The Background

On 28 January 2026, the NSW Auditor General’s Report on Local Government 2025 was published.

The report presents key findings and recommendations from the financial audits for the year ending 30 June 2025 of the State’s 125 councils.  As well as considering findings in respect of the sector’s financial sustainability, internal controls and governance, the report made some specific findings in respect of the delivery of major capital projects.

The report reviewed 29 major projects that were each valued above $30 million each for a cumulative spend of $1.5 billion. During 2024-25, councils spent $6.1 billion to renew or acquire infrastructure, property, plant and equipment.

Of the 29 projects reviewed, the report found the following;

• Only 7 projects were within budget and on time
• 14 projects were delayed by more than 6 months
• 6 projects were over budget more than 10%

 Governance

The report highlights that strong governance is fundamental to the successful delivery of infrastructure projects, which can be complex, have long delivery timelines and require significant investment.

Without clear decision-making frameworks, strong oversight and robust processes for monitoring costs, schedules, scope and risks, projects can experience delays and cost overruns or fail to deliver expected results.

The Office of Local Government requires councils to apply the Office’s Capital Expenditure Guidelines for all infrastructure facilities that will cost more than 10 per cent of ordinary annual rate revenue, or $1million, whichever is greater.

However, these guidelines are very outdated and do not apply to major infrastructure classes such as road, bridges, water supply networks, wastewater networks, and stormwater drainage.  Furthermore, the focus of the guidelines is narrow with an emphasis on project initiation and therefore does not adequately consider the complexity and risks of the full cycle of modern infrastructure delivery.

The guidelines should ensure councils adopt a framework of policies that aim to ensure value for money, efficient procurement and effective project management.

What Does Good Look Like?

Councils should adopt a Project Management Framework (PMF).  A PMF will not eliminate all problems, however it will minimise risk by putting in place standard processes to deal with contingencies.

There are project management software systems that are affordable and user friendly and capable of supporting a PMF. This software can manage efficient and consistent collation and reporting of project information.

PMBOK (A Guide to Project Management Body of Knowledge) is a standard for project management that is highly suitable as a guide for a PMF for local government.   Other alternative guides are available.

Project Stages

A project has multiple stages.  A project stage may be a project in itself, for example, the design or planning for a major infrastructure asset.  Contracts may apply to one stage or multiple stages – or multiple contracts may apply to a single stage.

Typically, a PMF will operate with three project stages namely pre-project, project execution and post implementation review.  The PMF should define roles and responsibilities to ensure appropriate review and approval processes operate within each stage.  This is why the PRF ensures good governance as the framework provides a consistent approach to decision review and accountability.

The Importance of the Pre Project Stage

The Pre-Project stage is important to ensure that any proposal achieves the appropriate business reasons to proceed, including ensuring the project adds value and is aligned with a council’s Integrated Planning and Reporting Framework.

Risk exists in all stages of project development.  Accordingly, the risk assessment processes should start in the Pre-Project stage.

The output of the Pre Project Stage is a Project Management Plan which will document a range of issues including project initiation, risk, financials and procurement.

Consideration should be given at this stage to obtain expert advice, including legal advice and environmental planning advice.  The procurement strategy and planning approvals can be significant factors in the risks of delay and cost escalation for projects.

The procurement strategy must ensure compliance with the statutory framework and council policies.

A corporate project advisory team is an effective way for project proposals and plans to be reviewed as this team can represent the diverse multi-disciplinary stakeholders and subject experts that exist within a council. Referrals to this advisory group support decision makers in their project review and approvals.

Legal Issues

As discussed above, councils are subject to a complex web of legal, regulatory, and ethical obligations when engaging in procurement and managing contracts. Lawyers can provide critical support in ensuring compliance with these obligations, drafting and negotiating contracts, ensuring agreements are legally binding and enforceable, managing risks, and resolving disputes.

Contract forms such as the Australian standards and GC21 provide frameworks for managing major capital works projects.  Obtaining legal advice is recommended when drafting contracts for major capital works to ensure terms for risk allocation, dispute resolution, and compliance with government guidelines (including confidentiality and probity) are properly considered.

The GC21 contract, for example, incorporates cooperative contracting and enhanced communication features, which can help streamline project management and reduce the risk of disputes.  Lawyers can advise councils on the legal implications of contract terms that vary these general conditions.

Legal advice can assist councils to identify potential risks, such as delays, cost overruns, and disputes, and develop strategies to mitigate these risks.

To further enhance the effectiveness of procurement and contract administration, councils should consider engaging lawyers early in the process to provide comprehensive legal support. This includes drafting and reviewing tender documents, negotiating contracts, and advising on risk management and dispute resolution strategies.

 Keystone Lawyers

Keystone Lawyers have assisted many councils with their major projects.  This work includes advising on procurement strategies, probity advice, as well as tender and contract documentation review. Of course we have also acted on behalf of councils involved in litigation arising from contract disputes.

One of lawyers, John Truman, has 30 years’ experience as a senior executive in local government and was responsible for the delivery of many major capital works projects.  Accordingly, John has a deep understanding of the governance needed to ensure councils are successful with their project delivery.  This understanding and experience supports our extensive legal expertise working in this sector.

Conclusion

All councils should adopt a PMF.  The available guides ensure an adopted PMF is scalable and made fit for purpose for each individual council.  Under a PMF, council officers can consider the support needed in a project management plan to deal with legal issues. Ideally this support should be identified in the Pre Project Stage. By providing these services, lawyers can contribute to the successful delivery of major capital works projects and the maintenance of public trust in local government operations.