Boo!!! If Halloween isn’t hair-raising enough, check out some of the activities we’ve been working on this past month. 🎃🎃
Start the night big
I attended the first meeting of the National Construction Industry Forum (NCIF) in Canberra this month. Details of the meeting will be released by the Federal Government shortly but I can say that I was truly encouraged by the broad agreement on the importance of the industry and the significant issues that it faced.
Just before the NCIF meeting, the Australian Constructors Association (ACA) released a report that challenges the widely held belief that underpayment is rampant in the construction sector amid the industry’s increasing insolvency rates.
The report, Trust deficit, reveals that payment performance among construction firms is on par with the rest of the economy and attempts to single out the industry with additional regulations like Project Bank Accounts (PBAs) would hinder, not help, the industry. According to the Federal Government data, the construction industry pays almost 70 per cent of its invoices on time, aligning closely with the economy-wide average. Industries such as health and social assistance, IT and retail are less likely than construction to pay their suppliers on time.
The only valid reason to impose additional regulation like PBAs on head contractors would be if the industry’s payment performance was systematically worse than others – and it isn’t. PBAs are not a guarantee for subcontractor payment because they don’t reflect the realities of the way construction payments flow. If no money is coming in, there is no money to pay out.
We have seen this play out recently in the first test case of Queensland’s PBA laws, where the insolvent builder’s trust accounts held less than 10 per cent of the funds owed to subcontractors. The report emphasises that the significant restrictions PBA schemes impose on legitimate trade are not justified by the problem they are trying to solve.
There is no question that the construction industry is in a weak financial position. But the answer is not to further hobble one category of business that is already heavily burdened with regulation. The answer is to fix the broken commercial model that transfers all the risk to the builder and drives a race to the bottom. We need more collaborative procurement models that focus on delivering best value not lowest price at the tender box.
Download the report – Trust deficit.
Tips, tricks and treats
We talk a lot about the need to improve construction productivity. But how do we measure it?
Economists say there are many ways to measure productivity, all of which are based on measuring the output level for any given input level. In essence, productivity is about doing more with less. This could be doing more with less labour (labour productivity) or more with a range of inputs (multi-factor productivity).
It is still not straightforward, and I challenge anyone without an economics degree to explain in simple terms how the Australian Bureau of Statistics calculates its construction productivity measures.
For a while now in the UK they have been using ‘the pound in the ground’ as a measure. In simple terms they are calculating what percentage of the total cost to build a project is made up of the direct costs of construction.
In our report, Nailing Construction Productivity, ACA recommends the development of a National Construction Strategy including the creation of a data alliance to develop and track a number of simple metrics like the pound in the ground or, in our case, the dollar in the dirt.
Find out more in my latest blog.
If you’ve got it, haunt it
ACA and Engineers Australia will tomorrow be opening entries for the 2024 Australian Construction Achievement Award (ACAA).
The ACAA isn’t just any award; it’s Australia’s premier recognition of excellence in the construction sector. In its 27th year, the winner presentation event will be held in August at Doltone House Jones Bay Wharf, Sydney.
This award is a chance to be recognised by the industry for the unwavering commitment to delivering impactful, complex projects. The award not only recognises traditional construction excellence but also excellence in initiatives designed to make the industry a more efficient and better place to work.
Find out more.