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QMCA Twelve Days of Xmas

The 12 days of Christmas is an English Xmas Carol describing the giving of increasing lavish gifts to someone by their ‘true love’. In the run up to Christmas, QMCA will reveal the 12 gifts that we would most like to receive in 2019. As we lack one true love, we ask that you like and share the gifts you agree so that we can reach those able to bestow the gifts we seek.

Up until recently many Clients have taken the view that the best way to achieve certainty of project outcome (from a cost perspective) is to pass liability for all risks to the contractor. Projects such as Sydney Light rail however have shown that this does not always work. QMCA believes that risks should be apportioned to the party that is best able to manage them. In some cases it will be the contractor, in some it will be the Client and on projects with a high degree of uncertainty it may be desirable to share management of them between all parties.

Asset recycling involves the monetization of existing public assets through sale or lease to the private sector, with all funds received being reinvested in new infrastructure. Asset recycling offers the opportunity to provide much needed infrastructure without adding to public debt – which here in Qld is already very high. NSW and even labor-controlled Victoria have embraced asset recycling with great success, proving that political ideology need not be a barrier to its implementation if it is properly explained. Qld cannot put off asset recycling indefinitely and the sooner it starts the better the price it will get given that advances in technology may make some assets obsolete in the not too distant future.

City Deals are a partnership between all three levels of government and the community to work towards a shared vision for productive and liveable cities. City Deals work to align the planning, investment and governance necessary to accelerate growth and job creation, stimulate urban renewal and drive economic reforms. There are currently four City Deals in Australia (Western Sydney, Townsville, Launceston and Darwin). QMCA supports a proposal currently under preparation for an SEQ City Deal and we hope the Federal Govt will support this too once the proposal has been received by them.

On average, Contractors spend 1-1.5% of the predicted cost of a project on bidding for the project e.g. the cost to bid a $100M project is in the region of $1-1.5M. Clients often obtain significant value from the bidding process particular on ECI or D&C projects where the contractor provides design and constructability enhancements to the reference design. The cost of bidding for new work is a business overhead that is recovered through on costs on successfully delivered projects i.e. the Client indirectly pays for all Contractors to bid. By making a direct contribution to bid costs Clients can ensure strong competition and increased innovation at tender that could ultimately reduce the overall cost of the project.

The construction industry is inherently cyclical with booms followed by busts followed by booms again. These extremes in workload drive extremes in behaviours and are partly the reason why construction industry productivity remains stubbornly low as contractors either don’t have the time in booms or the money in busts to invest in improvements. As the biggest construction client, Governments can and should do more to plan their requirements to provide a more consistent and stable pipeline of work across the State and particularly in regional locations to maximise the benefit to the local community.

Contractors and their suppliers are naturally innovative. They thrive on finding solutions to problems and have considerable experience of doing so. On many projects this experience is not drawn upon and opportunities for innovation are missed through overly prescriptive specifications and locked in design. QMCA calls on Clients to given consideration to earlier contractor involvement in the design process and greater use of performance specifications rather than overly prescriptive detailed specifications.

QMCA welcomes the launch by the Qld Govt of its plan for the progressive implementation of Building Information Modelling (BIM) on major government infrastructure projects but more needs to be done. Currently major Government projects have minimal contractual requirements for the data and information related to the physical infrastructure to be submitted in a way that can be captured, managed, maintained, shared, reused and repurposed during the life of the asset to reduce its total cost. Furthermore the contracts are not written in a way to encourage collaboration. The broader economic benefits of improved asset delivery and subsequent performance can only be achieved by removing todays siloed approach to the different phases of the infrastructure lifecycle and by applying connected ICT solutions to those phases. (With thanks to Brian Middleton of Bentley Systems)

Unions were formed to provide a collective voice to workers on important matters such as pay and conditions. Union leaders were drawn from the workforce to represent their colleagues and place collective interest above personal interest. Whilst pay and conditions have steadily improved in the Australian Construction industry there has been a corresponding increase in the militancy and illegal activity of some union leaders that can only be explained as self-advancement rather than collective advancement. QMCA values harmonious industrial relations and welcomes open and honest dialogue with union leaders willing to truly represent the interests of their members.

In modern contracting the term ‘standard contract’ has become a contradiction in terms. Aside from the proliferation of bespoke contracts, developed at great expense with the apparent aim of generating an ongoing source of revenue for their authors, industry standard forms have been amended to such an extent as to render them unrecognisable. This has resulted in significantly increased costs for both contractors and the Clients as well as an increase in disputes as both sides struggle to administer them. QMCA would like to see increased use of truly standard contracts that are easy to understand, promote collaboration between the parties and provide for an equitable sharing of risk – such as the NEC contract series.

Whilst there is undoubtedly a role for government to regulate industries in important areas such as employees’ rights and protection of the environment. There is a distinction between reasonable legislation and red/green tape that provides little or no benefit for the increased cost to business that is ultimately passed on to the consumer. The recent changes to the Queensland Procurement Policy are a case in point. The changes provide no additional benefit for tax payers and will result in a significant additional cost to business. QMCA calls on government to engage with industry and discuss perceived problems before introducing additional regulation and to undertake periodic reviews into the ongoing necessity of existing regulations.

Given the significant sums of money involved in constructing major projects it is unsurprising that Clients turn to specialist advisors to guide them through the process. Clients trust their advisors to assist them with matters such as, market sounding, selection of an appropriate procurement process, selection of delivery model and administration of the contract. With advisory commissions such as these it can be tempting for advisors to tell the Client what they think they want they want to hear rather than what they need to hear in order to favoured for further commissions. As an industry association the QMCA has no such conflict and is willing to provide Clients with free construction advice that draws on the combined experience of our members. This service can either be used to reduce advisor costs or provide an alternative point of view.

Here in Qld we have a problem. In order to remain competitive, we need to build just as much new infrastructure as NSW and Victoria (if not more due to the size of the State) but we have more debt than the other States and have ruled out the best option to pay it off (See 2nd Day of Xmas). We therefore need to get smart and find ways to build more for less. Studies have shown that savings of up to 30% can be achieved when parties work collaboratively together to develop innovative solutions for complex projects, reduce waste, and improve productivity. QMCA has been a vocal advocate for increased collaboration and we are pleased that the QLD Government has agreed to start discussions on what this could entail. Whilst this is an important milestone, we have effectively just reached the starting line of what could be a very long race and we ask for your continued support in 2019.

Our members.

Acciona Infrastructure Australia
BGC Contracting
BMD Constructions
CPB Contractors
Decmil Group Limited
Fulton Hogan
Golding Contractors Pty Ltd
John Holland
Laing O’Rourke
Lend Lease
McConnell Dowell
Seymour Whyte Constructions