Welcome to the Building Industry Bulletin

Queensland regional construction activity update

The June quarter update from the National Institute of Economic and Industry Research (NIEIR) shows that total Queensland construction activity grew by 7.2% to $36.8 billion in 2007-08. The projected growth for Queensland construction in 2008-09 is 3.9% to $38.2 billion, followed by an estimated 1.4% growth to $38.8 billion in 2009-10.

Over the next three years the drivers of Queensland construction growth will be private and public engineering expenditures. In 2007-08 total engineering expenditures explained all of the Queensland construction industry growth rate and this is expected to continue in 2008-09 and 2009-10. Housing expenditures are forecast to recover strongly in 2012 and 2013 with an estimated average increase in housing construction of 7% per annum over these two years.

NIEIR estimates that in March 2008 the skilled labour shortage in the Queensland construction industry was around 14,000 persons and this is projected to increase to 29,000 by the end of 2008-09.

The rate of increase in real Queensland construction costs is likely to decline from around 2% per annum to between 0% and 0.5% per annum by 2010. By 2011 it is expected Queensland will not have a labour shortage and capacity utilisation rates are anticipated to return to between 80% and 85%.

[View NIEIR Annual Report 2008] (.pdf, 625kb)

DPW Contractor Survey

Evidence of trade shortages continues to lessen, with the June quarter returning the most positive result since the survey commenced in June 2004. Currently 25% of PQC contractors (compared to 34% during the March quarter 2008 and 49% in the December quarter 2007) experienced difficulty employing subcontractors.

For those experiencing shortages during the June quarter, more felt this was an overall shortage (65%) rather than being concentrated in specific trades (35%). Despite a significant increase in the availability of subcontractors overall, the regions of Far North, Mackay, Wide Bay Burnett and Gold Coast reported experiencing above average subcontractor shortages. The sectors experiencing above average subcontractor shortages were residential low density units (44% of those operating in this sector), high density units (33%) and education (27%).

Almost nine in ten (88%) contractors expected building material costs to increase over the next three months to September 2008, compared to 85% in the March quarter 2008. There were mixed views on forward workload and labour costs with 53% of contractors anticipating workloads would increase in the short term and 55% anticipating labour costs would increase during the three months to September 2008.

Contractors, on average, estimate they are operating at 80% of total capacity (similar to perceptions over much of the past 18 months). All contractors in the Sunshine Coast region, as well as the sole contractors surveyed in the Northern and Central West, reported operating at 100% of available capability.

[ View the full report ] (.pdf, 135kb)

PQC Tender Activity

Despite an increase in the number of tenders let during the June quarter, there was a noticeable improvement in tender activity with the average number of tenderers reaching 4.7 per project. This is compared to 4.0 in March quarter 2008 and 4.3 in December quarter 2007.

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

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.

[ View the table ] (.pdf, 14kb)

Projected Programmed Spend Per Week – Construction

Information held in the whole-of-Queensland Government’s PQC System and Online Project Search can be used to project the dollar spend per week to meet current programmed milestones for government building projects.

Looking at the first eleven months of the 2008 - 2009 financial year, the average weekly spend to meet the current construction program, on a straight line analysis, is approximately $23M per week (as at 24 July 2008). It is projected that this weekly construction spend will increase in June 2009 to approximately $36M per week.

Education, corrective services and health projects account for 62% of these projects by dollar spend over this time.

Currently, excluded from these projections are capital works programs (including housing programs) that have not yet been 'unrolled' into individual projects.

The Department of Public Works uses this data to identify opportunities for workload smoothing or bundling in regional areas of Queensland.

 [ View the graphs ] (.pdf, 41kb)

Building Price Movement Forecast

The Department of Public Works forecasts indicate building cost movement for the June quarter 2008 decreased by 0.5%, however, a further cost increase of 0.5% is anticipated through the period to September quarter 2008.

Building cost rises are expected during 2008-2009 and 2009-2010 with the Department forecasting quarterly increases of between 1% to 2%.

[ View the table ] (.pdf, 22kb)

Building Materials Cost Comparison

During the June quarter 2008 there were cost increases in 200mm std concrete block (21.4%), mild steel sections - beams (12%) and face brick - settler range (14.4%). A material not included in previous cost comparisons, reinforcing steel meshes, shows an increase of 7%.

Over the last 12 months there has been no increase to the cost of aluminium windows - fixed and float glass tinted - 4mm thick.

According to Reed Construction Data, the most significant increases during the last 12 months have been in 200mm std concrete block (21.4%), face brick - settler range (16.7%), F14 structural timber (15.1%) and mild steel sections - beams (12.6%).

[ View the full table ] (.pdf, 31kb)

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 a policy document, a number of guidelines and policy advice notes, and an Online Toolbox.

The policy document has been revised recently and is available by clicking here.

Recent changes to the policy document include:

• a new requirement for centralised workload smoothing and program management for medium and lower value projects ($0.5 million to $20 million)
• a new requirement covering the preparation of government building project estimates, allowances for escalation, cash flows and identification of urgency of projects
• inclusion of an index of key terms

Briefings on the revised CWMF policy document are available by arrangement with the relevant Principal Policy Manager, Building Policy Unit contactable by telephone on (07) 3224 5631 or by email to bpu@publicworks.qld.gov.au.

The most recently published policy advice notes address Environmental Rating Systems and Government Buildings [July 2008] (.pdf, 132kb) and Contract Cost Estimates [August 2008] (.pdf, 75kb). The first of these is designed to assist departments to make informed decisions about the various environmental rating systems available. The second covers the issues of estimates and, among other things, explains that over-estimation or incorrect data entry may result in otherwise eligible tenderers being excluded from eligible list searches under the Prequalification (PQC) System adversely affecting the achievement of a value-for-money outcome.

As the associated guidelines and policy advice notes are revised/finalised, they will be issued to departments in electronic format and made available on the Department of Public Works' website. To access the website, please click here.

Maintenance Management Framework

The second edition of the Maintenance Management Framework (MMF) policy document has been recently released in its final published format and is available by clicking here. Hardcopy publications of the policy document are also now available on request.

The MMF is the Queensland Government's policy for managing building maintenance. The MMF comprises the policy document and a series of associated guidelines and policy advice notes.

In the past period, Building Policy Unit has released a number of revised guidelines and policy advice notes which reflect the changes made to the content and structure of the MMF policy document, including:

• Building Maintenance Policy, Standards and Strategy Development (.pdf, 185kb) (a consolidated guideline comprising updated content from four existing guidelines),
• Scope of Building Maintenance (.pdf, 151kb) (a revised policy advice note),
• Capital or Expense (.pdf, 104kb) (a revised policy advice note).

It is expected that the MMF guideline Building Condition Assessment (a revised guideline) will be finalised and released in the next period.

For further information or to arrange a briefing on the revised MMF, please contact the Principal Policy Manager, Building Policy Unit on telephone: 3224 8673.

Building Asset Performance Framework

On 11 June 2008, the Minister for Public Works, Housing and Information and Communication Technology approved the Building Asset Performance Framework (BAPF). The BAPF is a Queensland Government best practice guideline aimed at ensuring that departments have a systematic approach to managing the performance of government 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.

The BAPF was issued to departments in hardcopy, electronic format and made available on the Department of Public Works’ website. To access the website, please click here here.

For further information or to arrange a briefing on the BAPF, please contact the Principal Policy Manager, Building Policy Unit on telephone: 3224 8673.