A civil SME picks up a subcontract package on a Victorian road project. Six weeks in, the head contractor sends a spreadsheet asking for labour hours broken down by apprentice, trainee and cadet, by month, with evidence.
The contractor has one apprentice, employed casually across three jobs, and no system that allocates his hours to any particular project. Nobody mentioned this at the quotation stage. It is now a contractual obligation they are already failing to meet. Participation targets are a different obligation from the industrial instrument that governs how those people are paid — see our guide to awards, enterprise agreements and labour rates.
These are contract terms, not policy statements
Local content and skills requirements are frequently filed by contractors under “government policy” — the sort of thing that appears in a tender’s background section and has no operational consequence.
That is wrong on every measure that matters. These requirements are:
- Scored at tender. Agencies must embed targets in tender documentation and assess contractor capacity during proposal evaluation.[1]
- Written into the contract. In Victoria, template model clauses for each project type are prepared by the Victorian Government Solicitor’s Office.[2]
- Reported on periodically. NSW agencies require quarterly contractor reporting on achievement against targets, and report results to Training Services NSW.[1]
- Increasingly tied to payment. From 1 July 2026, Victorian agencies must ensure project contracts include a contingent payment mechanism unless it is not practicable or appropriate.[2]
Scored, contracted, reported and — in the newest iteration — connected to whether you get paid. That is not background material.
How it reaches an SME
The obvious objection is that the thresholds are large. Victoria’s Major Projects Skills Guarantee applies at or above $20 million;[3] the NSW apprenticeship target starts at $10 million;[1] Commonwealth AIP requirements attach at $20 million.[4] A contractor working in the $50K–$2M band will rarely hold a head contract at those values.
Three mechanisms bring the obligations to you anyway.
1. Subcontracting is counted in the head contract’s numbers. Under the MPSG, total labour hours are based on the total value of the project, including all sub-contracting under the principal contract.[3] Your hours are part of the head contractor’s obligation, which is why the spreadsheet arrives.
2. Flow-down clauses. Head contractors satisfy their commitments by pushing them into subcontracts. A subcontract on a major project will typically carry the reporting obligations and sometimes the targets themselves.
3. Selection. A head contractor who must hit an apprentice target will prefer subcontractors who help rather than hinder it. A contractor who can evidence apprentices, trainees and a diverse workforce is a more useful package partner — which turns compliance into a competitive advantage rather than a cost. That connects directly to the strategy in our guide to subcontracting to Tier 1 civil contractors.
Victoria: Local Jobs First and the MPSG
Victoria’s arrangements are the most developed and the most prescriptive, and they operate under the Local Jobs First Act 2003 through the Local Jobs First Policy — updated in July 2026.[2]
The Major Projects Skills Guarantee sits inside that framework and is the piece with a hard number attached.
| Element | Requirement |
|---|---|
| Application threshold | Victorian Government construction projects valued at or above $20 million[3] |
| The target | At least 10% of labour hours delivered using apprentices, trainees and cadets[3] |
| How the base is calculated | Based on estimated labour hours provided by bidders at project tendering[3] |
| What counts toward the base | Total labour hours based on the total value of the project, including all sub-contracting under the principal contract[3] |
| Model clauses | Prepared by the Victorian Government Solicitor’s Office for each project type; updated 1 July 2026[2] |
Note the phrase “estimated labour hours provided by bidders at project tendering”. The number you commit to at tender becomes the number you are measured against. That makes the labour-hour estimate in a bid a commitment rather than an approximation, and it is one of the returnables most likely to be prepared carelessly and regretted later.
The MPSG arithmetic that surprises people
One feature of the MPSG catches contractors and, occasionally, agencies out.
The MPSG applies regardless of the amount of a project budget given over to the actual construction component. If only $20 million of a $60 million project is for construction, the MPSG still applies to the total project value — but it can be utilised across all aspects of the project.[3]
Read carefully, that is a two-sided provision. The obligation is calculated on the larger number, which is demanding. But the target can be met across the whole project rather than only within the construction package, which gives flexibility about where the apprentice, trainee and cadet hours come from.
For a subcontractor, the practical consequence is that head contractors on mixed projects are actively looking for places to find qualifying hours. A subcontractor who arrives with apprentices already engaged and hours that can be evidenced is solving a problem for them. That is a stronger commercial position than it sounds.
