Chapter 1

Introduction

The Australian Jobs Bill 2013: an overview

1.1        On 21 March 2013, the Minister for Climate Change, Industry and Innovation, the Hon. Greg Combet, announced the release of an Exposure Draft of a bill titled the Australian Jobs Bill 2013. The same day, the Senate referred the exposure draft of the Australian Jobs Bill 2013 to the Senate Economics Legislation Committee for inquiry and report by 14 May 2013.

1.2        The bill's stated objective is 'to support the creation and retention of Australian jobs by requiring Australian Industry Participation plans for major projects'.[1] Australian Industry Participation (AIP) Plans aim to ensure that Australian entities have 'full, fair and reasonable opportunity' to bid for the supply of key goods or services for the project.[2]

1.3        The Minister, Mr Combet, explained that the bill would require AIP Plans for all projects with a capital expenditure of $500 million or more, to help Australian firms win work on large domestic projects and in global supply chains. These Plans must be provided to a new body created under the proposed legislation—the Australian Industry Participation Authority. The Authority's core objective is to ensure that Australian businesses have access and support in winning business from major projects.[3]

1.4        The Exposure Draft bill proposes strengthened compliance provisions for businesses that refuse to comply with AIP requirements and provide fair access to Australian suppliers. The proposed AIP Authority will be able to seek court orders to ensure compliance with the legislation.

Australian Industry Participation: a brief history

1.5        The committee highlights the efforts of successive federal, state and territory governments to prioritise and fund initiatives to give Australian industry opportunities to participate in major public and private sector projects in Australia.

1.6        In 2001, the AIP National Framework was signed by commonwealth, state and territory governments. The purpose of this framework was to provide Australian industry with 'full, fair and reasonable opportunity to participate in major projects in both the public and private sectors, in Australia and overseas'. It also aimed to improve the international competitiveness of Australian industry by encouraging participation in investment projects.[4] Each Australian jurisdiction currently has its own industry participation policies.

1.7        In 2002, the Commonwealth introduced the Enhanced Project By-law Scheme (EPBS) to encourage Australian industry participation and investment in major projects. The EPBS is a voluntary scheme that waives the five per cent tariff on eligible goods not produced in Australia for projects over $10 million in applicable sectors. Under this scheme, project providers must prepare and implement an AIP Plan outlining how the project will give Australian industry 'full, fair and reasonable opportunity' to participate in the project.[5]

1.8        In 2009, the Commonwealth Government released an Australian Government Procurement Statement. In the statement, the Government announced that it will:

• strategically apply the AIP framework to large Commonwealth tenders (generally above $20 million) and to Commonwealth infrastructure projects by requiring tenderers to prepare and implement AIP Plans;
• renegotiate the AIP National Framework to ensure it maximises the ability of Australian industry to win work in Australia and overseas;
• seek a reconfirmed commitment to the AIP National Framework through the Council of Australian Governments and use this opportunity to link government procurement more effectively with industry development, innovation and training initiatives;
• clarify the intent of the Tariff Concession System and the EPBS and provide appropriate resources to strengthen AIP requirements in private sector investment projects which access the EPBS;
• provide an additional $8.5 million over four years to the Industry Capability Network through the Supplier Access to Major Projects program, with an emphasis on connecting Australian suppliers to Commonwealth-funded infrastructure projects; and
• appoint Supplier Advocates with specialised industry knowledge within the then Department of Innovation, Industry, Science and Research at a cost of $8.2 million over four years.[6]

1.9        In 2010, the Government introduced the Buy Australian at Home and Abroad program to further support Australian industry participation in major resource projects. The program included a further $4 million in funding for the Supplier Access to Major Projects program, as well as $34.4 million to support activities in the resources sector and $5 million for the Clean Technology Focus for Supply Chains program.[7]

The Australian manufacturing sector

1.10      The Government's intent in framing the Exposure Draft has also been closely tied to the needs of Australia's manufacturing sector. The sector employs nearly one million workers, accounts for eight per cent of Australia's gross domestic product directly and produces 29 per cent of Australia's exports.[8] However, a recent report to the Australian Government noted a number of adverse trends facing the Australian manufacturing sector:

