The Western Australian (WA) Government has recently rolled out a new initiative designed to stimulate participation and competition in the procurement process for state infrastructure projects with its Bid Contribution Policy for Major Projects.
The government’s statement reads in part:
The policy provides a clear, consistent and transparent approach to providing financial contributions for eligible bids on major non-residential projects of value greater than $100 million and others that are considered high-risk or comprise high complexity, including strategic regional projects.
Proponents invited to the second stage of eligible procurement processes will be able to apply for a financial contribution up to $750,000 towards their bid costs, with the State to be provided unencumbered use of the intellectual property associated with each bid.
This move aligns with similar efforts by the New South Wales (NSW) and Victorian Governments to offset bid costs for large or complex projects in an effort to encourage greater competition, better bids and better value for money for taxpayers. However, the Western Australian Government’s clause around the use of IP is a notable aspect that warrants some examination.
Here, we break down some high level pros and cons of such a policy.
Financial incentives and opportunities
1. Financial support for tenderers
In the Western Australian case, the policy, which was developed in consultation with the Master Builders Association WA and tier 1 and 2 contractors, offers substantial financial support for tenderers bidding on complex projects such as hospitals, correctional facilities and cultural buildings. The actual figures on what construction companies spend on their bids is lacking, making precise industry-wide estimates challenging. Anecdotally though, we are aware that it can be as high as 2% of a contract’s value, with an average of 1 in 5 success rate. Recouping bidding costs is therefore a welcome financial relief in a high stakes, highly competitive and low margin industry.
2. Improved participation
By reducing the financial barriers to entry, the policy encourages a broader range of suppliers to participate. This heightened competition can lead to more diverse and innovative solutions, benefiting both the government and the public.
3. Balancing government interests and private sector innovation
The policy seeks to ensure the state receives value for its financial contributions to bids, and aligns with the Western Australian government’s broader commercialisation and innovation approach. That is, providing opportunities for IP to be used or commercialised for the benefit of Western Australians.
Intellectual property concerns
Despite the financial benefits, the policy mandates that the government gains unencumbered use of the intellectual property (IP) associated with each bid. This requirement invites a couple of key considerations:
1. Loss of control
Tenderers must consider the implications of relinquishing control over their IP. Innovations and unique solutions, once shared, become accessible to the government and potentially to other competitors. This could diminish the competitive advantage initially secured by these innovations. This might lead to ”deterrence of innovation” where companies might be hesitant to include their most innovative ideas in bids if they risk losing control over their IP.
2. Competitive disadvantage
There is a potential risk that competitors could benefit from the shared IP without compensation. This could lead to a scenario where the original innovator does not fully reap the benefits of their creativity and investment. This could potentially lead to disputes around the ambiguity of ”unemcumbered use’ or in determining fair compensation for IP rights. Additionally, using IP in specific projects might limit a bidder’s capacity to leverage the same innovations in other markets or projects, potentially hindering future revenue avenues.
Lessons from other jurisdictions
Examining the implementation in regions such as NSW and Victoria shows that the policy’s effectiveness largely hinges on how well it is executed and how aligned it is with market conditions. While the policy intends to foster competitive tension by promoting strong bids, the lack of specific data on its success makes it a work in progress. There is a need for ongoing assessment to ensure the policy meets its intended objectives and aligns with the expectations and needs of bidders.
Key takeaways
The WA Government’s Bid Contribution Policy represents a bold attempt to level the playing field in government procurement. While it provides financial incentives to encourage participation, the implications for intellectual property and potential impacts on competitiveness present new challenges for major contractors.
As with any significant policy, the ultimate verdict on its success will depend on its implementation and the feedback from those who engage with it. Suppliers considering participation should weigh the financial support against the potential implications for their intellectual property and competitive positioning.
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