What changed in Victoria on 1 July 2026
Two changes took effect, and the second is significant.
Model clauses refreshed. The Victorian Government Solicitor’s Office template model clauses for each project type were updated on 1 July 2026.[2] If your understanding of what the clauses require dates from an earlier project, refresh it.
Contingent payment mechanism. From 1 July 2026, agencies must ensure that project contracts include a contingent payment mechanism unless it is not practicable or appropriate.[2]
That is the change that converts these obligations from reporting exercises into cashflow. Where a portion of payment is contingent on local content or skills performance, failure to meet a commitment is no longer a compliance conversation — it is money you do not receive, on a job whose margin was priced without allowing for it.
Three practical responses for a contractor bidding Victorian government work:
- Read the payment provisions specifically for contingency tied to local content or skills, and put it on the one-page contract summary described in our guide to contract administration for civil SMEs.
- Commit to numbers you can actually deliver. An ambitious commitment that improves your evaluation score and then fails is now directly expensive.
- Build the measurement system before you need to report, because a contingent payment depends on evidence, not on effort.
NSW: skills, training and diversity targets
New South Wales runs a tiered regime by contract value, mandated through a NSW Procurement Board Direction applying to construction procurements by NSW Government agencies under the Public Works and Procurement Act 1912, commencing after 1 July 2020, with targets set on contract value excluding GST.[1]
| Contract value (ex GST) | What applies |
|---|---|
| Up to $10 million | No specific skills targets mandated. Agencies should support skills development and comply with the Aboriginal Procurement Policy[1] |
| $10 million – $100 million | Agencies must embed an apprenticeship target of 20% of the trades workforce, and consider adopting additional targets from the larger-project tier[1] |
| Over $100 million | All of the above, plus the Infrastructure Skills Legacy Program minimum targets[1] |
The sub-$10 million tier is worth reading precisely. It does not mandate specific skills targets, but it does not release agencies from supporting skills development or from Aboriginal Procurement Policy obligations.[1] In practice that means skills and diversity content can still appear in evaluation criteria on smaller contracts — just without prescribed numbers.
The Infrastructure Skills Legacy Program targets
The Infrastructure Skills Legacy Program addresses skills shortages and increases diversity in the construction sector. Skills, training and employment targets were mandated under the ISLP in July 2020 for major government infrastructure projects, and the program is now mandatory for NSW Government infrastructure projects.[5]
The ISLP minimum targets that attach above $100 million:[1]
| Target | Minimum |
|---|---|
| Learning workers — trainees, and workers updating qualifications | 20% of total workforce |
| Apprentices | 20% of trades workforce |
| Women in trade roles | 2% — doubling from a 1% baseline |
| Workers aged under 25 | 8% of workforce |
| Local region workers | Employment data reporting required |
Transport for NSW embeds industry skills and diversity targets in relevant delivery partner contracts, aligned with the NSW Procurement Board Directions and Transport’s own procurement policy.[5] For a civil SME that is the flow-down mechanism in plain terms: the targets in the delivery partner’s contract become requirements in the subcontracts beneath it.
Agencies must embed targets in tender documentation, assess contractor capacity during proposal evaluation, and require quarterly contractor reporting on achievement against targets, with results reported to Training Services NSW.[1] Quarterly is the cadence to design your record-keeping around.
Where the NSW pipeline sits and which parts of it are genuinely accessible is covered in our guide to the NSW infrastructure pipeline and the civil SME.
Commonwealth: AIP and CAIP plans
The Commonwealth approaches this differently. Rather than workforce composition targets, Australian Industry Participation is about giving Australian businesses full, fair and reasonable opportunities to bid to supply goods and services on a project, including advertising those opportunities.[4]
Two streams:[4]
| Stream | Threshold | What applies |
|---|---|---|
| Commonwealth-funded procurement | $20 million or more (GST inclusive), including extension options | Successful tenderers may need to prepare a Commonwealth Australian Industry Participation (CAIP) plan |
| Major public and private projects | Expenditure of $500 million or more to establish or upgrade an eligible facility | Subject to the Australian Jobs Act 2013 |
For a civil SME, the AIP framework is more often an opportunity than an obligation. Its whole purpose is to require large project proponents to give Australian businesses a fair chance to bid — which means advertised subcontract packages, published plan summaries, and a procurement process a smaller Australian contractor is entitled to participate in.
