentary Committees" tabled in October, 1993. These two reports had bi-partisan support.

    Opposition members of the Committee were keen to ensure that this bi-partisan approach continued with the Committee's third report dealing with Productivity. Unfortunately this has not been possible.

    It became apparent to Opposition members that it would be impossible to support the findings and recommendations of the Majority Report, and at the same time comply with the Terms of Reference and the Minister's expressed wishes on the role and purpose of this Inquiry.

    Moreover, the authors of this Minority Report are deeply concerned at the way in which the Inquiry was conducted. Our concern goes to two areas:

    The behaviour of Government members has not been in keeping with the spirit and intent of Parliamentary Committees.

    We believe that Government members, and the consultant employed by the Committee, approached their task not only with pre-conceived ideas, but also with a pre-determined political agenda which they sought to impose on the Committee by force of numbers.

    This demeans the role of Parliamentary Committees, and devalues the important contribution they can make to the administration of this State.

    It became apparent on several occasions that some Government members were uncomfortable about the way in which the Inquiry was being conducted, but felt too intimidated to resist. This further reduced any prospect of the Committee achieving a bi-partisan approach to its task.

    It is against this background that this Minority Report has been prepared. It seeks to examine in a positive and honest framework the important reform process that is already underway in the building industry, and how this process might be improved and complemented.

    CHAPTER 2

    FINDINGS AND RECOMMENDATIONS

    We find that the Majority Report of the Committee has failed to meet the obligations of the Parliamentary Committees Act of the Parliament of Victoria.

    We find that the national industry reform process that is currently taking place should be encouraged and supported to ensure that productivity improvements and workplace change become a permanent feature of the industry.

    We recommend that the Victorian Government should continue its support for and active participation in the Building Industry Reform Strategy of the Federal Government, and this process should continue to enjoy bi-partisan political support in Victoria.

    We welcome and endorse the on-going support the Victorian Minister for Housing has given the Federal Government Building Industry Reform Strategy, and in the light of this support, express our dismay at the failure of the Majority Report to endorse the Reform Strategy and the important contribution of Victoria since 1991.

    We find that the Building Industry Reform Strategy of the Federal Government (including the work of the Construction Industry Development Agency) has facilitated workplace reform and higher productivity in the industry, and that in some cases outstanding results have been achieved as a result of these initiatives.

    We find that while enterprise bargaining was slow to take off in the building industry it is now being actively undertaken across the industry, and that Enterprise Bargaining Agreements (EBAs) entered into under the Commonwealth Industrial Relations Act have led to the achievement of higher productivity and workplace reform, and have resulted in projects being brought in on or ahead of time, and under Budget.

    We find that the Victorian Building Industry Agreement (VBIA) has assisted in achieving stability and harmonious relationships in the building industry and has assisted in dramatically reducing the incidence of lost time. We find that the VBIA approach is supported by parties in the industry, and should be supported by this Committee and the Victorian Government.

    We find that collusive tendering has had an adverse effect on productivity levels in the building industry.

    We find that there are circumstances where unscrupulous employers in the industry avoid their legal responsibilities (e.g. award obligations, insurance, taxation payments, WorkCover, Occupational Health and Safety legislation), and that this works against reform and productivity improvement in the industry.

    We recommend that the Minister for Industry Services take steps to strengthen the enforcement role of his Department and its statutory authorities in ensuring these responsibilities are met.

    Further, we recommend that the Minister for Industry and Employment and the Minister for Industry Services raise with the Commonwealth Government the need for the enforcement role of the Department of Industrial Relations to be strengthened where it has responsibility for these matters.

    We find that the employment of ex-BLF officials with the CFMEU is of concern to the industry but that no evidence has been provided at this point which confirms the fears of some employers or the Master Builders' Association.

    We recommend that the Government consider enacting legislation that would provide that the funds and assets of the BLF being held by the Custodian be used for the purpose of training and skills development in the building and construction industry, with particular emphasis on assisting unemployed building workers.

    We find that no credible and tested evidence has been presented which indicates that unions have used intimidating tactics to secure "No Ticket No Start" agreements on sites since the introduction of Freedom of Association provisions under the Employee Relations Act 1992.

    We find that the award provisions relating to inclement weather can lead to unnecessary disputation and lost productivity, and welcome the new provisions contained in Enterprise Bargaining Agreements that deal with inclement weather.

