Assurance Process for Construction Procurement

  • Policy
Updated: 1 Oct 2020
This document sets out the Assurance Process for Construction Procurement.

1. Introduction

This document sets out the Assurance Process for Construction Procurement. The assurance process is one element of the Construction Procurement Operating Model.

The assurance process takes effect on 1 January 2021.

Published by Public Works Advisory (PWA), Department of Regional NSW. Department reference number: DOC20/416576.

2. Assurance process overview

2.1 Background

Under the Construction Procurement Operating Model (see appendix A), an agency that is not accredited under the Accreditation Program for Construction Procurement can only conduct construction procurement valued over $1.3 million (excluding GST) if an accredited agency provides assurance. This document explains the assurance process for construction procurement.

2.2 Scope of the assurance process

The assurance process applies to the procurement of construction services and excludes goods and services procurement.

In the NSW Procurement Policy Framework, the NSW Procurement Board defines construction services as “services relating to the construction of buildings or works, including pre-erection works, construction work, and repairs, alterations and restorations.”

The assurance process focuses on all three phases of the procurement process, as defined in the NSW Procurement Policy Framework – that is, Plan, Source and Manage.

The assurance process applies to:

  • unaccredited agencies engaging in construction procurement valued over $1.3 million (excluding GST)
  • accredited agencies that have been engaged to provide assurance for unaccredited agencies.

All agencies should also note that all construction projects with an estimated total cost of $10 million and above must also be registered with Infrastructure NSW and comply with the Infrastructure Investor Assurance Framework.

2.2 What is assurance

Assurance is an affirmation by an accredited agency that an unaccredited agency’s procurement plan is fit for purpose and compliant with the NSW Procurement Policy Framework and all other relevant legislation, policies and frameworks.

There are 2 types of assurance:

  • Unconditional assurance. The accredited agency provides assurance without imposing any additional requirements on the accredited agency.
  • Conditional assurance. The accredited agency provides assurance on the assumption that the unaccredited agency will meet certain requirements set by the accredited agency. If the unaccredited agency fails to meet these requirements, the accredited agency can withdraw its assurance.

2.3 How the assurance process works

The assurance process comprises several elements:

  • the preparation that an unaccredited agency must undertake before seeking assurance (see part 3)
  • the unaccredited agency engaging an accredited agency to provide assurance (see part 4)
  • the responsibilities of an accredited agency when providing assurance (see part 5)
  • the responsibilities of an unaccredited agency after assurance has been provided (see part 6).

Appendix B of this document summarises the elements of the assurance process in a diagram.

2.4 Objectives of the assurance process

The assurance process aims to ensure that unaccredited agencies receive appropriate support when engaging in high-value construction procurements. By doing this, the process seeks to:

  • ensure that public infrastructure projects are delivered in an efficient and effective manner
  • improve the accountability and manage the risk of unaccredited agencies engaging in high-value construction procurements
  • drive continuous improvement and capability development in unaccredited agencies.

3. Preparation by unaccredited agency

This part outlines the key actions that an unaccredited agency must complete before engaging an accredited agency to provide assurance.

3.1 Business case

The unaccredited agency must develop a business case to justify the need for a new construction project and to secure funding for the project. Please refer to NSW Treasury’s NSW Government business case guidelines for information on developing a business case.

Before the unaccredited agency engages an accredited agency for assurance, the business case must be approved internally and funding for the project must be secured.

3.2 Construction procurement plan

The unaccredited agency should draft a construction procurement plan to outline how it intends to undertake its procurement activities. Please refer to the construction procurement plan guidelines for further information about developing a construction procurement plan.

Before the construction procurement plan is finalised, the unaccredited agency must engage an accredited agency for assurance, the construction procurement plan is completed in collaboration with the accredited agency before being progressing to approval.

3.3 Project risk assessment

The unaccredited agency must use the project risk profile tool XLSX, 1337.15 KB to assess the level of risk associated with its construction project.