Commonwealth AIP plan summaries are published, which makes them a genuinely useful business development source: they identify major projects and the categories of work being sought. The broader Commonwealth procurement framework is covered in our guides to the Commonwealth Procurement Rules, AusTender and ICN Gateway.
Defence: the lower thresholds
Defence applies materially lower thresholds than the general Commonwealth position. All Defence materiel and non-materiel procurements above $4 million, and procurement of construction services above $7.5 million, are captured under the Defence Policy for Industry Participation.[4]
A $7.5 million construction services threshold is within reach of a substantial civil SME or a consortium, which makes Defence one of the few places where industry participation obligations attach at a scale a mid-sized contractor might actually hold directly. It is also a market with its own procurement culture and security requirements — worth understanding properly before pursuing rather than treating as ordinary government work.
The comparison table
| Jurisdiction | Instrument | Threshold | Core requirement |
|---|---|---|---|
| Victoria | Local Jobs First Act 2003 / Local Jobs First Policy (July 2026); MPSG | $20M+ | ≥10% of labour hours by apprentices, trainees and cadets, based on tendered estimated labour hours, calculated on total project value including subcontracting |
| NSW | NSW Procurement Board Direction — skills, training and diversity in construction | $10M+ / $100M+ | 20% apprentices of trades workforce from $10M; full ISLP targets above $100M; quarterly reporting |
| Commonwealth | CAIP plan requirements | $20M+ (GST incl.) | CAIP plan — full, fair and reasonable opportunity for Australian business to bid |
| Commonwealth (major projects) | Australian Jobs Act 2013 | $500M+ facility expenditure | AIP plan obligations |
| Defence | Defence Policy for Industry Participation | $4M materiel/non-materiel; $7.5M construction services | Industry participation requirements |
Queensland, Western Australia, South Australia and the territories run their own local content and workforce arrangements, and several attach buy-local requirements to state-funded work. Our guides to QPP 2026, the NT Buy Local Plan and the ACT Secure Local Jobs Code cover those regimes, and the Secure Local Jobs Code in particular operates as a certification requirement rather than a target — a different mechanism to the ones described here.
How the obligation flows down to you
Understanding the mechanism lets you negotiate rather than absorb.
- The agency embeds targets in the tender documentation and assesses the head contractor’s capacity to meet them during evaluation.[1]
- The head contractor commits — in Victoria, by providing estimated labour hours at tender.[3]
- The commitment becomes a contract term, through model clauses or the agency’s own drafting.[2]
- The head contractor’s obligation is calculated across subcontracting, so your hours are part of their number.[3]
- Your subcontract carries flow-down obligations — usually reporting, sometimes targets.
- You report periodically, and your data rolls up into the head contractor’s quarterly return.
Two things to check in any subcontract on a major project:
- Are you being given a target, or a reporting obligation? They are very different. A reporting obligation costs administration. A target you cannot meet with your actual workforce is a commercial risk that should be priced or negotiated before you sign.
- Is any payment contingent on it? Particularly on Victorian work after 1 July 2026, where the head contract may carry a contingent payment mechanism that gets passed down.[2]
What you actually submit at tender
Where these requirements are scored, the returnable is usually some combination of the following. Treat it as a scored response, not a form.
| What is asked | What a strong response contains |
|---|---|
| Estimated labour hours | A build-up, not a number — by activity, crew and duration, consistent with your programme and your priced schedule. This becomes your measured commitment[3] |
| Apprentice / trainee / cadet hours | Named or nominated positions, their qualifications and stage, and which activities they will work on. Specific beats aspirational |
| Current workforce composition | Actual figures for apprentices, trainees, women in trade roles, workers under 25 — with your baseline stated honestly |
| How you will recruit and retain | Your relationships with training organisations, group training organisations, and any existing pipeline. Evidence of past apprentice completions is strong |
| Local content commitment | Local suppliers and subcontractors by name where you can, with the value of packages |
| Reporting and governance | Who collects the data, how, at what frequency, and how it is verified |
The general principles that make any scored response work — evidence over assertion, specificity over intent, and answering the criterion as written — apply here exactly as they do elsewhere. Our guide to addressing selection criteria in government tenders covers the technique, and how government tenders are scored explains how the marks are actually allocated.
