The path to road reform is a long and winding one.
Australian Competition and Consumer Commission (ACCC) Chair Rod Sims says engineers are more often expert witnesses than defendants or plaintiffs before the ACCC, but engineers should be aware of their work, particularly in the areas of road reform and unfair contracts.
Speaking at an Infrastructure Partnerships Australia Conference in Sydney last year, Sims raised what he described as “major and growing problems” with road reform in Australia.
He said the country’s road policy framework has at least three problems: revenue raised from road use does not flow directly to the entities that build and maintain our roads; road user charges are set based on past road expenditure; and we need to provide better signals for road use.
“I think it’s fair to say that the road sector hasn’t had the change that other sectors have had,” Sims told create.
“To take one example of how the debate is a rather strange one in Australia, and it’s a very narrow example, we hear people saying that farmers and miners shouldn’t get a rebate on their diesel fuel, and that’s strange, because diesel excise is a road user charge.
“If you’re a truck, you pay a diesel excise only to the extent of your relevant truck’s contribution to maintain the road, based on past expenditure on the roads. If you’re a truck on the road, you’re paying that because you’re using the road, if you’re a truck on a mine site and you’re not using that publicly-funded road, well why should you pay the excise?”
Sims said many people fail to realise that diesel excise is really a road user charge.
“I think there’s also a lack of understanding that fuel excise is really only as big as it is because it’s also a road user charge,” he said.
“People resist higher fuel excise, but I think that would change if people knew that it was actually a road user charge and the proceeds were going into building more roads. Likewise, we have this strange situation with road charging at the moment, where the proceeds of course don’t automatically go to the road building agencies.
“You’re in this weird position where say the government in any state wants to build a road, and when it builds it, that road has to compete with hospitals and schools for funding. Once it’s built, there is really a user charge that’s funding it over time.”
Sims said the combined taxes and fees paid by motorists for road use is roughly equivalent to the annual expenditure on roads. In this sense, road users are already paying for the cost of Australia’s roads.
“If we could make the user charges more formally linked to people who build roads, then I think you’d close the cycle much better. You’d have more efficient road funding and I think you’d have a better acceptance of it, people would know that, ‘I’m paying these petrol and diesel excises, but I’m getting certain road investment out of it’, and they could see the link,” Sims said.
When it comes to providing better signals for road usage, Sims feels that mass distance charging and congestion pricing, for example, would see us making much better use of the roads we have.
However, he cautions against starting the conversation with congestion pricing, as it will bring an inevitable political backlash.
“I personally think this a two-stage argument. I think the first stage is to link the excise petrol and diesel to the people who build the roads, all your engineers. So that you get public acceptance that our money is going into roads,” Sims said.
“Only then can you start using those road user charges as a signal of road use. I think if you try and use them in the signal of road use as the first step, you run into enormous and understandable political problems.”
Another issue Sims felt is important for engineers to be aware of is the upcoming changes to unfair terms and contracts. The laws relate to standard form contracts entered into or renewed on or after 12 November this year. They do not cover contracts that are negotiated and there is give and take on both sides.
“What is covered, say, is if you’re building a 50-storey building in the middle of Sydney, and the head contractor says to everybody here is the standard contract, every subbie on the side, every engineer who’s helping out on design or whatever, ‘Here’s the contract you’ve got to sign to be able to do this.’ If that contract is unfair, then it could get caught by the new laws,” Sims said.
“If the contract, to take the most extreme example, allows the head contractor to terminate you without payment, or to unilaterally change the price that they pay you, then that would very likely be seen as unfair.”
He pointed out that protections only apply to firms with less than 20 employees and contracts no more than $300,000, or $1,000,000 if it runs over 12 months.
However, he adds that while these contracts are relatively small, it just takes one company with a small contract that is found to be unfair to trigger wider ramifications for other companies using the same standard contract.
“If you’ve got a 50-storey building, and 95 per cent of the companies have contracts way above that, but one or two companies have a small contract and that was found to be unfair, it would have wider ramifications,” he said.
“It is a very important law when working on big projects.”