Contractors face high expectations, tight margins

How one defines quality in infrastructure can be open to interpretation.

It may be the quality of the materials used, the longevity and reliability of the asset, whether or not it’s up to Australian Standards, or even the quality expected from the client.

Gerard Keynes, General Manager Queensland at BMD Constructions, says the quest for quality can be heavily affected by downward pressure on the cost of a project. “To drive a price down puts pressure on the quality of the product,” he says.

In today’s Australian infrastructure market, he says there’s a problem with governments, clients and companies squeezing those price margins, but still expecting a quality asset. “The industry is facing [that] challenge at the moment in the infrastructure market,” he says.

NSW, however, has bolstered its infrastructure market through the state government’s Rebuilding NSW Plan, which is seeing $20 billion invested in new infrastructure across the region. The 2015-16 State Budget also includes a cash injection of more than $590 million to fast-track the delivery of big ticket infrastructure projects.

Mr. Keynes says that outside of the NSW region, there’s not enough work to sustain the contractors out there. “A huge part of [the market decline] is in the decrease in government spending on road infrastructure, occurring at the same time as a reduction in resource sector spending,” he says.

This lull in the market has played out over the past few years, he explains, and the pressure on prices is creating a fiercly competitive environment for contractors. “It affects the industry as a whole,” Mr. Keynes adds.

Right now the infrastructure market has stalled, he explains, and contractors in particular need to adopt more business-savvy methods to survive.

Mr. Keynes explains that the procurement process for a project, for instance, is important because it’s the start of a commercial relationship between contractor and client, and may ultimately influence the final product. “At the moment, we see wasted resources in the procurement process,” he says. “You’ve got a disproportionate range of tender fields, protracted tender processes and slow decision making.”

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