One warning specific to this returnable. Because the commitment becomes contractual and, increasingly, payment-linked, over-committing to win the tender is now a direct financial risk rather than a reputational one. Bid what your workforce can genuinely deliver.
Delivering against the targets
Small contractors do meet these targets, and the ones who do treat it as a workforce strategy rather than a compliance task.
- Engage apprentices before you need them. A contractor with two apprentices already employed can bid work that a contractor with none cannot credibly bid. Recruiting to meet a target you have already committed to is the hardest version of this.
- Use group training organisations. They carry the employment relationship and the administration, which suits a business with variable workload and no HR function.
- Track hours by project from day one. This is the operational failure in the opening scenario. If your timesheet system does not allocate apprentice hours to a project, you cannot report, and unreportable hours do not count. Add a project code and a category flag — that is the whole fix.
- Keep the evidence. Training contracts, qualification records, timesheets. Reporting is evidence-based, particularly where payment is contingent.
- Look at your baseline honestly on diversity targets. Moving women in trade roles from zero is a longer project than moving apprentice numbers, and it needs to start well before the tender.
- Talk to the head contractor early. On a major project they have a target to hit and a strong interest in helping you contribute to it. That conversation frequently produces practical support.
The reframe worth making: these obligations are a barrier to contractors who ignore them and an advantage to contractors who prepare. In a market where every civil SME faces the same targets, being the one who can already evidence compliance is a differentiator that costs less than most of the things contractors spend money on to win work.
Where this meets Indigenous procurement
Skills and local content requirements sit alongside, and sometimes inside, Indigenous procurement obligations. The NSW position is explicit: even below the $10 million skills threshold, agencies should comply with the Aboriginal Procurement Policy.[1] The ISLP targets include Aboriginal and Torres Strait Islander participation as one of the diversity dimensions the program was designed to address.[5]
These are related but distinct regimes, and they are scored separately in most tenders. Our guide to social and Indigenous procurement policies in NSW, VIC and QLD covers that framework in full.
The practical overlap is in supply chain. A commitment to engage Indigenous businesses in subcontract packages can contribute to both social procurement and local content responses, and it is a genuine strategy rather than a presentational one — provided the relationships are real and established before the tender.
Checklist
At tender
- What is the project value, and which thresholds does it cross?
- Are skills, local content or industry participation requirements scored? At what weighting?
- Are you being asked for estimated labour hours? Build them properly — they become the measured commitment.
- Can your actual workforce deliver what you are about to commit to?
- Is any part of payment contingent on performance against these commitments?
In a subcontract
- Does it flow down a target, a reporting obligation, or both?
- What is the reporting frequency and format?
- Is there a contingent payment mechanism attached?
- Have you priced the administration?
In delivery
- Are apprentice, trainee and cadet hours coded to the project in your timesheet system?
- Is the evidence — training contracts, qualifications, timesheets — being retained?
- Is someone named as responsible for the quarterly return?
- Are you tracking against the commitment monthly, so a shortfall is visible while it can still be corrected?
The short version
- These are scored at tender, written into contracts, reported quarterly and — in Victoria from 1 July 2026 — connected to a contingent payment mechanism.
- Victoria’s MPSG applies at $20M+ and requires at least 10% of labour hours from apprentices, trainees and cadets, calculated on total project value including subcontracting.
- NSW mandates 20% apprentices of the trades workforce from $10M, with the full ISLP target set above $100M and quarterly reporting throughout.
- Commonwealth AIP attaches at $20M; Defence at $4M generally and $7.5M for construction services.
- The thresholds are large but the obligations flow down — your hours count toward the head contractor’s number.
- Code apprentice hours to the project from day one. Unreportable hours do not count, and increasingly do not get paid.
References
This guide is general information for Australian civil construction businesses and is not legal advice. Policy thresholds, targets, model clauses and reporting requirements change, and several of the regimes described here were updated during 2026. All examples are illustrative. Always work from the current policy documents and from the tender and contract documents applying to your project.