The project risk profile tool establishes 4 criteria against which the risk of the project is assessed. The unaccredited agency will select a risk level for each criterium and be given a corresponding risk score (see appendix C). The project risk profile tool then consolidates the four risk scores into an overall weighted risk score for the project.

The risk scores selected by the unaccredited agency will ultimately be validated by the accredited agency that provides assurance. As such, it is recommended that the unaccredited agency gather supporting documentation to substantiate its scores.

Where the construction procurement is valued at $10 million or above, the unaccredited agency must also assess the risk of the project by applying the Infrastructure Investors Assurance Framework. In some instances, the agency may need to register the procurement with Infrastructure NSW.

4. Engaging an accredited agency

Once an unaccredited agency has completed the planning actions above, it must engage an accredited agency to provide assurance for its construction project. The accredited agency will provide assurance services on a fee-for-service basis.

The unaccredited agency has the flexibility to engage an accredited agency within its cluster or Public Works Advisory, for example.

The unaccredited agency must provide all project documentation (including the business case, construction procurement plan and project risk assessment) to the selected accredited agency.

Important

Only accredited government agencies can provide assurance services.

That is, the provision of assurance services is not considered a contestable or potentially contestable market. Given this, the competitive neutrality principles set out in the NSW Government’s Policy Statement on the Application of Competitive Neutrality do not apply to the provision of assurance services.

5. Responsibilities of accredited agency

This part outlines the actions that an accredited agency must complete when providing assurance for an unaccredited agency.

5.1 Project documentation review

The accredited agency must thoroughly review the unaccredited agency’s project documentation (particularly the business case, construction procurement plan and project risk assessment).

The accredited agency may choose to perform a more detailed review to better understand the unaccredited agency’s capability to deliver the project. For example, the accredited agency may interview the unaccredited agency’s key procurement personnel or request additional information about the project.

Important

The role of the accredited agency is not to approve the project documentation.

Rather, the accredited agency will review the project documentation to gain a better understanding of the project’s context and make an informed decision about whether to provide assurance.

5.1.1 Project risk assessment review

When the unaccredited agency completed the project risk profile tool XLSX, 1337.15 KB, it selected risk scores for its project. Based on all information provided, the accredited agency must determine whether it agrees with the unaccredited agency’s self-assessment or whether the risk scores require adjustment.

5.2 Assurance decision

In light of the project documentation review, the accredited agency will decide what type of assurance, as per part 2.2, is appropriate for the project. To make this decision, the accredited agency should consider:

  • whether the unaccredited agency’s procurement plan complies with the NSW Procurement Policy Framework and all other relevant legislation, policies and frameworks
  • whether the unaccredited agency has the capability and capacity to deliver the construction project in an efficient and effective manner, by sourcing the required construction services and effectively managing the project, in accordance with its procurement plan
  • the level of risk of the project (table 2 below suggests appropriate forms of assurance based on the weighted risk score of the project)
  • any other relevant considerations that are specific to the project.
Table 2: Weighted risk scores and suggested assurance
Weighted risk score rangesSuggested form of assurance
0.0 - 2.0Accredited agency provides formal assurance with minimal or no conditions.
2.1 - 2.5Accredited agency provides formal assurance with some general conditions.
2.6 - 4.0Accredited agency provides formal assurance with specific conditions.
4.1 - 5.0

Accredited agency provides formal assurance on the condition that either:

  • the accredited agency supports the unaccredited agency to find an appropriate third party to procure and deliver the project on behalf of the unaccredited agency, or
  • the accredited agency procures and delivers the project on behalf of the unaccredited agency.

5.2.1 Conditional assurance

If the accredited agency determines that conditions need to be imposed on the unaccredited agency before assurance can be provided, the accredited agency will consult with the unaccredited agency to decide what specific conditions should be imposed. The accredited agency should only impose conditions that are necessary to:

  • ensure that the unaccredited agency complies with the NSW Procurement Policy Framework and all other relevant legislation, policies and frameworks
  • minimise risk
  • ensure that the unaccredited agency can successfully deliver its construction project.