• in the four years from 2007–08 to 2011–12, manufacturing lost 106 775 jobs;
• many parts of the industry are operating at well below full capacity;
• critical links in supply chains have been weakened and the businesses around them have been weakened;
• global production has increased markedly while prices and margins have fallen; and
• China's demand for mineral resources has pushed up prices for key commodities and, as a key supplier, Australia's currency has appreciated. This has hurt exporters and import-competing sectors, such as manufacturing.[9]

1.11      Major investment projects conducted in Australia are potentially a significant source of investment for Australian firms and employment for Australians. While the Australian Government does not support mandatory minimum local content obligations, it has been active in ensuring that the opportunities for Australian involvement in these projects are publicised and promoted.

1.12      On its website, the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education states that Australian companies working on major projects 'continue to demonstrate that they can successfully compete against global competitors to win work supplying goods and services to major projects'.[10] However, it adds that Australian firms:

...still face challenges in gaining access to global supply markets and major investment projects. The relatively small size of the Australian economy, coupled with its geographical distance from the major markets of Europe and North America, and the trend towards greater use of established supply chains by international investors, can create significant impediments to Australian industry participation in major projects.[11]

1.13      Currently, major projects—both public and private—are encouraged to develop an AIP Plan. While major government procurement projects require an AIP Plan, there is no such requirement for major private sector projects. However, there have been important recent government initiatives to publicise AIP Plans and promote opportunities for Australian involvement in major projects.

The Prime Minister's Taskforce on Manufacturing

1.14      At the Future Jobs Forum in October 2011, the Prime Minister, the Hon. Julia Gillard, announced the creation of a taskforce on manufacturing. The purpose of the taskforce was to plot a 'shared vision for the future of Australia's manufacturing sector and help strengthen local firms as they adjust to changes in our economy.'[12] Chaired by the Prime Minister, the taskforce would be formed from representatives of industry, the unions, government and the research and development community.

1.15      The Prime Minister also announced at the Future Jobs Forum that major federal grants of $20 million or more (including grants to the states and territories) would be contingent on maximising opportunities for Australian businesses.[13] In addition, future project developers would be required to publish more extensive details on opportunities available to Australian businesses if they want to receive a five per cent tariff exemption on imports for major projects through the EPBS.

1.16      The October 2011 statement also announced that the Government will appoint a working group of stakeholders to advise on the implementation of these measures.[14] A consultation paper was issued in November 2011 seeking stakeholder comment on the proposals. Twenty-three submissions were received.[15]

1.17      The AIP Working Group reported in February 2012. It made 21 recommendations.  The first five recommendations related to proposals to disclose information in the AIP Plans. The Working Group proposed that companies should:

• provide a breakdown of the key goods and services to be procured for the project, and the estimated percentage of Australian industry value added as a measure of Australian content;
• provide an estimate of Australian versus overseas content to the then Department of Industry, Innovation, Science, Research and Tertiary Education, although this should not be published where it is commercial-in-confidence;
• publish the Plans in a central location maintained by the government;
• provide an executive summary of AIP Plans in a standardised form for publication by DIISRTE. The executive summary should include:
  • a description of the project;
  • how the company or project will actively seek and utilise information on Australian industry capability and communicate opportunities to potential suppliers;
  • details of expected areas of opportunity for Australian suppliers, including how the company/project will provide opportunities to Australian industry through all stages of a project and through all tiers of supply;
  • an explanation of the process and criteria to assess potential suppliers (including any prequalification processes); and
  • how the company will work with suppliers (and government programs where applicable) to encourage capability development and integration into global supply chains. [16]

1.18      The Australian Government responded to the Working Group's report in April 2012.[17] It accepted the vast majority of the Working Group's recommendations, noting that a few were outside the Working Group's Terms of Reference.