- NSW Government — Skills, training and diversity in construction, NSW Procurement Board Direction (arp.nsw.gov.au). Mandatory direction applying to construction procurements by NSW Government agencies under the Public Works and Procurement Act 1912 commencing after 1 July 2020, with targets set by contract value excluding GST. Contracts up to $10 million: no specific skills targets mandated, though agencies should support skills development and comply with the Aboriginal Procurement Policy. Contracts $10–100 million: agencies must embed an apprenticeship target of 20% of the trades workforce and consider adopting additional targets from larger projects. Contracts over $100 million: all of the above plus Infrastructure Skills Legacy Program minimum targets of 20% of total workforce as learning workers (trainees and workers updating qualifications), 20% of trades workforce as apprentices, 2% women in trade roles (doubling from a 1% baseline), 8% of workforce aged under 25 years, and employment data reporting for local region workers. Compliance requirements including embedding targets in tender documentation, assessing contractor capacity during proposal evaluation, requiring quarterly contractor reporting on achievement against targets, and agency reporting of results to Training Services NSW. ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩
- Local Jobs First (Victoria) — Local Jobs First Policy, July 2026, and Agency guidance and Key documents (localjobsfirst.vic.gov.au); Local Jobs First Act 2003 (Vic). Template model clauses for each project type prepared by the Victorian Government Solicitor’s Office and updated on 1 July 2026; and the requirement that from 1 July 2026 agencies must ensure that project contracts include a contingent payment mechanism unless it is not practicable or appropriate. ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩
- Local Jobs First (Victoria) — Major Projects Skills Guarantee (agency guidance) and Major Projects Skills Guarantee (MPSG) glossary entry (localjobsfirst.vic.gov.au); Major Projects Skills Guarantee Policy Statement, October 2022. MPSG requirements applying to all Victorian Government construction projects valued at or above $20 million; MPSG-applicable projects including a requirement for the contractor to deliver at least 10% of labour hours using apprentices, trainees and cadets; the target based on estimated labour hours provided by bidders at project tendering; total labour hours under the MPSG based on the total value of the project including all sub-contracting under the principal contract; and the application of the MPSG regardless of the amount given over in a project budget to the actual construction component, such that where only $20 million of a $60 million project is for construction the MPSG still applies to the total project value but can be utilised across all aspects of the project. ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩ ↩
- Australian Government Department of Industry, Science and Resources — Australian Industry Participation, Develop and submit your AIP plan and Commonwealth AIP plan summaries (industry.gov.au); Australian Government Department of Finance — Commonwealth Australian Industry Participation plan (CAIP plan) clausebank entry (finance.gov.au); Australian Jobs Act 2013 (Cth) factsheet (business.gov.au); Australian National Audit Office — Maximising Australian Industry Participation through Defence Contracting. Companies awarded Australian Government contracts, grants, payments or investments of $20 million or more being subject to Commonwealth Australian Industry Participation requirements; successful tenderers potentially required to prepare a CAIP plan when awarded Australian Government procurements of $20 million or more (GST inclusive) including extension options; major public and private projects with expenditure of $500 million or more to establish or upgrade an eligible facility being subject to the Australian Jobs Act 2013; the purpose of AIP plans being to give Australian businesses full, fair and reasonable opportunities to bid to supply goods and services on the project and to advertise those procurement opportunities; and the Defence thresholds capturing all Defence materiel and non-materiel procurements above $4 million and procurement of construction services above $7.5 million under the Defence Policy for Industry Participation. ↩ ↩ ↩ ↩
- Transport for NSW — Infrastructure Skills Legacy Program (transport.nsw.gov.au); Training Services NSW — Infrastructure Skills Legacy Program (training.nsw.gov.au); NSW Government — What the program does (nsw.gov.au); Global Infrastructure Hub — New South Wales Infrastructure Skills Legacy Program case study. The program’s aim of addressing skills shortages and increasing diversity in the construction sector; the mandating of skills, training and employment targets under the ISLP in July 2020 for major government infrastructure projects with the objective of increasing diversity among the construction workforce; the program’s approval under the NSW Procurement Board Direction on skills, training and diversity in construction and its application to NSW Government infrastructure projects; the NSW Government Action Plan requirement for agencies to demonstrate commitment to skills and diversity targets for the engagement of apprentices, learning workers, young people under 25 years, women, and Aboriginal and Torres Strait Islander people on major construction projects; and Transport for NSW ensuring industry skills and diversity targets are embedded in relevant delivery partner contracts aligned with NSW Procurement Board Directions and Transport’s Procurement Policy. ↩ ↩ ↩