    We find that the Employee Relations Act has had little, if any impact on the Victorian building industry and that its role will continue to diminish because of the exodus of workers to federal awards. This trend is likely to be beneficial to productivity levels in the industry in the long-term because of the superior arrangements in the federal jurisdiction for enterprise bargaining and linking wage increases to productivity improvements.

    We find that during the 1980s there was an insufficient capacity for regulatory authorities to regulate the asbestos industry.

    In particular, in relation to asbestos, we find that:

    We recommend that:

    We note with concern that evidence was presented by the Master Builders' Association that in 1985 the then Leader of the Opposition, Mr Jeff Kennett, collaborated with the BLF during the same period in which the Federal and Victorian Governments were in the process of de-registering the union and seeking to bring about better industrial relations in the industry. We also note that this was the same period in which the leadership of the BLF was attempting to pressure the Victorian Government to intervene in the legal processes so that criminal charges against Mr Norm Gallagher would be dropped.

    We find that the Majority Report has abused the Parliamentary Committee process in that it has sought to advantage one side in the CFMEU Union elections at the expense of due process.

    We therefore find that the Majority Report has acted in an undemocratic fashion in interfering in the internal elections of trade unions and trying to pre-empt a decision of the Federal Court.

Code of Tendering - May 1994

CHAIRMAN'S INTRODUCTION

This is the fourth report of the Economic Development Committee of the Parliament of Victoria which under its terms of reference is conducting an inquiry into the Victorian Building and Construction Industry (VBCI) together with the tendering procedures for government works and services.

As has been indicated previously the Terms of Reference before the Committee are far reaching.

The Committee has thus far tabled three reports in response to its terms of reference.

This report, Code of Tendering provides an overview of the economic contribution of the VBCI and reports on Public Tendering Provisions for Government Works.

It makes no recommendations in relation to the purchase of non building and construction goods and services. It is the Committee's intention to report separately on these purchases.

The Victorian Building and Construction Industry (VBCI) has only recently been subject to overseas competition. It is important that all the participants recognise the need to compete on the basis of price, quality of product, standard of service and to adopt the highest standards of business ethics to achieve a competitive edge over their competitors.

During the course of its inquiry into the VBCI, the Committee became aware of the need to maximise the degree of competition in respect of public sector tendering processes to ensure that the public secures "value for money" and is confident that participants in the tendering process for the procurement of public works and services (including public servants), do not engage in collusive practices.

The Committee recognises that not all VBCI participants will accept the need for increased competition in relation to public sector tendering processes, or the need to act according to the highest standards of business ethics. There will no doubt be those individuals or organisations which will seek to achieve a competitive advantage by engaging in anti competitive practices through collusive tendering activities. However, where this situation arises governments are duty bound to protect the public interest through the introduction and application of appropriate legislation.

The Committee believes that collusive practices which restrict competition and hence lead to higher prices should where possible be eliminated. To this end, it is our firm view that the Collusive Practices Act 1965, Crimes Act 1958, Public Sector Management Act 1983 should all be used to the fullest extent to protect the public interest.

During the inquiry the Committee discussed tendering related issues with a number of officers from government departments and agencies. These officers provided information openly and freely to the Committee for which we are most grateful.

The Committee would be concerned if any of these officers were to become subject to any form of victimisation by management or other persons. The same concern is also expressed in relation to other witnesses or individuals who provided information to the inquiry.

Should such victimisation occur, it would constitute a breach of Parliamentary Privilege and would be viewed most seriously by the Committee.

Finally, in tabling this report I would like to recognise the support and efforts of Committee members, staff and in particular our researchers Mr Terry Ritson and Mr Walter Broussard and consultants.

The Honourable Gerald Ashman, MLC
Chairman
Economic Development Committee

FINDINGS

Finding 1.1

The Committee finds that given its importance to the growth of the Victorian economy, the VBCI should be classified as a key industry sector in terms of the State Government's Industry Policy and be provided with industry and facilitation assistance available to other key industry sectors identified in the Industry Policy.

Finding 2.1

The Committee finds that:
+ There is scope for the development and implementation of uniform tendering policies, procedures and guidelines for public sector works and services to improve standards of public service accountability probity, equity and overall efficiency of the tender process.
+ Where Bills of Quantities are provided there is less scope for variations in contract tendering prices to occur and where such variations do occur they are more easily identified.
+ The use of Bills of Quantities reduces tendering costs and results in savings on project costs.

