WA Election: Government contract overruns

Some of Western Australia’s biggest contracts let by the State Government have caused financial hardship for subcontractors who have not been paid for project work.

The solution this week is to quarantine funds from the project contractor.  It sounds simple, but it’s not. Quarantining without reducing waste and contract overruns will simply drain the contractors’ cash flow more quickly and hasten any bankruptcy.

Perth Now, Sunday Times, 5 July 2016

Perth Now, Sunday Times, 5 July 2016

Julie Matheson for Western Australia calls on the State Government to accept some of the blame for the bankruptcies and non-payment to subcontractors as the initiator of the project.

Project contractors are caught in the cycle of uninformed government departments letting contracts based on deficient specifications. This deficiency creates delays, over-runs, re-work and waste1 which may lead to bankruptcy if none of this expenditure was factored into the contract.  This cycle is accelerated in politically critical projects where “ready-fire-aim” is the basic approach, and considered engineering advice is not requested or ignored.

Many State Government departments have gone through a cost cutting process of de-engineering their expertise in a cost cutting exercise leaving the department and the tax payer as uninformed clients who cannot properly instruct consulting engineers, ensure the engineering design is fit for purpose or even built to that design.  This was the finding of The Productivity Commission, Public Infrastructure, 2014 Inquiry that estimated $25 billion2 will be wasted in Australia over the next 10 years.  This would cover every unpaid subcontractor many times over.

While government departments are subject to cost cutting without understanding the long-term consequences, private companies are now starting to understand the importance of in-house engineers to ensure a profitable long-term operation.  This is best illustrated by Chevron3 deciding to bring engineering design back in-house following a disastrous two month outage just months after starting their $54Bn Gorgon LNG plant.

The State Government must accept some blame in project manager bankruptcy and non-payment of subcontractors.  De-engineering and department cost cutting has been the source of project overruns and deficient design specifications.

Julie Matheson for Western Australia calls on the State Government to re-engineer its departments to ensure understanding of the lifetime cost of public projects, and establish a Professional Engineers register in Western Australia, as has been done in Queensland and is being done in Victoria.  This will ensure that accountants, economists or lawyers will not be making, or ignoring, vital engineering decisions with the burden of costs to subcontractors, or the public tax payer, over the lifetime of its public and private infrastructure.  Ref.  Professionals Australia, South Melbourne, Victoria 3205

Contact Julie Matheson | e: jcmatheson@bigpond.com | m: 0409 294 495

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