1.19      On 1 July 2012, new requirements came into effect to provide more opportunities for Australian industry to win work supplying goods and services to major projects. The reforms include:

• requiring publication of AIP Plans and outcomes;
• requiring more comprehensive evidence of opportunities being made available to Australian industry through all stages of the EPBS;
• requiring project proponents to list details of opportunities for Australian industry to participate in major projects on a public website for large EPBS projects (greater than $2 billion);
• requiring project proponents to report more regularly on AIP Plans and their outcomes, for large EPBS projects (greater than $2 billion);
• amending the EPBS guidelines to require approval of eligible goods as an additional step for large projects (greater than $2 billion);
• extending AIP Plans to projects which receive Commonwealth grants over $20 million; and
• extending AIP Plans to large infrastructure projects where funding over $20 million is provided by the Commonwealth through the states and territories.[18]

1.20      In August 2012, the report of the non-Government members of the Prime Minister's Taskforce on Manufacturing was released. The report noted:

Australian Industry Participation Plans should be formulated as early as possible, with proponents providing clear indications of engagement with local suppliers. Proponents should provide detailed expectations of the levels of local content to be used in the project, with a breakdown of percentages in classes of materials and goods. Such detail will provide greater accuracy for the purposes of review and audit as to the successful efforts of that proponent in providing full, fair and reasonable access for Australian local manufacturers.

In part this will involve project developers working with the Industry Capability Network, AusIndustry and others to ensure that a careful assessment is made of which key contracts include contestable items (between domestic producers and importers), and ensuring that packages bid for this work are appropriately packaged to ensure ‘full, fair and reasonable’ opportunity.[19]

'A plan for Australian Jobs'

1.21      The Exposure Draft Bill is part of the Government's broader 'Plan for Australian Jobs' Statement, announced by the Prime Minister on 17 February 2013. The Prime Minister explained that the plan has three key strategies:

• initiatives to assist Australian industry to participate in more Australian-based projects. This includes:
  • establishing the new AIP Authority;
  • legislating AIP arrangements to require projects worth $500 million or more to implement AIP Plans;
  • requiring projects worth $2 billion or more to apply for concessions to have AIP officers within their global supply offices; and
  • reforms to the anti-dumping system;
• initiatives to support Australian industry to win new business abroad. This includes:
  • investing 'more than $500 million' in establishing up to ten Industry Innovation Precincts to drive business innovation and growth in areas of Australian competitive advantage; and
  • a new Industry Innovation Network that will allow businesses around Australia to take part in Precinct activities. The government has announced that the first two Precincts will be a Manufacturing Precinct with locations in South East Melbourne and Adelaide and a Food Precinct headquartered in Melbourne;
• initiatives to help small and medium enterprises (SMEs) create jobs. This includes:
  • a new $350 million round of the Innovation Investment Fund to stimulate private investment in innovative Australian start-up companies;
  • changes to venture capital tax arrangements to improve clarity and certainty for investors;
  • the new Growth Opportunities and Leadership Development (GOLD) initiative to provide focused support for SMEs with high-growth potential;
  • extending the Enterprise Connect program for SMEs to more manufacturing firms and sectors such as professional services, information and communication technologies, and transport and logistics; and
  • a new Enterprise Solutions Program to help SMEs develop solutions to public sector needs and become better equipped to win work through public tenders.[20]

The remit of the bill

1.22      As noted above, the bill would require the proponents of projects with a value of $500 million or more to provide an AIP Plan to the AIP Authority. Chapter 2 of this report identifies some concern with this threshold. The Regulation Impact Statement (RIS) sets out the case for the proposed threshold as follows:

The $500 million threshold strikes a balance between capturing the major projects undertaken by large EPCMs [Engineering, Procurement, and Construction Management] with global supply chains and the compliance burden on proponents and the administrative burden of monitoring and implementation of the AIP Plan by the agency.