Finding 2.2

The Committee finds that:
+ State Public sector tendering processes need to be audited and reviewed periodically to ensure that inefficient tendering practices are addressed; that probity and accountability of all VBCI participants is maintained; and that high tendering standards are set for the private sector to emulate.
+ Independent audits of tendering processes need to be conducted to ensure that departmental/agency conflicts of interest do not arise.

Finding 2.3

The Committee finds that uniform tendering policies and procedures need to be developed and implemented across all State Government departments and agencies in accordance with strategic management principles.

Finding 3.1

The Committee finds that Open Tendering, in conjunction with project specific and other general tender criteria, should be fully adopted (for State Public Sector Projects with a value in excess of $50,000) by all public sector departments and agencies, to increase the efficiency of public sector tendering practices and enhance competition within the VBCI.

Finding 3.2

The Committee finds that:
+ Tender assessment and selection for State public works and services in excess of $50,000 should be based on project specific and general tender selection criteria, and lowest price tendered; and
+ The financial viability of the lowest tendered should also be assessed in conjunction with financial capability and the credit rating of the tenderer.

Finding 3.3

The Committee finds that a central computerised database is needed for the purpose of ascertaining the historical performance capability of tenderers including their work performance and management and technical capabilities.

Finding 3.4

The Committee finds that the proposed public sector open tendering system for State public sector works and services in excess of $50,000 in value should be open to both domestic and international firms so that market competition is maximised. Also, new entrants should be encouraged to submit expressions of interest for the tendering of minor works and services of up to $50,000.

Finding 3.5

The Committee finds that:
+ The introduction of competitive tendering and the reform of the building certification system throughout Local Government provides a useful precedent for the application of competitive tendering principles in respect of all public sector building and construction works and services.
+ Competitive open market tendering should be applied within the State public sector over a three year period to achieve maximum benefits from competitive tendering.

Finding 3.6

The Committee finds that selective lists or Invitations-to-tender restrict competition and may result in corruption of managers of the tender process.

Finding 3.7

The Committee finds that the tendering process for State public works and services should provide for the payment of tenderers' fees only in circumstances deemed exceptional by the Minister concerned. Such circumstances could include situations where tenders are called and the project does not proceed or where the State might wish to acquire the technical expertise and intellectual property design.

Finding 3.8

The Committee finds that State Government departments and agencies should advertise on an annual basis, for expressions of interest from suppliers, for the submission of tenders in respect of minor works and services less than $50,000 in value.

Finding 3.9

The Committee finds that chief administrators of State government departments and agencies and senior managers should ensure that managers of the tender process are accountable and receive appropriate training (particularly in regard to the development of tender selection criteria, tender assessment, performance based measures, and business ethics).

Finding 3.10

The Committee finds that regular meetings of senior officers from all agencies involved in the letting of tenders should be held frequently for the exchange of information on tender activities and practices, and the reinforcement of public sector business ethics. There also needs to be more interaction between public and private sector managers involved in the tender process through interchange programs and seminars/workshops. Joint private and public sector participation is required if existing culture/practices are to be reformed.

Finding 3.11

The Committee finds that "purchasing" is not recognised as a career stream in the public service and this can be detrimental to the efficiency and probity of the tendering process.

Finding 4.1

The Committee finds that:
+ There is a need to develop codes of tendering and practice for all public sector projects (and guidelines which will assist in the interpretation of the codes) to reduce unethical practices and increase accountability of all VBCI participants.
+ The NSW Code of Practice and Code of Tendering, the Western Australian Code of Practice and the CIDA Code of Tendering, provide useful models for the development of similar Victorian codes.

Finding 4.2

The Committee finds that a joint VBCI public/private sector working group should be established to develop and implement codes of tendering and practice. Membership of the group should be on a non tenured basis so that private and public sector organisations have the opportunity to nominate new representatives every two years. The group should also develop initiatives to encourage industry self regulation; increased efficiency, and productivity; high quality standards; and high standards of business ethics by all industry participants. In view of the industry issues involved, the group should report to the Minister for Industry and Employment and receive policy/administrative support from his Department.

