A new Australian Constructors Association report has looked into why productivity isn’t improving in the construction industry
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| The industry is seen as being less attractive for younger workers to enter |
Productivity in Australia’s construction sector has not improved across the past 30 years, a report from Australian Constructors Association (ACA) says.
The report – Disrupt or Die – outlines how the industry has stagnated in terms of its productivity. Construction productivity, it says, is lower today than it was in 1990 which is a result of a sector that is stuck in the past and has failed to adapt to contemporary practices and technologies.
Considering the Australian construction industry is responsible for employing almost one in 10 of the country’s working population and contributes seven per cent of the national GDP, the report paints a worrying picture of a sector not only treading water but regressing in its efforts to be more productive.
In all, the poor productivity achieved by the construction sector, which is Australia’s fourth largest industry, costs the economy $47 billion each year, the ACA says.
Disrupt or Die was derived in 2020 by the ACA, which commissioned BIS Oxford Economics to investigate productivity in the construction industry since 1990.
ACA chief executive Jon Davies outlines the problems faced by the industry that were brought to light in the report.
“Over the last 30 years, almost every other industry has advanced, yet Australia’s construction industry has gone backwards,” Davies says.
“Construction productivity today is lower than it was in 1990 and the industry is out of touch with the next generation of workers, who no longer view it as an industry of choice.
“Workers do not want a job in an industry where the hours are long and disputes are commonplace, Excel spreadsheets are considered the height of tech and little focus is placed on the impact we are having on the environment.”
Australia’s construction industry boomed in 2014 when resources were at their most available.
However, since then, productivity has decreased 16.5 per cent from the 2014 levels at such a rate that productivity performance is now 1.8 per cent lower than in 1990. That means the construction industry yields an average growth rate of -0.1 per cent.
Other laborious industries in Australia such as manufacturing, transport and other selected industries such as agriculture, forestry, mining and waste services have all grown over the past 32 years, some of which are 33.6 per cent more productive than construction.
Value for money
While there are many culprits which the ACA has outlined to be at fault
for the current state of the industry, the biggest opportunity to improve productivity lies in fundamentally improving how projects are procured, delivered and governed, it says.
These so-called ‘white-collar’ activities are responsible for the
overseeing of construction projects – something which the ACA describes as a “significant wastage of skilled resources”.
For a while contracts have
been a race to the bottom, with
the lowest upfront cost often winning out, even though it may not be the best value. That concept is outdated, not sustainable and
is focused only on the short-term, the ACA says.
And while time and cost are obviously important components of value, assessed value should also include additional outcomes, ACA says, namely increasing innovation, productivity and environmental sustainability
as well as improving industry culture and sovereign capability.
“There is significant wastage of skilled resources through inefficient tender processes, but the bigger problem is the myopic focus on selecting the lowest price at the tender box to the detriment of all else,” Davies says.
“The lowest bid at the tender box is a completely false economy and is the direct cause of the adversarial contracting environment in which we now find ourselves.
“All too often, procurement processes encourage competition on willingness to price and accept unquantifiable risk rather than ideas to deliver improved project outcomes.”
The ACA also raised other issues that hinder productivity, such as the long hours worked by construction workers and the need to evolve towards utilising more advanced technological solutions.
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| Productivity and innovation are being hindered by inefficient tender processes |
Time to act
Paramount to the Disrupt or Die report was an outline of how best to disrupt the sector and make it more productive.
The ACA called on the various levels of government – the largest infrastructure client in Australia – to play the role of the disrupter in chief and encourage state governments to procure projects to maximise productivity, promote training and upskill the workforce.
To do so, the Future Australia Infrastructure Rating (FAIR)
has been developed to rate government-funded projects against key reform areas. All projects undertaken by government agencies would be given a rating that is published.
If implemented, the ACA has also proposed that the FAIR system could be included in the next National Partnership Agreement as a requirement for all projects funded by the federal government.
Other recommendations outlined by the ACA to improve productivity performance in
the industry include a better adoption of digital technologies, increased collaboration of contracts, streamlined design review process and a greater use of enterprise delivery models that increase innovation and improve engagement.
To fully address the productivity issue currently plaguing the construction industry, government, industry and unions must come together and collaborate, the ACA says.
“The industry cannot afford to continue down the path of slow incremental change,” Davis says.
“It is time to fundamentally disrupt how it operates to ensure we have sufficient workers delivering infrastructure that Australia can afford.
“Everyone has a part to play, including contractors, but it is the government, if it chooses to, that has the biggest power to disrupt.”