We are pleased to announce the launch of the first edition of our Public Sector Contracting: State of The Market Report.

Our key findings:

  • COVID-19 appears to be responsible for a $5 billion loss in awarded public sector contracts in Q3 alone – down nearly 50% on the same period in 2019.
  • Whilst there is much talk of an ‘infrastructure bonanza’ in new government contracts ($3.9bn of major project infrastructure spending), this will struggle to fill the rapid drop in the value of routine contracts.
  • All sizes of contracts have been impacted – micro contracts (less than $50,000) have seen as much decline as those over $50 million
  • However, not all States have been equally impacted – whilst most States increased their spending over Q1-Q3 this year, NSW has dropped by 18% and Victoria, the epicentre of the second wave of COVID-19, saw a drop of 63%.
  • As a professional services provider to the sector, our concern is that with a smaller number of contacts on offer there may be competitive pressure to bid for work below the market rate and on a basis where the contractor carries a higher level of risk than is usual.  Whilst contractors may rejoice in being awarded these contracts at the time, contractors may come to regret agreeing to these conditions when competition subsides. If these risks materialise contractors may be left with an unusually high level of unforeseen costs, crippling their business.

Recommendations:

  • The government could significantly enhance economic recovery within the sector simply by resuming the normal processing of contracts.
  • Get your house in order for when things pick up.  This downturn has been manufactured by COVID-19 so as that (hopefully) continues to abate, work will pick up. You need to be in good shape to make the most of this.
  • Try to mitigate the risks associated with taking work on by undertaking contract reviews.  We have developed a contract assessment tool (free to use) which will allow you to triage a contract before you sign it.
  • Stay on top of upcoming opportunities by following our Tender Tracker.  Every fortnight we extract the currently advertised tenders from each of the state and federal governments, and make them available to you to view.  You may have whizzy software or subscriptions that will do this for you, but if not, this should save you a lot of google time.  You are welcome!

 

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