Finding 4.3

The Committee finds that the Victorian Codes of Tendering and Practice should clearly define the responsibilities of all VBCI parties, particularly in relation to industrial relations issues, contract administration requirements, and the achievement of best practice. The Codes should also detail sanctions for non compliance with the Codes and clearly define and prohibit, unethical tendering practices.

Finding 4.4

The Committee finds that the State Government can introduce a number of non legislative initiatives to encourage compliance with Victorian Codes of Tendering and Practice, these include:
+ The provision of networking and industry facilitation experience to firms which comply with the Codes.
+ The promotion of the benefits of the Codes to all VBCI parties through the media and educational programs.
+ The use of tender selection criteria which requires prospective tenderers to comply with all components of the Codes.

Finding 4.5

The Committee finds that there is scope to strengthen the Collusive Practices Act 1965 to support compliance by all VBCI parties with the Victorian Codes of Tendering and Practice.

Finding 4.6

The Committee finds that statutory declarations are a useful deterrent against tenderers engaging in collusive tendering practices

Finding 4.7

The Committee finds that the use of State Government purchasing power is available to encourage compliance with proposed Victorian Codes of Tendering and Practice.

Finding 4.8

The Committee finds that there is scope to provide increased training opportunities, for sub contractors and contractors to enable them to acquire small business management skills, contemporary knowledge of business ethics, and an understanding of basic contract law and tendering procedures.

RECOMMENDATIONS

Recommendation 1.1

The Committee recommends that:
+ The VBCI be recognised as a key industry sector by the State Government in terms of its Industry Policy Statement.
+ The Department of Business and Employment develop a detailed sector strategy for the VBCI industry sector, with the aim of improving the industry's efficiency and international competitiveness.

Recommendation 2.1

The Committee recommends that:
+ Uniform tendering policies, procedures and guidelines be developed and implemented for the procurement of public works and services by all State Government departments and agencies.
+ To improve the efficiency of the tender process and reduce associated tender costs, Bills of Quantities should be provided on all projects above $2 million and be considered for projects less than $2 million.
+ The accuracy of Bills of Quantities, where used, should be guaranteed by the contract and that "Concise" or "Abridged" Bills of Quantities should not be used by departments and agencies.
+ To reduce the incidence of risk, Australian Standard Contract (AS124), with appropriate special conditions of contract, should be used by all State Government departments and agencies.
+ The tender period should be extended where addenda are issued.
+ Tender receipt times should be at least:

- 14 days for minor works and services;

- 21 days for works and services up to $200,000; and

- Up to three months for large complex projects where detailed design work is required.
+ A State public sector Policy, Co-ordination and Review Working Group be established to develop uniform statewide tendering policies, procedures and guidelines for the acquisition and maintenance of public works and services.
+ The Policy Co-ordination and Review Working Group should comprise private sector consultants, senior managers from the Departments of Finance, Treasury, Planning and Development, and Business and Employment and other departmental/agency representatives on a rotational basis.
+ The Policy Co-ordination and Review Working Group should be chaired by a suitably qualified person and report to the Government through the Minister for Finance.

Recommendation 2.2

The Committee recommends that:
+ Random independent audits of departmental/agency tendering activities should be conducted regularly by the Auditor-General, to ensure maximum accountability and probity in the tendering process.
+ Audits should cover all project related tendering activities from the time tenders are let to the final completion stage of the project(s).
+ The Auditor-General must be provided with sufficient funds to conduct audits of the tendering process through employment of private sector consultants skilled in quantity surveying and audit techniques. These consultants should report directly to the Auditor-General.
+ The Auditor-General should investigate instances where departments have let a number of tenders for minor works and services instead of a single tender for a whole project as a means of circumventing open tendering principles.
+ Chief executives and senior managers of government departments and agencies must be accountable through their employment contracts for the efficiency and effectiveness of the tender process under their control.

Recommendation 2.3

The Committee recommends that strategic management principles should be applied to enhance the development and implementation of uniform tendering policies and procedures for all State Government works and services.

Recommendation 3.1

The Committee recommends that State public sector building and construction projects in excess of $50,000 in value should be subject to open market tendering in conjunction with project specific and other general tender selection criteria.

