The construction sector has long suffered from narrow margins, inappropriate risk allocation and cyclical bouts of insolvency.
Jon Davies, Chief Executive Officer of the Australian Constructors Association (ACA), spoke today about the challenges facing the Australian construction industry, with a call for cultural change under the attention grabbing title ‘Disrupt or die’.
Issue significantly affecting the sector include:
- labour shortages, exacerbated by constrained migration of skilled workers needed by the sector;
- falling productivity (a massive decline of 16.5% since 2014) to a level now lower than in 1990!;
- costs increases, to the level of hyper-inflation;
- historically high levels of insolvency appointments, currently at around 26% of all appointments annually.
Jon presented on the ACA’s report “Disrupt or die – Transforming Australia’s construction industry”. The 10 key recommendations from the report are:
- that there be a shift in focus by infrastructure clients from choosing the lowest tender price to selection based on value for money calculated to include qualitative factors such as improved sovereign capacity, health of the industry, value generated to the community, innovation and increased productivity and improvements to diversity, inclusion and industry culture;
- the use of collaborative contracts which align all parties to achieving agreed ‘best for project’ outcomes and risk allocation based on capacity to control risks rather than to the lowest levels of the supply chain;
- the use of enterprise delivery models to reduce tendering costs, improve on innovation and engage with the supply network;
- increased ability to rely on information provided at tender, instead of disclaimers of liability by project owners;
- streamlining of design review processes;
- the adoption of a Culture Standard to enhance wellbeing and diversity/inclusion (including a move away from family-unfriendly standard 6 day working weeks and immense pre-completion pressure;
- the adoption of digital technologies such as Building Information Modelling to facilitate transparent sharing of information;
- the use of performance specifications instead of prescriptive specifications, allowing greater scope for value engineering and innovation;
- improvement on collaboration between government industry and unions on culture and productivity issues;
- a call for the Federal Government to incentivise reform in the sector by using its buying power (e.g. to drive adoption of collaborative contracting models, digital technologies, improved design review processes and improvements to site working hours and culture).
With thanks to Austin Nguyen for his assistance in preparing this update.