How the consulting and engineering sector in Australia is weathering the COVID storm
Nicola Grayson is the Chief Executive of Consult Australia (ACE’s equivalent in Australia). We caught up with her to look at how the consulting and engineering sectors in Australia are weathering the COVID storm.
Nicola Grayson
How has the infrastructure sector reacted to the disruption caused by the COVID pandemic?
In terms of transport infrastructure across Australia, the state governments have responded well to calls from ourselves, contractors, and the supply chains to prioritise the construction sector during the recovery from the pandemic.
Many state governments had already committed to a strong pipeline of infrastructure work and reacted quickly to confirm that they remain committed to keeping the pipeline intact.
Many worksites have operated as usual throughout the pandemic response period with appropriate safety measures in place. The most significant impact on businesses in our industry over the past six months has been in the commercial and residential building area.
What are the significant issues for the sector at the moment?
Pipeline transparency is probably our biggest issue at the moment. While the federal and state governments are committed to keeping the pipeline intact in the public sector space, our members are concerned at the uncertainty around workflow in the medium to long term. Generally, we would have more transparency around future work, but that has become more opaque, which is creating uncertainty in the market. Having clarity around the longterm outlook is vital for workforce planning, so our message to governments has been for greater transparency of the forward pipeline. There has been plenty of positive talk about the development of social infrastructure right around the country, but this is another area where we are seeking more clarity about what the work will look like and when will it be available for tender.
What type of work is in the pipeline?
There have been a lot of announcements of major projects in the infrastructure boom states of New South Wales and Victoria, which mainly involve rail and road developments. A number of these projects sit on Infrastructure Australia's priority list for Federal and State Government funding but the unknown at the moment is what is coming behind those projects. State Governments have spoken at length about shovel-ready projects, but we are seeking more concrete information on what the upfront design/= and advisory element of these projects look like because that is what feeds the pipeline. Without design and preliminary work happening upfront, there is no construction.
The Federal Government simplified the procurement framework this year. Has that made any difference to the industry?
The most significant change has been to get cash flowing out to the industry earlier. The Government has committed to much shorter payment timelines, and they are asking the supply chain to move those payments along to keep cash moving through the industry. That is one change that we have found extremely positive. Securing better procurement practices has been a long-term campaign for Consult Australia. The main aim of this work is to reduce the level of disputation in the industry and address the cost inefficiencies that are prevalent right across the supply chain as a result. COVID-19 has hastened the need for the development of better contracting and procurement practices because we have got to be efficient, effective and as productive as possible to benefit the economic recovery of the country. Frankly, there is a long way to go in getting our procurement framework right.
There is a fast-track programme for shovel-ready projects. Is it working?
In the construction sector, the fast-track process has had some success in getting projects off the ground. However, in the consulting industry, work has been slower in gathering momentum. We would like to see considerably more stimulus for the consulting sector in the preliminary design and advisory phase.
Is there a light at the end of the tunnel for the commercial building industry?
It has been a reasonably dark tunnel, but I think some green shoots are starting to appear in the states that have returned to some semblance of normality from COVID-19. In Queensland, some developments are coming back onto the timetable, but it's very early days, and the commercial sector is where the most significant amount of pain is being felt. We are in the process of producing a piece of thought leadership looking at where there might be potential to stimulate investment back into the private sector. We hope that investment will restore confidence in the building sector and result in more projects being put back on the table. Other organisations that work alongside Consult Australia are also looking at how to provide stimulus in this space. Governments are well aware of the issue, so we need to work together to stimulate private sector investor confidence.
What is the house construction sector like in Australia?
The market is pretty flat in terms of new builds as many projects were shelved when COVID struck. In Sydney, there are cranes around, but it seems many developers are a little shy of committing too much to house building in the current climate. It's well known that there is a deficit of housing in Sydney and Melbourne and there has been an enormous number of new developments underway. However, there are now questions about whether these properties will just sit on the market and if so, for how long. Immigration has been driving the property market for many years, but COVID-19 has put paid to that for the time being. There is still potentially some confidence in the housing market, and when life returns to normal, the demand for housing and infrastructure is likely to return to where it was before COVID. So we shouldn't put everything on hold as we still need to build for future demand, especially if immigration returns to its pre-COVID-19 level.
What is the road to recovery for the construction industry?
I think many positives could come from this experience. If we are smart about it, we will make changes around procurement, and we will recognise that collaboration is the best road to take for the delivery of exceptional projects. We must continue our work to significantly reduce disputation in the industry and breakthrough the toxic culture that has been building up over many years.
These things are contributing towards the sector defeating itself, but COVID-19 has shown that now is the time to pull together for the betterment of the industry. The pandemic doesn't discriminate, and the industry must help the country's economic recovery. We will do this by becoming a proper ecosystem of industry working to deliver quality projects for the public. There has never been a better time to get our procurement processes right, to get contracting more balanced, to drive innovation forward and have good conversations to ensure the industry is moving towards our goals in a coordinated manner. Focussing on those things will contribute to the development of an optimistic road map for recovery. It'll also help us tell a positive story that will attract young people to our industry.
We have to grab the opportunities that are available now with both hands to ensure our industry comes out of this challenging period in the best shape possible for the future.