Recommendation 3.2

The Committee recommends that:
+ Project specific and general tender selection criteria should be developed in support of the proposed open market tendering system for State public works and services;
+ Project specific and general tender selection criteria guidelines should be developed by the proposed Policy Coordination and Review Working Group. Where cost effective, project specific selection criteria should be outsourced to the private sector;
+ Project specific tender selection criteria should include benchmarks (set at international standards) which would need to be met or exceeded by tenderers; and
+ Tender selection and assessment for State public sector works and services should be based on the most appropriate lowest price in conjunction with project specific and general tender selection criteria.

Recommendation 3.3

The Committee recommends that:
+ A central computerised database should be established for the purpose of ascertaining the historical performance capability of tenderers including their work performance and management and technical capabilities.
+ This database containing the past history of work performance of tenderers should be put to open tender to ensure "value for money" and access to the latest technology.
+ Tenderers should have the right of appeal against records of their past work performance, as recorded on the central database, initially to the officer-in-charge of the database, and finally, to the Ombudsman.
+ The Minister for Finance should be responsible for the letting of the tender for the central database and selection of the successful tenderer.
+ Cabinet should determine the appropriate Ministry for administration of the database.

Recommendation 3.4

The Committee recommends that:
+ Market competition should be maximised under the proposed open market system for State public sector works and services, by opening the tender system (for works and services in excess of $50,000) to both domestic and international firms;
+ The tender period should be set at a sufficient minimum (14 days) for all projects in excess of $50,000; and
+ There should be no barriers to tendering thus providing every encouragement for new entrants to tender for State public sector works and purchasing contracts.

Recommendation 3.5

The Committee recommends that open market tendering for State Government public sector works and services in excess of $50,000 should be introduced over three years across all State Government Departments and agencies.

Recommendation 3.6

The Committee recommends that:
+ Selective lists or invitations-to-tender should only be used with ministerial approval in circumstances such as the acquisition of works and services with specialised applications, responses to emergency situations or in situations where there is a single source of supply.

Recommendation 3.7

The Committee recommends that:

The tendering process for State Government works and services should include provision for the payment of tenderers' fees in exceptional circumstances and only with the approval of the Minister concerned.

Recommendation 3.8

The Committee recommends that tenders in respect of State public sector minor works and services of less than $50,000 in value should be selected on the basis of lowest price and quality assurance standards.

Recommendation 3.9

The Committee recommends that chief administrators of State government departments and agencies and senior managers, should provide appropriate training opportunities for staff involved in the management of the tender process.

Recommendation 3.10

The Committee recommends that Victorian public sector efficiency be enhanced through inter-departmental/agency exchange of information on tendering activities and joint public/private sector interchange programs. This should be the responsibility of the Minister for Finance.

Recommendation 3.11

The Committee recommends that the Public Service Commissioner investigate the feasibility of establishing a purchasing career stream within the Victorian public sector to raise ethical standards and efficiency levels in respect of all tendering activities.

Recommendation 4.1

The Committee recommends that:
+ Codes of tendering and practice and associated user guidelines should be developed to provide minimum standards of acceptable behaviour within the VBCI.
+ The Victorian codes of tendering and practice should be tailored to meet VBCI specific needs.
+ The NSW Code of Practice and Code of Tendering, the Western Australian Code of Practice and the CIDA Code of Tendering should be used as guides for the development of the Victorian codes.

Recommendation 4.2

The Committee recommends that a VBCI working group, with joint public/private sector membership, should be established to develop and implement Victorian Codes of Tendering and Practice and initiatives which will encourage VBCI self regulation, and efficiency.

The proposed VBCI working group should, in particular, consider ways by which unethical tendering practices can be addressed; whether it is feasible to introduce standard contracts for both public and private sector building and construction projects. It should also consider VBCI training requirements, quality assurance initiatives, and other EDI techniques to improve the productivity of the tender letting process.

Recommendation 4.3

The Committee recommends that the Victorian Codes of Tendering and Practice:
+ Reflect the current State Government's industrial relations Initiatives to reform workplace practices in the VBCI.
+ Clearly define the responsibilities of all VBCI parties in respect of all elements of the Codes.
+ Discourage unethical tendering practices.

Recommendation 4.4

The Committee recommends that the State Government encourage VBCI parties to comply with the Victorian Codes of Tendering and Practice by promoting the benefits of the Codes to all parties; by providing networking and industry facilitation assistance to firms/individuals willing to comply with the Codes; and by ensuring that tender selection criteria requires all tenderers to act in accordance with the Codes.

