In brief
The Victorian Government has announced a Royal Commission into the construction sector, which is expected to investigate allegations of corruption, criminal conduct, procurement practices, governance failures and oversight of major government infrastructure projects. While the Terms of Reference have not yet been released, the Government has indicated that the inquiry will be broad in scope and involve significant scrutiny of participants across the construction industry.
For contractors, subcontractors, developers, consultants, labour hire providers and project participants, the key question is whether they are compelled to be involved in the inquiry process.
What may the Royal Commission involve
Although the precise scope of the inquiry will depend on the Terms of Reference, construction businesses should expect increased scrutiny of:
- Procurement and tendering practices
- Subcontractor and labour hire arrangements
- Project governance and decision-making processes
- Contract administration and payment practices
- Relationships between industry participants and third parties
- Compliance systems and reporting practices.
Construction businesses that work on government projects should expect greater focus on governance, transparency, record keeping and contractor management.
How do Royal Commissions operate
Royal Commissions have extensive coercive powers under the Royal Commissions Act 1902 (Cth), including the ability to:
- Summon witnesses to appear and give evidence (s 2)
- Require the production of documents (s 2)
- Require a person to provide information or written statements (s 2)
- Issue search warrants in certain circumstances (s 4)
- Compel witnesses to answer questions under oath or affirmation (ss 2 and 6).
Even businesses that are not directly criticised may need to respond to document requests, witness interviews and public scrutiny.
Failure to comply with a summons or notice may constitute an offence.
What should businesses be doing now to prepare
While the Terms of Reference have not yet been released, construction businesses should begin preparing now. Early preparation can significantly reduce the disruption, cost and risk associated with responding to compulsory information requests and public scrutiny.
Practical steps include:
- Preserve project, procurement and governance records
- Review document retention policies and record-keeping systems
- Identify key personnel who may have relevant knowledge
- Assess existing governance and compliance frameworks
- Review procurement, subcontracting and labour hire practices
- Obtaining legal advice before commencing internal reviews or investigations.
Particular care should be taken when undertaking internal investigations. Documents prepared for legal advice may attract legal professional privilege, but privilege can be lost if those investigations are not structured appropriately from the outset.
How Baker McKenzie can help
Baker McKenzie's construction team is well placed to help businesses navigate the legal, commercial and reputational risks associated with Royal Commission investigations. We have experience assisting clients through parliamentary inquiries, regulatory investigations and major project disputes.
Our team can assist with:
- Responding to notices to produce and compulsory information requests
- Document preservation and review strategies
- Legal professional privilege assessments
- Internal investigations and risk reviews
- Witness preparation and hearing support
- Engagement and coordination of technical experts
- Assessment of contractual and project-specific risks
- Management of related disputes, regulatory investigations and claims.
We understand the practical realities of major construction and infrastructure projects and the legal, commercial and reputational risks that can arise when project decisions, procurement practices and governance arrangements come under examination.
If you would like to discuss how the Royal Commission may affect your business, please contact Harriet Oldmeadow and Emanuel Confos. We will continue to monitor the situation and keep the industry updated.
Ali Fincher, Associate, has contributed to this legal update.