Concerns from The Australian Constructors Association have emerged on the proposed review of the Federal Government’s $120 billion investment to state infrastructure projects.
The review has the potential to result in cancellations and deferrals across both the labour and material supply, placing pressures onto construction material suppliers and quarrying operations.
Large cost escalations across multiple project and supply chain pressures have drastically increased the costs of major projects, according to Minister for Infrastructure, Catherine King.
The infrastructure pipeline includes rail and road projects in capital cities nationwide, as well as rail and road construction and upgrades in regional areas.
The government is reportedly keeping the size of the pipeline the same, but with its content changing.
“Delivery of infrastructure is not like a tap. It can’t simply be turned on and off,” Australian Constructors Association chief executive officer Jon Davies said.
“Developing teams and capabilities that are equipped to bid and deliver large projects can take years, and once assembled, it is difficult to reallocate them, particularly if there is a widespread deferral of projects.
“It is vital that industry is consulted in the review to avoid inflicting further pain on an industry that is already doing it tough as a result of having to absorb significant rises in material and labour costs.”
The government is set to still deliver on election promises and following through on projects now under construction, though noting that many projects never started, and some 160 had a commitment of $5 million or under.
“Australia should have a pipeline of land transport infrastructure projects that are genuinely nation-building, economically sustainable and resilient to our changing climate,” King said.
“Projects were left without adequate funding or resources, projects without real benefits to the public were approved, and the clogged pipeline has caused delays and overruns in important, nation building projects.”
The Australian Constructors Association has said that a steady and transparent pipeline of government infrastructure projects is crucial for the industry to plan and invest for the future, and project cancellations and deferrals undermine this effort.
“If projects are cut, governments must take action to reallocate a proportion of the saved funds to help industry by compensating contractors who have incurred significant additional costs without any fault of their own and currently lack contractual relief,” Davies said.
“It is unethical and uneconomical for a government to pay less for an infrastructure project than its construction cost due to uncontrollable factors like a pandemic or distant war.
“Construction currently accounts for 26 per cent of all business insolvencies in Australia and the implications of these failures on the wider economy are huge.”