Recommendation 4.5

The Committee recommends that the Attorney General review the Collusive Practices Act 1965 to provide for:
+ Increased and wider ranging penalties for collusive tendering practices.
+ Clearer definitions of collusive tendering practices, "goods" and "services".

Recommendation 4.6

The Committee recommends that the proposed Victorian Codes of Tendering and Practice should stipulate the use of statutory declarations to limit collusive practices.

Recommendation 4.7

The Committee recommends that State Government Departments and Agencies should utilise Government purchasing power as the last resort to ensure that tenderers comply with the proposed Victorian Codes of Tendering and Practice.

Recommendation 4.8

The Committee recommends that the Minister for Tertiary Education and Training request the State Training Board to examine the feasibility of including small business management subjects in TAFE related building and construction training courses.

Evidentiary Powers of Parliamentary Committees - October 1993

CHAIRMAN'S INTRODUCTION

This is the first Report of the Economic Development Committee of the Parliament of Victoria.

The terms of reference for the Committee are broad and far reaching and are outlined in detail in the body of the Report.

The first reference to the Committee deals with the tendering procedures for Government works and the equity in that tendering process.

The second reference relates specifically to the building and construction industry and requires the Committee to review and make recommendations in the planning process in Victoria and to investigate industry productivity and identify, where appropriate, changes to further improve productivity.

With the broad scope and complexity of the references before the Committee, the Committee determined that the most appropriate way in which to manage the reference was to segment the reference into three sections.

The first issue to be addressed by the Committee was to be the tendering process. As a result of that decision this first Report makes recommendations only in relation to the issues of collusive tendering, cover prices and payment of unsuccessful tenderers' fees.

The Committee has not as yet addressed, in detail, the issue of tendering codes of practice.

Whilst some may argue that this Report is premature, the Committee took the view, given the evidence before it, that a task force should be established within the Justice Department to further pursue the three issues of collusive tendering, cover pricing and unsuccessful tenderers fees as identified.

To delay the Report pending the Committee's consideration of tendering codes would be to delay detailed investigation of the three practices identified by the Attorney-General's Task Force, recommended in this Report.

In preparing this Report, the Committee has made direct approaches to Government departments, Ministries and industry and employee organisations. A series of public hearings has been conducted and written submissions received from the industry and general public. The Committee has also drawn heavily on other contemporary inquiries and research studies.

The Committee in tabling this Report acknowledges the support from some sectors of the industry, but also notes that there has not been a significant level of support to the Inquiry from individual employers and to date no submission has been received from the Victorian Trades Hall Council or any union representing employee interests in the building industry.

The Committee also notes, with some concern, the unwillingness of the Australian Federation of Construction Contractors, National Secretariat, to appear before the Committee to clarify evidence submitted by the AFCC's Victorian Division prior to its closure on 8th April. This action evidently casts a shadow on that organisation's membership.

With the tabling of this Report, the Committee emphasises its intention to take further evidence of the code of tendering practice, planning issues and move to the reference on productivity and work practices, and in particular the Committee needs to look with a great deal of scrutiny at the sub-contracting area.

The Committee will be seeking further public input to these issues by way of public hearings and written submission.

In tabling this first Report I would like to acknowledge the support and efforts of the Committee Members and Staff in achieving this report, in what has been a tight time frame.

The Honourable Gerald Ashman, MLC
Chairman
Economic Development Committee


FINDINGS

      • procedures for a Code of Tendering;
      • evaluation of tender documentation for evidence of corrupt practices; and
      • accountability, training and monitoring of officers responsible for evaluating such documentation.
    • The Committee finds, in relation to all Victorian Government Departments, statutory authorities and agencies, a lack of uniformity in:

      • consider, but not be confined to, issues dealing with:

        - public versus select tendering;

        - opening of tenders;

        - monetary limits for use of statutory declarations;

        - public scrutiny of tender lists;

        - conditions of contract;

        - specifications, standards and variations;

        - auditing standards;

        - registration of contractors;

        - payment of contractors; and

        - monitoring procedures;

      • ensure uniformity of policy for tendering procedures.
    • The Committee finds that it will need to further investigate tendering procedures and the development of a Code of Tendering for use by all Victorian Government Departments, agencies and statutory authorities which will:

