Major Projects Skills Guarantee: How to help up-skill Victoria

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The Major Projects Skills Guarantee ensures all of Victoria’s major publicly funded works use local apprentices, trainees or engineering cadets for at least 10% of the project’s total labour hours.

The Major Projects Skills Guarantee is another sign of the Victorian Government’s commitment to ensuring the projects it undertakes generate sustainable economic growth and development for the state. If you’re bidding for government business, you’ll be asked provide a plan for how you’re going to meet this objective.

The required plans can seem like a sea of acronyms – the VIPP and associated LIDP, the LIP and the MPSG. We’ve written previously about the VIPP (Victorian Industry Participation Policy) and the LIP (Local Investment Plan), so in this article we’ll aim to de-mystify the MPSG and give you some tips for when you’re responding to a tender that includes this requirement.

What is the Major Projects Skills Guarantee?

The Major Projects Skills Guarantee, or MPSG, is designed to help the Victorian Government meet its commitment to build a ‘strong and sustained vocational training culture’ – through building skills, driving local investment and creating jobs in the state.

The MPSG applies specifically to projects in the building and construction, infrastructure and civil engineering sectors. It is mandatory for all publicly funded projects with a contract value of $20M or more, including public private partnerships (PPP). It is voluntary for smaller projects.

The basic tenet of the Major Projects Skills Guarantee is that the supplier must commit to fulfilling 10% of the estimated total labour hours using apprentices, trainees and engineering cadets.

Major Projects Skills Guarantee

Calculating the required hours

The government provides a formula for converting project value to working hours:

Total contract sum

Less GST, Margin and Cost of specialist equipment

= Adjusted contract sum

Apply ‘deemed labour ratio’ to the adjusted contract sum.
Apply ‘deemed labour hourly rate’ to convert labour value to hours

= Total labour hours for the project.

10% of the total hours is the target for apprentices, trainees and cadets.

The deemed labour ratio is the percentage of cost the government deems to be typically represented by labour over material costs, while the deemed labour hourly rate is a standardised average hourly rate. The Government has specified deemed labour ratios and deemed labour hourly rates based on project type, as follows:

Building and construction — Deemed labour ratio 35%, Deemed labour hourly rate $75
Civil/infrastructure (no construction) — Deemed labour ratio 15%, Deemed labour hourly rate $70
Mixed — Deemed labour ratio 25%, Deemed labour hourly rate $75

The Government should make it clear in tender documents which type of project applies for the calculation of the MPSG. Further information on calculating the required hours (including a worked example) can be found in the MPSG explanatory guide.

Tips for creating an MPSG

Having explained the mechanics of the Major Projects Skills Guarantee, here are eight tips for responding to a tender that requires you to apply it.

1. Plan early. When the RFT is released, it will include a copy of the MPSG and its requirements. At the stage of submitting your response, you will only be asked to acknowledge receipt and understanding of the documentation. But if you are shortlisted, you will need to provide a detailed Skills Guarantee Compliance Plan, showing exactly how you will meet the specifications of the Guarantee. But be aware that some tenders require tenderers to complete a MPSG as part of their initial tender submission. This requirement will be made clear in the tender.

2. Understand what is meant in the context of the MPSG by ‘apprentice’, ‘trainee’ or ‘cadet’. An apprentice is employed under a National Training Contract and will combine structured training with paid employment. To meet the requirements of the MPSG, a trainee or apprentice must be registered with the Victorian Registration and Qualification Authority (VRQA). A cadet will be combining formal university training with practical work experience. You can meet the target with any combination of apprentices, trainees and cadets, employed directly, or through a Group Training Organisation (GTO). If your apprentices, trainees and cadets attend training at a Registered Training Organisation (RTO) during the contract, you may count this towards the target hours.

3. Where possible, include apprentices, trainees and cadets from groups that have historically been under-represented in the construction and infrastructure industry, including women, indigenous people, workers who are transitioning from other industries, older workers and those with a disability. While this is not mandated, the Victorian Government certainly encourages it.

4. Don’t forget sub-contractors. If you are the primary contractor, you are the one committing to the MPSG, but are unlikely to employee all the staff on the contract. It is expected that you will pass on the MPSG requirements to your sub-contractors in a ‘back to back’ contract, and you will be the one responsible for reporting on the hours worked by sub-contractor apprentices, trainees and cadets.

5. Think beyond the initial phase. The MPSG typically applies to the upfront investment or project costs. However, it’s also valuable to look at MPSG commitments where your project has an ongoing maintenance/support or operations phase. This gives you an opportunity to increase your MPSG and possibly exceed the minimum 10% requirement.

6. Consider a voluntary MPSG if your project is worth less than $20M: it is encouraged by the Government.

7. Keep detailed records. It’s not enough to submit the plan; you’ll be required to provide reports to show that you are implementing it. So do keep detailed records right from the start – for you and your sub-contractors’ staff.

8. Get expert help. It’s important to get your Major Projects Skills Guarantee right, so if you don’t feel confident, use some expert help.

It can look daunting, but don’t be deterred by the requirement for an MPSG – with some research, planning and maybe a little help, you’ll be able to provide a well thought out Major Projects Skills Guarantee to ensure your project contributes to the development of Victoria.

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