The conditions can relate to any phase of the procurement process, as defined in the NSW Procurement Policy Framework – that is, Plan, Source and Manage. Table 3 below provides a non-exhaustive list of conditions that might be imposed at each phase of the procurement process.

Table 3: Examples of conditions
Procurement phaseExamples of conditions
Plan

The accredited agency may require the unaccredited agency to amend its construction procurement plan.

Source

The accredited agency may require the unaccredited agency to provide updates to the accredited agency at specific points during the source phase of the procurement.

The accredited agency may require the unaccredited agency to engage a service provider to:

  • select proposed tenderers in a selective tender process
  • review the prepared tender documents
  • review the tender evaluation plan
  • review the recommendations in the tender evaluation report to ensure they align with the construction procurement plan.
Manage

The accredited agency may require the unaccredited agency to provide updates to the accredited agency at specific points during the manage phase of the procurement.

The accredited agency may require the unaccredited agency to engage a service provider to:

  • prepare a contract management plan
  • review any contract management plans that the unaccredited agency may have prepared
  • manage the construction contract(s)
  • manage variations to the contract(s) above a specific dollar value
  • manage the project.
Important

The accredited agency providing assurance may require the unaccredited agency to engage an entity to provide a service. If the service is offered by the private sector or other government business competitors, the provision of that service is considered a contestable market.

Given this, competitive neutrality principles set out in the NSW Government's Policy Statement on the Application of Competitive Neutrality apply to the provision of the service.

In some cases, the accredited agency may offer the required service itself. If this is the case:

  • the unaccredited agency must consider all potential service providers equitably, and
  • the accredited agency must take reasonable steps to ensure that the unaccredited agency considers all potential service providers equitably by, for example, directing the unaccredited agency to the relevant pre-qualification schemes and explaining what factors the unaccredited agency must consider, as per the NSW Procurement Policy Framework, before selecting a service provider.

5.3 Providing formal assurance

Once the accredited agency has decided on the appropriate type of assurance and finalised any conditions that will be imposed on the unaccredited agency, the accredited agency must complete a formal assurance letter. Please refer to appendix D for a suggested template for the assurance letter.

The assurance letter must be signed by the accredited agency’s chief procurement officer or executive director responsible for the accredited agency’s procurement function. The letter must be sent to the nominated representative of the unaccredited agency.

5.4 Dispute process

If the unaccredited agency does not agree with conditions imposed by an accredited agency, the unaccredited agency can refer the matter to the Procurement Subcommittee of the Construction Leadership Group for resolution.

6. Unaccredited agency post-assurance

6.1 Conduct procurement

Once the unaccredited agency has received formal assurance from the accredited agency – and, where applicable, satisfied any conditions relating to the plan phase that were imposed – the unaccredited agency can undertake the source and manage phases of the construction procurement. The unaccredited agency must:

  • complete all procurement activities in line with the NSW Procurement Policy Framework and all other relevant legislation, policies and frameworks
  • ensure that it meets all conditions for assurance imposed by the accredited agency.

6.2 Project completion

Once the unaccredited agency completes the construction project, it must complete a project completion summary report DOCX, 79.17 KB.

The unaccredited agency must submit the report to Public Works Advisory, acting as an agent for the NSW Procurement Board (see part 7 for more information).

7. Role of Public Works Advisory (PWA)

PWA is responsible for administering the assurance process. Its responsibilities include, but are not limited to:

  • collating all project completion summary reports for the NSW Procurement Board
  • collating and analysing data from these reports
  • using the data to identify how construction procurement policy can be optimised to support better project delivery outcomes
  • proposing construction policy initiatives and solutions to the board, to drive better procurement and project delivery outcomes.

8. Definitions

Table 4: Definitions

TermDefinition
Agency A “government agency”, as defined in section 162 of Public Works and Procurement Act 1912.
The BoardThe NSW Procurement Board
Construction

Construction services means services relating to the construction of buildings or works, including:

  • pre-erection works
  • construction work
  • repairs, alterations, restorations and maintenance.
PWAPublic Works Advisory, an entity within the Department of Regional NSW