Infrastructure sector expects only minor delays to delivery of current pipeline
COVID-19 is expected to cause only minor delays to the delivery of Australia’s current transport infrastructure projects – but the question of who pays for those delays is still very much up in the air.
A second survey of infrastructure leaders conducted this week by Roads Australia (RA) reveals that one third are worried about the business impacts of clients rigidly enforcing contracts and terms without making allowances for COVID-19.
The industry has had to adopt strict physical distancing rules to keep construction sites open, resulting in slower-than-usual progress on many projects.
The problem has been exacerbated by a range of COVID-related challenges for management teams, including travel restrictions, unavailability of clients for approvals and sign-offs, and the inadequacy of bandwidth and other technologies associated with working from home.
Roads Australia President Michael Bushby says the latest survey results underline the importance of clients and contractors having ‘honest discussions’ about the impacts of COVID and being flexible in working through the issues.
“Governments and industry have been recognising the importance of collaboration to get through this crisis,” he says.
“Only last week, Victorian Transport Infrastructure Minister Jacinta Allan, and the Director-General of the Major Transport Infrastructure Authority Corey Hannett, wrote to industry to acknowledge the pressures it was facing and to emphasise the need for all parties to work together. The NSW Government has come out in similar terms, with Infrastructure NSW providing a single point of advice for the construction sector.
“We’ve seen the positive results of this collaborative approach in the way clients and contractors have worked together to keep construction sites open. But we also need to see it in how we manage the time and cost impacts.
“Contracts typically include clauses to cover delays caused by force majeure events, but from what we’re hearing the COVID pandemic may be sitting in a grey area.
“Nationally, contractors and consultants are getting very mixed responses from their clients - both public and private - on the question of who pays for any delays.
“Half our survey respondents say their clients have ‘opened the door’ to the possibility of varying terms, while the other half have received no such indication.
“Contractors and consultants are naturally concerned about the financial implications of having to bear all the costs. In the longer term, it may discourage them from bidding on projects.”
Seventeen per cent of respondents to the latest RA survey expect COVID-related project delays to be significant, 70 per cent to be minor and 13 per cent to have no impact.
“While it’s good news that the overwhelming majority believe the damage, in terms of cost and time overruns, will be minor or non-existent, it’s still a concern,” Mr Bushby said.
“Many are describing this current heated infrastructure market as a profitless boom. Margins are extremely tight and even relatively minor cost overruns can have big impacts on bottom lines.”
Mr Bushby says this week’s survey also reveals productivity across the infrastructure sector as a whole has dropped by 18 per cent since the impacts of COVID kicked in.
“Nearly 55 per cent of our respondents say the crisis is impacting on their abilities to deliver their current workloads, compared to 33 per cent who were asked the same survey question three weeks ago,” he said.
“It’s also worrying that overall productivity has fallen slightly from 86 per cent three weeks ago to 82 per cent this week. We hope that as flexible working arrangements and physical distancing changes bed down, we will start to see this trend turn around.
Sydney continues to be Australia’s most expensive city for construction
A new global report from Arcadis has yet again ranked Sydney as Australia’s most expensive city for construction, climbing four spots from last year to be ranked 30th out of 100 global cities.
The Arcadis International Construction Cost Report 2020 names London as the world’s most expensive city, followed by New York City, Hong Kong, Geneva and San Francisco.
Sydney is the most expensive Australian city at 30, followed by Brisbane (38), Melbourne (41) and Perth (50). Only Adelaide has fallen slightly outside at 56.
The ten least expensive cities are in Asia with at least half of those found in China.
According to the report, the cost of construction in Australian cities is heavily impacted by the slowing economy and the steady decline in construction work over the last three years, particularly within the residential sector in Sydney and Melbourne. However, this is countered by an increase in demand for non-residential and infrastructure projects in other cities.
Commenting on the report findings, Matthew Mackey, National Director, Cost & Commercial Management, Australia Pacific, Arcadis said despite the fall in construction levels over the last few years, construction costs had continued to rise in the majority of Australian cities. The impact of the COVID-19 pandemic on local construction costs was expected to be significant – although it was extremely difficult to predict to what extent and for how long, he added.
The annual International Construction Costs Report provides a comparative index of global construction costs. This year’s report addresses two challenges: the unfolding effects of the COVID-19 pandemic and unchanged need for the industry to focus on rethinking resilience amid climate change while plotting a course towards a carbon neutral future.
Construction processes alone are responsible for nearly 12 per cent of global, energy-related CO2 emissions and heating and cooling buildings is one of the biggest single causes of global warming.
CPEE short courses go 'live on-line'
Due to the ongoing COVID-19 virus concerns, all CPEE face-to-face short courses have been postponed, with a resumption date unlikely before October. However, in the interim the education provider has moved swiftly to continue delivering the program via webinars.
CPEE CEO, Ray Farrelly, says each short course we provide access to the same expert presenter, the same full set of printed notes (folder containing text and PPTs), the same Course Program and content as well as question and answer sessions.
"We were determined to set the bar high, so we'll add value by responding in writing to all submitted questions plus, where appropriate, add a separate optional workshop session to conclude the course. This will enhance the learning and enable more presenter commentary on the course and on any additional questions.
A further additional component will be the chance for delegates to undertake a formal assignment, based on the course content, and submit for assessment at no additional cost. A successful outcome on the assignment would allow CPEE to issue a “Certificate of Attainment”, in addition to the standard “Certificate of Attendance.”
CPEE's Live On-Line courses now available are: