issue 18

Welcome to the Building Industry Bulletin

Queensland regional construction activity update

The December quarter update from the National Institute of Economic and Industry Research (NIEIR) shows that total Queensland construction activity grew by 7.1% to $38.4 billion in 2007-08. The projected growth for Queensland construction in 2008-09 is 1.6% to $39.0 billion, followed by an estimated 0.3% growth to $39.2 billion in 2009-10.

The outlook for Queensland dwelling construction over the next two fiscal years remains one of average stability with short term decline offset by recovery. Between September quarter 2008 and June quarter 2009 Queensland private dwelling construction is projected to fall by 10%. Over the following year to June quarter 2010 Queensland construction is projected to increase by 13%.

In 2007-08 non-residential building activity was valued at $6.7 billion. For 2008-09 non-residential construction activity is expected to decrease by 2.2%, followed by a further projected decrease of 1.7% in 2009-10. There has been a downward revision of 3.6% for 2008-09 and 1.4% for 2009-10 compared to the September Bulletin. This is a result of an expectation that current credit tightening will result in projects being cancelled, slowed or postponed.

In 2007-08 engineering construction expenditure was $15.6 billion, which represented a 22% increase from 2006-07. NIEIR have forecast engineering construction to increase by 3.3% in 2008-09. A further 1.2% increase is projected for 2009-10. The downward revision since September quarter for 2008-09 has been 4.6%. Similarly to the non-residential building sector, there is little immediate evidence for the downward revision as the value of work yet to be done remains strong. The sudden decline in coal shipments to China and elsewhere, has however, brought forward a number of announcements of expenditure declines from what was otherwise planned.

The current labour shortage in construction for Queensland is around 10,000 and is expected to improve to a balance of supply and demand by the middle of 2009.

Over the June and September quarters the real rate of inflation averaged 2.8% per quarter at annual rates. The downward revision to construction activity should result in the labour shortage in Queensland construction easing steadily over the next two years. Real inflation is also expected to ease steadily as the excess demand for labour is reduced.

[View NIEIR December Report 2008]
[View NIEIR Annual Report 2008]

DPW Contractor Survey

Throughout 2008, the ability to employ subcontractors improved compared to the levels seen between 2004 and 2007, reflecting a slowdown in the Queensland construction sector. In December quarter 2008, 11% of contractors experienced overall difficulties employing subcontractors, whilst 28% of contractors had difficulty finding suitably experienced or qualified subcontractors.

The DPW Contractor survey showed some regions and sectors were, however, experiencing above average subcontractor shortages. Overall shortages were higher in the Fitzroy, Gold Coast, South West and Central West regions and the residential multi-unit sector.

In the December quarter, 48% of contractors believed there was an overall shortage of subcontractors across the trades and the remaining 52% indicated it was concentrated in specific trades. This is compared to 65% and 35% respectively as reported in September 2008. The electrical, carpentry and tiling trades were the most mentioned amongst those experiencing difficulty employing subcontractors.

For those experiencing shortages, the most likely impacts were increased project costs (52%, down from 77% in September) and project delays (48%, down from 62% in September).

Contractors have recognised a slowing in building activity; on average, contractors estimated they were operating at 72% of capacity (down from 78% in September). Higher operating capacities emerged for contractors in the Brisbane (77%), South West (88%), Central West (100%) and the sole contractors surveyed in the North West (80%) and Wide Bay (95%) regions.

The survey revealed that more contractors believed their workloads had decreased in the past three months (40%) than increased (34%) or stayed the same (26%). Only 25% of contractors expected their workload to increase through to March 2009 (58% in September 2008). A significant shift in expectations of cost increases was also apparent with only 49% of contractors anticipating a rise in building material costs (79% in September 2008) and 15% expecting labour costs to increase (41% in September 2008).

[ View the full report ]

PQC Tender Activity

There was a significant increase in tender activity during the December quarter with the average number of tenderers reaching 6.6 per project. This is compared to 5.3 in September quarter 2008 and 4.7 in June quarter 2008.

Whilst there was continued strong interest from prequalified contractors to tender for housing projects during the December quarter, the average number of tenderers also continued to increase for a wider range of project types, including police and educational facilities and office refurbishment and fitout.

Difficulties are however, still being reported with regard to projects requiring electrical upgrades and projects in some regional areas of Queensland. Many of these projects continue to attract only a small number of tenderers.

Of the total number of open tenders accepted in December quarter 2008, 41% were for authorities (e.g. police, ambulance and fire stations), 35% were residential projects and 14% were for administrative/office related buildings.

Similarly to the previous quarter, almost half of all open tenders awarded in the December quarter were located in either Brisbane (25%) or the Far North (21%). The Moreton South/Gold Coast, Moreton North/Sunshine Coast and Darling Downs regions accounted for a further 17%, 11% and 8% of open tenders awarded respectively.

[ View tender activity table ] [ View open tenders by region ] [ View open tenders by project type ]

Building Price Index

The Department of Public Works BPI indicates building cost movement for the December quarter 2008 decreased by -6.5%. Building cost movement of -2.5% and -1.0% is forecast for the March and June quarters of 2009 respectively.

Building cost rises are expected from September quarter 2009 through to June quarter 2011, with the Department forecasting quarterly increases of betweeen 0.5% and 1.5%.

The Building Price Index tracks tender price movement for typical Queensland Government buildings to a maximum of $50M.

[ View the table ]

Building Materials Cost Comparison

Owing to the volatility of material supply prices experienced over the last quarter of 2008, detailed material pricing information has not been published in this edition of the bulletin.

Please refer to the Building Materials Cost Comparison on the Department of Public Works' Build website for any updated information prior to the release of the March Quarter 2009 Bulletin.

