Victoria’s Move on Collaboration and Risk Allocation a Positive Step

Roads Australia (RA), the peak body for roads within an integrated transport system, says the Victorian Government’s decision to modify its approach to risk allocation on the North East Link is a sensible and responsible approach that will benefit industry and the community.

Industry has long been concerned by the adverse impacts of a ‘hard line’ risk transfer approach, which is particularly unsuitable for large, complex projects,” said RA President Michael Bushby.

“This approach often leads to situations where unknown risks and complexity are significantly underestimated, or insufficient time is given for independent due diligence in the tender stage.

“In our recently released Procurement Reform Report, RA recommended that the Victorian Government move towards a more collaborative model, working with industry to define and price risk at the start of the process, allowing governments to set up project contingency funds to cover major risks.

“This approach makes better use of the skills and experience of all parties to innovate collaboratively, more effectively assess risk, help ensure projects are priced correctly and are delivered using the most appropriate model,’ Mr Bushby said.

‘It is more important than ever that industry and governments work together to ensure projects are delivered in a way that maximises benefits to the community and enables industry to get the best use of its capital and people.

“RA is pleased that the Victorian Government has listened to industry and recognised the potential benefits of this contracting model for the North East Link, which will see government commit resources to helping resolve risks around utility removal, contaminated materials and third party negotiations.

“This announcement also builds on the Victorian Government’s recent decision to adopt a more collaborative procurement model for its Suburban Roads Upgrade program, which RA previously noted would provide wider opportunities for all contractors and suppliers.

“Efficient delivery of the pipeline of major transport infrastructure projects will be central to driving post-COVID economic recovery and supporting employment growth.

“Adopting a more collaborative approach to risk identification and allocation will ultimately benefit governments, contractors and the community by reducing the prospect of delays, litigation and cost overruns. This will help ensure the economic and community benefits of projects can be fully realised.

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