What you will learn:
Since the 1980s, Public Sector engineering departments have undergone a dramatic shift in capacity……“The core of the issue is a dramatic ‘hollowing out’ of government engineering as successive Governments have driven a strategy of outsourcing to reduce costs”. Actions have been taken, for instance in the NSW Transport sector in particular in recognising and addressing deficiencies in public sector engineering capability. How well is this issue being managed?
New Sam Wilko Advisory Blog by Peter Wilkinson
Many of you who know me would be aware that I commenced my working life as a Cadet Engineer with the NSW State Rail Authority. In my era, the NSW State Government offered a range of technical Cadetships in the Transport, Water and Electricity sectors just to name a few. If I recall correctly, in 1985 over 50 Cadetships were offered by State Rail alone. The year after, 14 Cadetships were offered and the year after that only 3 Cadetships were available. This reflected the downward spiral in offered cadetships across the public sector at that time and is the core issue identified in “Rebuilding Government’s Engineering Capacity – the winding road to procurement expertise”, the cover story of the May 2014 edition of Engineers Australia.
The article defines the core issue as follows: “Since the 1980s, Government engineering departments have undergone a dramatic shift in capacity……“The core of the issue is a dramatic ‘hollowing out’ of government engineering as successive Governments have driven a strategy of outsourcing to reduce costs”.
The identified consequences include:
- Loss of Government’s ability to consider the engineering implications of a project and to properly document procurement requirements. This is highly likely to reduce the cost effectiveness of a project in the long run and evidence is cited in support of this assertion. A particular manifestation of this issue is “scope creep” with significant cost implications via variations, disputes and/or poor project outcomes;
- Loss of ability to make informed technical decisions regarding large and small scale engineering procurement. This in turn led to a rise in popularity of alliancing contracts as (amongst other intentions) a commercial mechanism to manage public sector deficiencies by drawing on the engineering expertise of the private sector participant. An alternative approach of adopting legal protections in favour of the public sector (gaining popularity with the market moves towards Public Private Partnership (PPP) contracts) can result in unreasonable risk transfer to the private sector provider;
- Loss of ability to assess procurement standards for conformance with the local regulatory environment and suitability in meeting local performance challenges.
The source document for this article is the 2nd edition (2012) of the Engineering Australia Report: “Government as an Informed Buyer – How the public sector can most effectively procure engineering-intensive products and services”. The Report offers advice on a way forward, including the two key Recommendations and the accompanying commentary reproduced below:
Recommendation 1: Agencies should explicitly recognise that procurement is a strategic and core function and focus their activities on developing procurement systems that ensure alignment between procurement and multilevel governmental objectives.
While once procurement was an administrative function used to obtain supplies for their in-house groups to deliver services, today agency procurement results in the private and nongovernment sectors actually delivering public services and public goods. Given the centrality of procurements to achieving governmental outcomes, the last decade has seen all Australian governments work towards improving procurement. Most effort has been focused on improving the procurement cycle and its constituent stages, with less focus on improving the procurement system.
Recommendation 5: Agencies undertaking capability and maturity assessments of procurement systems should incorporate engineering expertise considerations into their methodology and outcomes.
Agencies are increasingly using capability and maturity assessment to drive system improvements. When these assessments examine procurement of engineering-intensive products or services, it is essential that agencies consider engineering expertise issues. This requires agencies to understand how the maturity level of engineering expertise can be defined, how the process of engineering expertise provision operates, and which factors are important in assessing their engineering capability maturity level.
Actions have been taken, for example in the NSW Transport sector in particular in recognising and addressing deficiencies in public sector engineering capability. For instance:
- Senior engineering roles have recently been created in Rail as well as in Roads and Maritime Services within Transport for NSW; and
- A “Market Sounding” phase, which provides an opportunity to take private sector input on board during the procurement phase of a major project, is more commonly included in major asset procurement.
Much work remains. For instance, there has been a recent trend towards liberalisation of local Rail standards to recognise the applicability of international expertise and experience in areas such as vehicle design for crashworthiness and fire and life safety performance in confined spaces such as tunnels. This requires TfNSW as the procurement agency to maintain capability in assessing standards for local applicability, recognising the unique elements of the Australian environment and the expectations of local stakeholders. The extent to which this approach is successful will be borne out in the performance of a number of current major transport projects such as North West Rail Link and the Sydney CBD and South East Light Rail Extension. It will take some years for reliable evidence to materialise. In the meantime, it is worth noting that many decades of engineering experience and expertise have resided within the public sector and it would be an enormously expensive exercise to re-learn these lessons.
How well do you believe this issue is being managed?
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BE (Mech), MBA