Governments around the world are heavily involved in their local construction industry. And most debate the extent to which they involve themselves in the industry. A helpful place to start in determining what to concentrate on is to consider the past and evaluate what worked well then.
Of course, if we start with considering the past, we need to take into consideration what’s different with the present. For instance, what if the local industry is currently at overcapacity and has too many players? I don’t believe if this is the case that Government should get involved in this issue. Market forces will resolve this, through market consolidation or business exits, and individual businesses need to evaluate and respond to this risk as appropriate.
One area that Government has traditionally taken responsibility for is a process of monetary and non-monetary prequalification for various levels/types of work – analogous to the system of qualification that most national football league’s use across Europe such as the English Premier League in England. This gives guidance to industry as to the work that a given business is ready to deliver. It also reduces the client’s risk that a contractor is unable to deliver the work and therefore fails.
This system, across the local agencies in Australia that procure construction services, feels a bit frayed and undisciplined around the edges now. Whether this is because of Government lack of experienced resources, or lack of resources in general, is for Governments to consider.
Of course, a disciplined pre-qualification system requires Governments to ensure that sufficient projects are allocated to each level of the league. Otherwise, we end up with a suboptimal outcome from a productivity/use of available resources standpoint, and increased difficulty in construction service providers making confident business investment decisions. This seems to be a bigger challenge currently, maybe because of the influence of politics in the decision-making process.
For an Australian industry with a well-recognised skills deficit, we can’t afford to waste the resources that are available through inefficiency. For instance, it’s harder to justify investment in training young people if there’s a risk of them being stood down because the work has dried up. Another challenge for Governments to consider.
To address the current, flavour of the month conversation, regarding what Governments are being asked to do, the construction industry doesn’t need Governments to define what “collaboration” looks like. We all know what it looks and feels like. What needs to happen is that the contractual framework needs to be in place to allow collaborative behaviour to flourish, and sufficient preparatory work on the project needs to be done prior to letting out the project in line with the proposed contractual framework.
Peter Wilkinson – Director, Sam Wilko Advisory
Author of “The Steel Ceiling: Achieving Sustainable Growth in Engineering and Construction” Wiley, 2023
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