Plant & Equipment

Construction projects to decline in the north

The 2013 Major Projects Report ? Queensland Engineering Construction Outlook – launched by the director-general of Queensland?s Department of State Development, Infrastructure and Planning, David Edwards, has found that the amount of construction work carried out on major projects will fall from an all-time high of $18.5 billion in 2012-13 to $10.9 billion in 2016-17.

A project?s total cost must be $100 million or greater to be considered a ?major project? for the purposes of this report. BIS Shrapnel prepared the report for the Queensland Major Contractors Association and Construction Skills Queensland.

Queensland Major Contractors Association president Tony Hackett said while it was important to remember the report is only a forecast, it was based on reliable current data and highlighted many serious challenges for industry over the next four years.

?Queensland still has many positives on the major projects front and this forecast decline is in the context of 2012-13 recording the highest ever level of major projects activity but a decline of around 40 per cent is a serious investment challenge on the medium-term horizon,? Hackett said.

?More concerning is the unprecedented level of uncertainty about a pipeline of viable projects coming to fruition against a backdrop of declining productivity levels, persistent skilled labour issues, fluctuating commodity prices and declining public investment in large infrastructure projects.

?Importantly the report finds that the total volume of work over the forecast period has remained relatively unchanged but acute uncertainty now surrounds the timing of a significant number of new projects, with many pushed back and a large number remaining unfunded. This will herald many new complex challenges for the industry as it seeks to adjust to this shifting landscape.

?With construction such an important pillar of the Queensland economy, long term sustainability of the industry is critical. In the last 10 years, the engineering construction work done has grown from $6.5 billion to $33.5 billion in real terms, with the work done growing 44 per cent in 2011-12 alone.

?We?re building critical infrastructure for Queenslanders and also are very big employment providers sustaining thousands of jobs ? not only for tradespeople ? but right across the professional and technical fields too.?

Key findings and recommendations

The report found that:

?    Heightened global economic turbulence will continue to factor heavily in investment decisions in major projects.
?    Escalating costs over several years and falling commodity prices have combined to undermine the competitiveness and financial feasibility of the next round of projects.
?    Labour costs have grown substantially in Queensland over the past decade. In 2003, the state had construction wages 4.3 per cent lower than the national average but the forecast reveals they are likely to be 8.6 per cent higher by 2017.
?    Efforts by both federal and state governments to consolidate their balance sheets will particularly affect the ?roads and bridges? sector of engineering construction (notwithstanding previous and current flood reconstruction works).
?    The LNG market in Queensland should be seen as highly susceptible to risks including cost escalations, low gas extraction rates in the early phases and foreign competition from Asia and particularly US shale gas.
?    Major projects employment will peak over the next 12 to 18 months at some 24,700 people before declining to around 17,000 by 2017.

Hackett said the serious challenges industry would confront over the next five years would require a new level of co-operation between all industry stakeholders. He called on governments to take the lead in co-ordinating efforts to assist industry to grapple with the high levels of uncertainty.

He said the major areas in which policy-makers need to focus their efforts include:

?    Developing a more sustainable procurement model for major projects. This needs to start with serious engagement with industry leaders.
?    Continuing to advance a skills and training agenda that puts industry in the leadership position and delivers value for money and better training outcomes.
?    A co-ordinated approach to ?smoothing out? the investment peaks in relation to publically funded infrastructure.

Source: Queensland Major Contractors Association

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