Lowering the threshold below $500 million would result in a far greater number of projects being captured, but the effectiveness of AIP monitoring would thereby diminish as a result. It also can be argued that targeting the larger projects would, given time, have flow on effects at the lower end of the project scale, as many of the same EPCMs are involved in those types of projects. This threshold was accepted by at least some of the organisations consulted for this RIS, once the issue of effective monitoring and compliance was raised.[21]

1.23      Table 1, taken from the RIS, estimates that as of June 2012, there were 168 projects (committed or under consideration) in Australia with capital expenditure of $500 million or more. Ninety-one of these projects were valued between $500 million and less than $1 billion.[22]

1.24      The $500 million threshold would apply to projects in all sectors of the economy. The RIS notes that the sectors in which projects are most likely to exceed the threshold are the resource, construction, power and transport sectors. Table 1 shows that 47 per cent of Australian projects with a capital expenditure value of $500 million of more are in the mining sector. Many of these projects are in the Western Australian oil, gas and iron ore industries.

Table 1: Current projects listed as 'committed' and 'under consideration'

	Number of projects
Sector	>=$100m	>=$300m	>=$500m	>=$1b	>=$2b
Construction: This includes construction and redevelopment of hotels and resorts, offices, non-residential buildings, warehouses and shopping centres and retail developments. Construction of radio networks and telecommunications towers.	61	33	21	8	4
Mining: This includes oil and gas extraction, iron ore and coal mines and metal ores (such as zinc, lead and gold).	54	41	35	29	15
Power: This includes power stations, gas and wind turbines.	39	25	21	7	1
Transport: This includes road, rail and port upgrades and developments.	26	16	14	11	2
Total	180	115	91	55	22

Source: Deloitte Access Economics Investment Monitor June 2012

Table 2: Western Australian major resource projects (over $500 million)

Project	Estimated value (A$m)	Employment
BHP Billiton Worsley Alumina – Refinery Expansion	3400	1700
API Management Pty Ltd – West Pilbara Iron Ore Project	6000	4500
Asia Iron – Extension Hill Magnetite Mine	2000	1350
BHP Billiton Iron Ore – Inner Harbour Expansion	1824	n/a
BHP Billiton Iron Ore – Jimblebar Mine Expansion	3168	n/a
BHP Billiton Iron Ore –Port Blending and Rail Yard Facility	1344	n/a
CITIC Pacific – Cape Preston Mine & Processing Projects	5200	4500
Crosslands Resources – Jack Hills Stage 2 Hematite Mine	2000	800
Fortescue Metals Group – Chichester exp. Solomon Mine	9000	13 000
Fortescue Metals Group – Mine, Rail and Port Project	4000	3200
Grange Resources Ltd/SRT Australia Joint Venture – Southdown Magnetite Mine	2880	2600
Karara Mining Ltd – Karara Iron Ore Project	1975	2000
MCC – Cape Lambert Iron Ore Project	3700	4000
Rio Tinto Iron Ore – Hope Downs 4 Iron Ore Mine	1600	2820
Roy Hill Holdings Pty Ltd – Iron Ore Mine – Roy Hill	9500	5600
Sinosteel Midwest Corporation – Weld Range Hematite Mine	1000	1500
BHP Billiton – Macedon	1500	714
Browse LNG Precinct	30 000	6400
Chevron – Wheatstone LNG	29 000	5900
Gorgon Joint Venture Gas Processing Project	43 000	5900
North Rankin Redevelopment	5000	n/a
AngloGold Ashanti/Independence Group – Tropicana Gold	700	1100
Burrup Nitrates	600	665
CSBP – Kwinana Ammonium Nitrate Facility Expansion	550	310
Oakajee Port, Rail and Industrial Estate	4000	2300
Ord East Kimberley Expansion Project	506	761
Perdaman Chemicals & Fertilisers – Coal-to-Urea Plant	3500	2200
Total	176 947	74 424

Source: Western Australian Department of State Development, http://www.dsd.wa.gov.au/documents/Significant_Prospect_December_2012.pdf  (accessed 1 May 2013).

1.25      The boom in Australia's resource sector has been well documented. In December 2012, the Western Australian Department of State Development published a list of 'significant resource projects' in the state. The Department estimates that the total value of projects committed to or under consideration for the state during the next few years will be $175 billion. It estimates that these projects will create 50 000 construction jobs and 15 000 permanent jobs.[23] Table 2 lists current Western Australian resource projects with a project value of over $500 million.