      • not been uniform across Victorian Government Departments, statutory authorities and agencies in terms of type of declaration used, minimum monetary threshold applied and cross-evaluation between departments; and
      • contributed to industry confusion and potentially illegal practices.
    • The Committee finds that the use of statutory declarations in relation to government tendering process has:

      • not been able to identify in tender documentation any usage of statutory declarations to determine involvement of contractors in collusive tendering.
    • The Committee finds that, in regard to tendering for local government projects, it has:

      • collusive tendering;
      • cover pricing;
      • payments of unsuccessful tenderers' fees;
      • qualifications to tenders; and
      • industry association agreements.
    • The Committee finds that, in regard to Victorian Government works, corrupt practices have been in existence for many years and have included:

      • ten companies have admitted involvement in cover pricing;
      • four companies have admitted involvement in agreements for unsuccessful tenderers' fees; and
      • eighteen companies have refused to sign statutory declarations which state they have not been involved in collusive practices.
    • The Committee finds that, in relation to corrupt practices involving tendering on Victorian Government works, at the time of writing:

      • corrupt practices that occur in the public sector have also occurred in the private sector; and
      • there is a need for the Committee to further investigate these issues.
    • The Committee finds that evidence before it suggests that:

      • collusive price fixing in the areas of roofing tiles, bricks and plasterboard;
      • collusive practices extending to the labour involved in such supply; and
      • the need for further investigation of these issues, including market barriers to entry, by the Committee.
    • The Committee finds that, in relation to its hearings to date concerning the building and construction industry and the supply of goods and services to that industry, there is evidence of:

      • work practices affecting efficiency and productivity within the building and construction industry as they relate to both public and private sector works;
      • tendering codes;
      • sub-contractor activity;
      • planning issues; and
      • provision of services outside of building and construction areas to government.
    • The Committee finds that there is a need to further investigate:

      The Committee finds there is a need to further report on its difficulties as they relate to limitations on the powers of Parliamentary Committees in respect of individuals and documentation not extant within the State of Victoria.

        • review accountability, training and monitoring mechanisms of officers involved in tendering processes; and
      • The Committee recommends that the Victorian Government instruct all Victorian Government Departments, statutory authorities and agencies to:

        The Committee further recommends that regulations under the Annual Reporting Act 1983 be amended to include such information.

        • adopt a standard form of statutory declaration for use in tendering for government works and that the form specify information in relation to collusive practices, cover pricing, industry association fees and the retrospectivity of such practices.
        • co-ordinated by the Taskforce (as proposed in Recommendation 3.3).
      • The Committee recommends that the Victorian Government instruct all Victorian Government Departments, statutory authorities and agencies to:

        The Committee further recommends that the use of such standard statutory declarations specifying retrospectivity be:

        • commence usage of an approved form of statutory declaration for local government projects with monetary limits appropriate to particular authorities.
      • The Committee recommends that the Minister for Local Government require local government authorities to:

        • investigate potentially illegal practices as they relate to contractors, subcontractors and industry associations in regards to Victorian Government works;
        • recover any monies owing to the State as a result of such investigations;
        • initiate, where appropriate, due process; and
        • liaise when necessary with the Economic Development Committee and the Auditor-General.
      • The Committee recommends that the Attorney-General, using the powers of the Collusive Practices Act 1965 and other relevant Acts, be instructed to set up a Taskforce, to:

        • companies and individuals involved in such supply where the Committee has obtained preliminary evidence that illegal practices have occurred; and
        • companies and individuals involved in the delivery, assembly and on-site labour component of such supplies and goods.
      • The Committee recommends that, in relation to the supply of building and construction goods and services for government works, the Attorney-General be requested to investigate in the first instance:

        The Committee further recommends that the Attorney-General refer any identified illegality to the appropriate State or Commonwealth authority.

    • Recommendation 2.1

      Recommendation 3.1

      Recommendation 3.2

      Recommendation 3.3

      Recommendation 3.4

  • Finding 2.1

    Finding 2.2

    Finding 3.1

    Finding 3.2

    Finding 3.3

    Finding 3.4

    Finding 3.5

    Finding 3.6

    Finding 4.1

    Finding 4.2

    RECOMMENDATIONS