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Major Projects Skills Guarantee Frequently Asked Questions
Q. Why is the Government putting this initiative in place?
A. The Government has made election commitments to grow jobs and to promote vocational training. The Major Projects Skills Guarantee actively delivers on these commitments through leveraging new employment opportunities and more vocational training from its major projects procurement program, particularly for young Victorians.
The Major Projects Skills Guarantee is expected to:
· provide more employment opportunities generally from Government funded projects
· promote the uptake of vocational training
· boost the number of apprentices, trainees and cadets
· upskill people in areas of key skills shortage
· create more entry level opportunities for young Victorians into real careers.
Q. How was the minimum 10% target determined?
A. The 10% figure is the starting point. The key objective of Major Projects Skills Guarantee is to create more apprentices, trainees and cadets, and more employment overall – but to also minimise the impost on employers. The target will be reviewed after 12 months of operation.
Q. How was the $20 million threshold determined?
A. The threshold is a key indication of how many Victorian projects will be captured by the policy.
It was important not to set the figure too high as to limit the number of Victorian projects captured by the policy and therefore limit the beneficial outcomes of the policy but also too low as to create significant impost on employers and higher costs.
The threshold for applicable projects will also be examined after 12 months of operation.
Q. Will the initiative apply to services?
A. At this stage the Major Projects Skills Guarantee will only apply to publicly funded building, construction, infrastructure, civil engineering and other capital projects.
However, the 10% requirement applies to contract works as a whole - extending to all of the works specified as part of contracts for those projects.
Where an infrastructure or civil works project for example has a significant maintenance package as part of the contract, then this would be considered part of the contract, and the labour hours involved in that maintenance package would be included as part of the requirement.
Q. Will it apply to programs as well as projects?
A. The Major Projects Skills Guarantee will be applied to individual projects valued over the $20 million threshold. A program or project might be valued over the $20 million threshold but might only involve one or two contracts valued above the threshold. On the basis that the Skills Guarantee is applied to contracts rather than programs or projects, the 10% requirement is applied only to those contracts valued over $20 million, and not to contracts valued under $20 million even though they might be part of larger project or program.
In the event where a single large contract valued over the $20 million threshold, and the works are broken down into individual contract packages valued under the $20 million threshold where the smaller packages are contractually part of the initial large contract, the Major Projects Skills Guarantee will apply to those packages by being applied to the initial contract as a whole.
Where the principal contractor has no ownership of the smaller packages and they are being tendered separately, then the policy would not apply if they are valued under the threshold.
Q. Will the 10% requirement apply to each part of a project valued over $20 million?
A. The initiative will establish a minimum target of 10% of total estimated labour hours - all hours needed to complete the whole contract - so it’s directed at the contract as a whole and not at individual parts or stages or packages.
Contractors will need to demonstrate how they propose to comply with the 10% requirement across the life of their project as part of their Compliance Plans submitted at the short-listing stage.
While contractors will need to regularly report on their compliance, whether or not they have achieved the requirements under Major Projects Skills Guarantee will be determined at the end of the project.
Q. Why isn’t the policy using precent of head-count rather than precent of total labour hours? Wouldn’t that be easier?
A. Total contract labour hours provides a more accurate of way of assessing and measuring the real extent to which apprentices, trainees and cadets are actually used in delivering the schedule of work specified in contracts. It’s the reason why all other states that have similar mandatory apprentice and trainee use this approach as opposed to headcount.
Q. How were the deemed hour formulas determined?
A. The formulas are based on data from a sample of various types of Victorian projects that exceeded the $20 million value threshold. This data was used to provide the Department of Economic Development accurate ratios for extracting the labour component from contract value, and a labour hour quantum based on Victorian industry experience for converting labour contract value into total contract labour hours. This work was performed by experienced industry cost estimators.
Q. Who is going to the carry the responsibility for complying with the 10% requirement?
A. The 10% requirement is going to be part of the general terms of contract between the state and principal or main contractors. It will be their contractual obligation to make sure the project hits the minimum 10% target. It is expected that this will be passed on to their main sub-contractors and to sub-sub-contractors who will be doing most of the actual hands on work where apprentices, trainees and cadets are typically involved.
