Many current practices regarding contracting by federal and state governments are unfair, says a leading building and construction industry lobby group.
Master Builders Australia says the federal government must use a review cof ontract law to ensure that all forms of contracting conducted by government authorities and agencies are performed in a fair manner according to best practice standards.
In a submission to the Attorney General outlining priorities for contract law reform, Master Builders has urged the government to lead by example in the reform of on-the-ground practices.
As it stands, Master Builders Chief Executive Wilhelm Harnisch says, it is not uncommon for government departments and agencies at both the federal and state level to engage in unfair practices when dealing with the construction industry.
Harnisch says governments often include ‘termination for convenience’ clauses, which allow the department or agency to terminate the contract at will and without notice or reason.
Another area of concern relates to clauses which permit governments to alter the scope of a project at any time, meaning that if a contractor has tendered on a $10 million project, the government could at will change it to a $15 million project and expect the winner of the tender to stick to its price and margin for the smaller project.
Alternately, such clauses also allow the government to reduce the scope of a project at any time.
“These practices would not be permitted in the private sector,” Harnisch says. “The government should set a positive example and play by same set of rules it creates for other parts of the economy.”
These statements follow a submission by Master Builders Australia to a discussion paper released by the Attorney General in March exploring the scope of reforms and improvements to Australian contract law.
In its submission, Master Builders outlined 10 key recommendations. It says the harmonisation of federal and state law, particularly with regard to security of payment and proportionate liability, should be a main focus of any reform.
Master Builders also says the Commonwealth should establish a model code of conduct for its departments and agencies.
“The Attorney General administers a model litigation program that any department wanting to engage in litigation must follow,” Harnisch says. “This model should be recreated for contracting.”
Above all, Harnisch says the government must use the Attorney General’s review to clean up public sector contractor practices.
“It [the review] is an opportunity for the government to show leadership and set a best practice benchmark for contracting, and then of course, abide by this best practice,” he says.