Building Policy News

Capital Works Management Framework

The Capital Works Management Framework (CWMF) is the whole-of-Government policy for managing risks in the planning and delivery of government building projects. The CWMF comprises the policy document, a number of guidelines and policy advice notes.

A second edition CMWF guideline and a number of CWMF policy advice notes have been released in the December Quarter 2008.

Procurement Strategy and Contract Selection (released in November 2008) was first published in January 2001 under the title ‘Procurement Selection and Generic Contracts’. The second edition of the guideline has been updated to align its content with that of the second edition of the CWMF policy document (released in June 2008). The objective of this guideline is to facilitate consistency in, and provide guidance to government departments regarding, selection of the most appropriate procurement strategy and contract for each government building project.

Application of Financial Capacity Assessments to Projects delivered under the Non-Traditional Procurement System was released in October 2008. Policy requirement 9 of the CWMF states that, for all government building projects exceeding $500,000 in value, a formal financial capacity assessment of the preferred tenderer is to be undertaken by the Queensland Building Services Authority. The purpose of this policy advice note is to provide departments with further information regarding the application of this policy requirement to projects delivered under the non-traditional procurement system.

ClimateSmart Buildings: Towards Environmentally Sustainable Government Buildings was released in November 2008. The purpose of this policy advice note is to highlight environmental sustainability as a key consideration in the planning, procurement, management-in-use and disposal of government buildings.

Re-released in November 2008, Forecasting Escalation in Building Costs: Calculating, Documenting and Reviewing Allowances and Programming and Cash Flow Considerations when Budgeting for Government Building Projects were first published in March 2006. Both documents have been revised to reflect recent amendments to the CWMF policy document whereby departments must, after prior consultation with the Department of Public Works, declare their provision for building cost escalation and their proposed project cash flow when presenting budget submissions for building projects to Government.

All of the above documents have been issued to departments in electronic format and made available on the Department of Public Works' website .

An amendment to the Queensland Building Services Authority Regulation 2003 (the QBSA Regulation) came into operation on 1 January 2009 that created a new class of licence specifically for providers of the building project management services. A News Brief: Eligibility of project managers for registration on the Prequalification (PQC) System for building industry consultants will be released shortly to explain the implications of the amendment on the planning and delivery of government building projects.

For further information on any of these documents, please contact the Principal Policy Manager (CWMF), Building Policy Unit on telephone (07) 3224 5631.

Maintenance Management Framework

Following the release of the second edition of the Maintenance Management Framework (MMF), a number of MMF guidelines and policy advice notes have been revised and issued. This includes the Building Condition Assessment guideline (released in October 2008) which provides guidance to departments on the process to be adopted for the planning and implementation of condition assessments.  

All revised documents are available on the Department of Public Works’ website.

In the next period, it is expected that a revised Building Maintenance Budget guideline will be finalised and released.

For further information on any of these documents, please contact the Principal Policy Manager (MMF), Building Policy Unit on telephone (07) 3224 8673.

Building Asset Performance Framework

The Building Asset Performance Framework (BAPF) is a Queensland Government best practice guideline aimed at ensuring that departments have a systematic approach to managing the performance of their buildings to meet service delivery requirements.

The BAPF establishes the broad scope and application of building asset performance management and the key principles and elements necessary for achieving effective management of buildings. This includes guidance for departments to establish specific performance areas, performance indicators and performance measures for assessing building asset performance.

In the next period, departments will be invited to discuss the use of performance data for making decisions about their buildings with the aim to promote the uptake of the BAPF’s elements and principles.

To receive a hardcopy publication of the BAPF or to arrange a briefing on the BAPF, please contact the Principal Policy Manager (MMF), Building Policy Unit on telephone on (07) 3224 8673.

Recycling Policy for Buildings and Civil Infrastructure

The Recycling Policy for Buildings and Civil Infrastructure was approved for implementation as a Government policy administered by the Department of Public Works.

The policy, with effect from 1 July 2009, is aimed at ensuring that Queensland Government agencies and Government Owned Corporations adopt best practice with respect of waste construction materials for construction, refurbishment and demolition projects associated with buildings and infrastructure. The policy introduces:

• a recycling target of at least 40% of waste materials by weight for building and civil infrastructure projects. This refers to the percentage of total material that would otherwise be disposed of to landfill. Although not mandatory, the target aims to promote behaviour change and increase recycling capacity. The recycling target is to be applied as appropriate.
• a new obligation for agencies to demonstrate commitment to recycling by:
• reporting on recycling activities and performance in their annual reports
• ensuring that a Recycling Management Plan, which includes recycling measurement and reporting, is required to be prepared by a building contractor or in-house service provider for each applicable project.

A review of the policy and the associated recycling target will commence after two years of implementation to allow consideration of increasing the target.

For further information on the Recycling Policy for Buildings and Civil Infrastructure, please contact the Director, Technical Services Group, Technology and Development Division on telephone on (07) 3224 5205.

Recognition of the Australian Government Building and Construction OHS Accreditation Scheme

Following negotiations with the Office of the Federal Safety Commissioner, the Department of Public Works has agreed to recognise the Australian Government Building and Construction OHS Accreditation Scheme (the Scheme) for the OHS component of the Queensland Government’s Prequalification (PQC) System for building industry contractors and consultants. With several OHS prequalification schemes currently operating across various jurisdictions, the aim of the agreement is to reduce the administrative burden on industry participants through scheme recognition arrangements.

Contractors accredited under the Scheme will now be deemed to satisfy the OHS accreditation requirements of the PQC System.

CRC for Construction Innovation

The CRC for Construction Innovation has recently made available the research deliverables from a further 33 projects. All publicly available documents can be accessed as a pdf download via the CRC for Construction Innovation website.