This is the same approach used by the Victorian Industry Participation Policy to implement their local sourcing requirements - they also rest with the principal contractor who then passes them through the sub-contracting layers.
Q. Won’t this policy increase regulation for contractors?
A. There may be some additional administration for the contractor.
However, discussion that the Department of Economic Development has had with the industry suggests that contractors will have the necessary data on hand, and that that they will be able to manage the policy requirements of procuring and delivering government projects. It’s important to note that contractors already prepare, report and deliver related information for the Victorian Industry Participation Policy. Industry participants have suggested that the Major Projects Skills Guarantee will be seen as a particular extension of VIPP and will be managed in the same way.
Q. What if a contractor can’t comply due to factors beyond their control?
A. The policy was designed to be balanced and reasonable. If a contractor has compelling reasons to argue that they simply cannot aim for, or achieve compliance with the 10% through no fault of their own, then they’ll be able to make application for exemption from the policy. That will need to involve some demonstrable and testable reasons and will ministerial approval.
Q. What can count towards the 10% target?
A. Contractors can count work contributions from either directly employed apprentices, trainees or cadets or those engaged through group training companies. They can count work contributions from existing apprentices, trainees or cadets in addition to new apprentices, trainees or cadets engaged for completing the contract works. They can also count time spent by apprentices, trainees or cadets at trade school or other off-site vocational training.
Q. Can contractors just use apprentices or just trainees or cadets to comply with the policy?
A. Contractors can use apprentices, trainees or cadets in any combination- however there is an expectation that whatever mix they use, it will generally reflect what occurs in their particular industry or sector. Contractors operating in sectors where there is strong representation of apprentices, for example, shouldn’t just rely on trainees and cadets only. Or, alternatively, those in industries where there are significant trainees should look to include some trainees in their plans to comply with the policy.
Q. Do contractors have to use Victorian apprentices or trainees?
A. Generally, yes. Under the Major Projects Skills Guarantee, contractors are to use apprentices or trainees that are registered with the Victorian Registration and Qualification Authority to meet the 10% target. However, if there are compelling reasons why a contractor can’t achieve compliance with Victorian apprentices or trainees they should raise with their relevant department or agency contract manager.
Q. Do contractors have to use apprentices, trainees or cadets who are under-represented in industry or vocational training or who face barriers such as women, indigenous or older employees?
At this stage the Major Projects Skills Guarantee encourages contractors to draw their apprentices, trainees or cadets from these groups, so it’s not mandatory. As noted, the Skills Guarantee looks to create more jobs and training outcomes from the Government’s procurement spend, and it’s important to recognise that these opportunities need to extend to those that have found it harder to get start in a job or to get access to a trade career.
Q. How will the Government manage compliance?
A. Compliance will be based on what contractors propose in their Compliance Plans. They will also need to report against those proposals progressively during project delivery and provide both interim and final compliance reports. Where a contractor has not achieved compliance with the 10% requirement, that record will be carried over when next tendering for Victorian Government projects.
The Government will review compliance outcomes after twelve months, and where necessary consider options for strengthening compliance, such as linking contract payments to achievement of the minimum 10% requirement.
Q. What costs will the initiative involve?
A. The initiative might result in some increase in costs. Projects may be using more labour from apprentices, trainees and cadets, and while the cost of engaging employees from these groups are lower compared to qualified employees, they are less generally less productive, and also need to be supervised. However, the initiative was designed to minimise costs - for example, contractors will be able to count contributions from existing apprentices, trainees and to count apprentice, trainee or cadet school time. In addition, additional costs can be mitigated by using apprentices from Group Training Companies and not employing apprentices directly.
Q. What happens if a contractor doesn’t achieve the minimum 10% target?
A. Since the 10% requirement will form part of the general conditions of contract, not achieving the target will represents a breach of the contract. However, the policy anticipates that there will be progressive and regular performance reporting against the target as part of normal contract performance management, and that if compliance issues emerge during delivery that these would be identified and reported early - providing opportunity for contractors and contract managers to pro-actively manage performance.
More information
If you require any further information, please call Business Victoria on 132215 or email
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