Pursuant to the Queensland Procurement Policy 2021, the Queensland Government may apply certain ‘Best Practice Principles’ (or BPPs) to major state government projects (valued at $100 million and above) and declared projects, in accordance with guidance issued by the Department of Energy and Public Works and the Office of Industrial Relations. In practice, the application of these broad policy objectives is causing concern, legal risk and additional red tape for contractors in the building and construction industry.
Where the BPPs apply to a building and construction project, the relevant government department or agency must adopt a procurement strategy which involves the application of the BPPs via its evaluation criteria and contract clauses. In particular, head contractors must demonstrate how their offers will address the three principles as part of the non-price selection criterion, being:
A weighting of up to 30% may be applied for the BPPs (or a total of 40% with the local benefits test where applicable), though this will depend on the circumstances and characteristics of the particular project.
The Queensland Government’s stated purpose of the industrial relations principle is to ensure a quality workforce is attracted and retained, and to enable completion of the project with minimal disruption, by adopting ‘modern and progressive industrial practices’.
This principle is a mandatory evaluation criterion, with all contractors commonly required to demonstrate:
The commitments made by successful tenderers in relation to the BPPs and BPICs will be included in the terms and conditions of relevant contracts and subcontracts on a cascading basis.
While head contractors may have the resources to address this criterion and evaluate potential subcontractors, this may become more difficult and burdensome ‘down the chain’, particularly for small and unsophisticated subcontractors and commercially unviable for others.
BPICs are conditions that are intended to be project specific and are required to be developed by the relevant department or agency in consultation with the Department of Energy and Public Works, and approved by the Executive Government.
Tender documentation usually states that it is not mandatory that contractors have or enter into an agreement with a union in order to demonstrate that terms and conditions of employment of relevant workers are at least equivalent to the BPICs, and that contractors are not required to make any commitments that would breach any laws or the Commonwealth Code for the Tendering and Performance of Building Work 2016 (Building Code).
Theoretically it is assumed that the manner in which an individual contractor may choose to address the BPICs criteria may vary, depending on factors such as their size, existing business and particular circumstances. For example, whether they have an existing enterprise agreement or employment contracts with equivalent terms and conditions; whether they intend to engage further subcontractors or not; and how proposed arrangements may impact other projects and parts of their business.
The tender documentation may require that head contractors provide some ‘guidance examples’ to potential subcontractors, the only example given by the State Government being ‘collective agreements that provide wages and conditions that attract a high quality and skilled workforce‘.
While the Australian Building and Construction Commission (ABCC) has publicly stated that the tender package and BPICs issued for the Centenary Bridge Upgrade Project did not breach the Building Code or relevant laws, it has raised concerns that contractors should be wary of the legal risks they face in tendering for BPP projects.
This concern arises from the fact that a BPIC evaluation criteria effectively ‘encourages’ tenderers to adopt an enterprise agreement and/or the same or similar terms and conditions of employment (including pay rates) as the BPICs.
When a head contractor or subcontractor communicates and applies such an evaluation criterion to subcontractors and sub-subcontractors respectively, they need to be careful to ensure that they do not inadvertently contravene the provisions of the Building Code, Fair Work Act 2009 (Cth) and/or the Building and Construction Industry (Improving Productivity) Act 2016 (Cth).
In order to mitigate the risks associated with the implementation of an evaluation criteria based upon BPICs, it is therefore recommended that all contractors engaged on BPP projects seek appropriate legal advice in relation to commitments made in offers, the process for engaging others and the terms and conditions set out in tender and contract documentation. Team members should also receive appropriate training and guidance on the relevant criteria and evaluation processes to ensure appropriate communications with contractors who may wish to be involved in the project.
This may be difficult to manage with smaller and less sophisticated contractors and records in relation to the tender and evaluation process should be kept to justify the reasons for subsequent decisions.
Gadens can assist employers by advising them on their obligations. To see how Gadens may be able to assist, please contact Jonathon Hadley, who leads the employment relations team in Brisbane.
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Jonathon Hadley, Partner
Sarah Toohey, Partner