The Exposure Draft bill's key provisions

1.26      The Exposure Draft bill has 12 parts: Part 1 defines key terms relating to the bill; Part 2 explains the processes for AIP Plans; Part 3 sets out the obligations of project proponents to notify the AIP Authority; Part 4 establishes the Authority's information-gathering powers; Part 5 explains the administrative consequences of non-compliance; Part 7 establishes the Authority and sets out its functions and appointments, while Part 8 establishes the AIP Advisory Board and its functions and terms of appointment.[24] The following section sketches the main provisions of the bill.  

Outline of the bill

1.27      Section 4 of the bill provides an outline of its key features:

• An Australian Industry Participation plan (AIP plan)[25] is required for a major project to establish, expand, improve or upgrade a facility.
• An AIP plan will deal with:

(i) the project phase of a major project; and

(ii) if a major project involves establishing a new facility—the new facility’s initial operational phase.

• The key objective of an AIP plan is that Australian entities should have full, fair and reasonable opportunity to bid for:

a) the supply of key goods or services for the project; and

b) if the project involves establishing a new facility—the supply of key goods or services for the new 14 facility’s initial operational phase.

• This Act sets up the Australian Industry Participation Authority.
• The Authority's functions include:

a) approving AIP plans; and

b) monitoring compliance; and

c) other functions relating to Australian industry participation matters.

• The Minister may establish the Australian Industry Participation Advisory Board.

A major project

1.28      Subsection 8(2) of the bill defines a 'major project threshold amount' as $500 million.  Part 11 of the bill (sections 113 to 116) establishes that this amount will be indexed annually.

The trigger date

1.29      Proposed subsection 17(1) of the bill states that the project proponent for a major project must give the Authority a draft AIP plan for the project 'at least 90 days before the trigger date for the project'. A trigger date is defined as the day on which the earliest of the following events happens:

(i) the project concept design begins;

(ii) an environmental assessment of the project begins to be carried out by a project proponent;

(iii) a project proponent enters into a contract with another person to carry out an environmental assessment of the project;

(iv) a production calculation for the project is made;

(v) the raw materials for the project are estimated;

(vi) the utility consumption for the project is estimated;

(vii) block diagrams for the project are developed;

(viii) process flow diagrams for the project are developed;

(ix) a project proponent enters into a contract with another person under which the other person becomes a procurement entity in relation to the project;

(x) a request for bids for the supply of key goods or services for the project is made;

(xi) technical specifications for the project are prepared;

(xii) a project proponent determines which standard or standards will apply to any of the key goods or services that are to be acquired for the project;

(xiii) an equipment list for the project is prepared;

(xiv) the project proponent first contacts a supplier with a request for pricing details for any of the key goods or services for the project;

(xv) a construction and contracting methodology for the project is developed;

(xvi) an environmental submission is made in relation to the  project;

(xvii) a detailed schedule for the project is prepared;

(xviii) a high-level scoping of the goods and services for the project is conducted.

Parts of an AIP Plan

1.30      Section 30 of the Exposure Draft bill sets out the required parts of an AIP Plan. An AIP Project must have a Part A containing a title and a Part B containing a 'Project Phase'. If a major project is establishing a new relevant facility, an AIP Plan for the project must also have a Part C containing an 'Initial Facility Operational Phase'.

The reporting periods

1.31      Section 25 of the Exposure Draft bill establishes the need for a project proponent to complete a compliance report. The report must be lodged with the Authority within three months of the end of each reporting period (subsection 25(3)). The reporting period is the period of six months beginning on the day on which the plan is approved, and each subsequent six-month period for which the plan is in force and the project proponent is subject to obligations under Part B of the plan (subsection 25(2)). Section 26 of the Exposure Draft bill establishes the same timeframes and obligations for operators of new relevant facilities.[26]

The inquiry process

1.32      The committee received ten submissions which are listed in Appendix 1. The committee thanks these submitters and all those who contributed to this inquiry.

Navigation: Previous Page | Contents | Next Page