Meeting Australia’s Infrastructure Requirements in a Post-Covid World – Real Estate & Construction
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With infrastructure widely expected to lead the post-global pandemic recovery, the industry can expect serious competition over access to skills, assets and the supply chain.
The NSW government plans to invest A $ 107.1 billion (US $ 84 billion) over the next four years in transport infrastructure alone as part of its rolling infrastructure plan, while recent state and federal governments are expected to spend a total of 225 billion Australian dollars (US $ 175 billion) over the same period. While the scale of this investment is not new, it is clear that the next four years will be hectic for buyers and the service industry, and competition for a reliable supply chain will be intense.
Australia, like many countries, is currently experiencing a skills shortage throughout the supply chain as the trades and trades people required for infrastructure projects are also in high demand, competing with renewable energy and mining sectors. These factors have led to escalating costs for wages, materials, facilities and equipment – a trend that will only continue as the volume of work to be done increases.
Previous economic crises have seen a flood of projects brought to market at an accelerated pace by politicians looking for easy political gains and increased GDP that can result from new infrastructure. However, experience shows that without sufficient framing and consideration of risk allocation, the benefits promised to the public and private sectors will not materialize. Careful consideration of the best procurement models will be necessary as part of any government effort to manage post-pandemic capacity.
Bridging the skills gap
The public and private sectors will have to come together to bring more capacities and capacities to the market. Australia’s skills gap is not unprecedented, and the country can look to other jurisdictions for examples of successful strategies.
Without sufficient scope and consideration of risk allocation, the promised benefits of increased infrastructure investment for the public and private sectors will not materialize
Hong Kong, which has experienced a similar infrastructure boom over the past decade, has focused on young people leaving school and retraining. The government has invested heavily in trades-based training camps, promoting construction techniques that require fewer workers, while encouraging young people to choose construction-oriented trades and degrees. It has also advertised worldwide, seeking to attract experienced entrepreneurs and individuals from overseas.
Likewise, in London, Crossrail has established a Tunneling and Construction Skills ‘Academy’, aiming to train 3,500 people to work on the project and provide a lasting legacy of skills and jobs.
Australia has followed a similar path in terms of attracting skills overseas and training future construction professionals. Transport for New South Wales (TfNSW), for example, has in place measurable requirements for the training of junior members of the workforce for its contractors. The Victorian Major Projects Leadership Academy, which was established in 2019 to train the people needed to deliver the complex infrastructure projects of the future, was renamed in 2020 to welcome participants from across Australia.
Retraining will also be important as employment support programs end and the long-term impact of Covid-19 on industries such as airlines, retail and hospitality becomes clearer. . The Australian Constructors Association (ACA) has studied the potential transferable skills of those in these industries “displaced by Covid” and engaged with the Federal Commissioner for Skills on this issue.
The industry should also seek to attract a more diverse pool of potential candidates. Women are particularly under-represented in construction roles around the world, as the industry struggles to shake off its reputation as “man’s work”. The reasons are manifold, but include the long-standing disparity between the number of women studying and seeking careers in science, technology, engineering and mathematics (STEM); a lack of visible role models and mentors; and rigid shift patterns and non-social hours unable to accommodate those with family responsibilities.
An easy win would be to focus on those who are already working in the construction industry. There is much more that could be done to improve mental health in the sector, with its associated impact on availability for work. The effects of financial hardship and stress on small entrepreneurs who are the most financially vulnerable must also be taken into account.
Approaching capacity through contracting
While the peaks and troughs associated with economic fluctuations are inevitable, the construction industry works best when it responds to a stable and sustainable pipeline of projects rather than a “boom and bust” mentality.
The situation is even more complicated in Australia because it is each state, rather than the federal government, that is responsible for the infrastructure. Given the unprecedented and global impact of the pandemic, however, Australia needs to develop coherent and achievable national strategies aimed at stabilizing the infrastructure market. Without a national approach, a solution will be difficult.
Australian contracts used for megaprojects are usually tailor-made risk transfer documents, which lack practical utility. For entrepreneurs and the supply chain, collaboration will be the key to success in this new landscape. Procurement models that support and encourage such collaboration should be encouraged and both sides of the negotiating table should be committed to working towards the success of the project for a collaborative building model to be successful.
Instead of focusing on a particular form of procurement or one form of contract, the solution is likely to be some sort of hybrid model – market the certainties of the project and consider a target cost or interim sum approach for the uncertain. Components. The advent of the NEC4 contract in Australia is an exciting development, and should be seen as a necessary piece of the puzzle here. Pinsent Masons, the law firm behind Out-Law, has just completed work on Australia-specific “Y Option” clauses in support of the upcoming launch of this standard form in Australia.
Sydney Water recently entered the market on the basis of a 10-year framework leased as part of the NEC4 suite, which it calls Partnership For Success (P4S). This collaborative and long-term approach will secure its access to the supply chain during a period of limited capacity and capacity.
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