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Welcome
to the Building Industry Bulletin
The quarterly Building Industry Bulletin aims to provide updates on the latest trends within the Queensland building industry as relevant to the activities of the Department of Public Works.
Queensland regional construction activity update
The September quarter update from the National Institute of Economic and Industry Research (NIEIR) shows that total Queensland construction activity grew by 7.8% to $37 billion in 2007-08. The projected growth for Queensland construction in 2008-09 is 1.3% to $37.5 billion, followed by an estimated 0.6% growth to $37.7 billion in 2009-10.
In 2007-08, 100% of the growth in total Queensland construction was due to engineering construction and this is expected to continue in 2008-09 and 2009-10, with the contribution of private and public engineering expenditures to total Queensland construction activity growth projected to be 200% and 245% respectively.
As at September 2008, the outlook for Queensland dwelling construction over the next two fiscal years remains one of moderate decline, with quarterly total dwelling construction decreasing from the June quarter estimate of $4.1 billion to $3.8 billion by the middle of 2009.
In 2008-09 the projected growth for non residential construction is 2.6%, or a downward revision of 4% compared to the June quarter update. The growth for 2009-10 has also been revised downwards with a small decline of 0.2% expected. This is a result of the current world financial crisis which may lead to some projects being postponed or cancelled.
NIEIR estimates that in September 2008 the skilled labour shortage in the Queensland construction industry was around 14,000 persons and this is projected to increase to 21,000 by the end of 2008. The downward revisions to construction activity will mean that the labour shortage in Queensland construction will steadily ease over the next two years.
Due to high material cost increases (steel, plastics), current real inflation in the Queensland construction sector is running at around 0.6% per quarter, or between 3% and 4% at annual rates. Real inflation is expected to ease steadily as the excess demand for labour is reduced and the world recession triggers falls in oil and commodity prices.
These projections will be revised in the December quarter update to take into account changes in the world economic situation that occurred after this report was published.
[View NIEIR September Report 2008]
[View NIEIR Annual Report 2008]
DPW Contractor Survey
Evidence of trade shortages remains at low levels relative to previous years, although the latest results suggest a slight tightening in the September quarter 2008. A similar upturn was also noted in September quarter 2007. Currently 33% of PQC contractors are experiencing difficulties employing subcontractors. This is similar to March quarter 2008 (34%) and follows a record low in the June quarter (25%).
For those experiencing shortages during the September quarter 2008, the most likely impact is increased project costs due to an increase in subcontract rates: 77% in the September quarter 2008 (70% in June quarter 2008 and 85% in March quarter 2008). The regions of Fitzroy, South West, Brisbane and the Sunshine Coast reported above average subcontractors shortages. The sectors experiencing above average subcontractors shortages were offices single storey (50% of those operating in this sector), hospitals/health care (42%) and industrial (38%).
Most contractors (79%) consider building material costs will increase in the next quarter, easing from 90% in the June quarter 2008. Concerns over possible increases to labour costs continue to lessen, currently anticipated by 41% of contractors.
On average, contractors estimate they are operating at 78% of total capacity, compared to 80% in June quarter 2008. While this is comparable to levels over much of the previous two years, close to half of all respondents say they have experienced an improvement in their operating capacity since the previous quarter.
[ View the full report ]
PQC Tender Activity
The improvement in tender activity continued during the September quarter with the average number of tenderers reaching 5.3 per project. This is compared to 4.7 in June quarter 2008 and 4.0 in March quarter 2008.
Whilst there was continued strong interest from prequalified contractors to tender for housing projects during the September 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.
Of the total number of open tenders accepted in September quarter 2008, 43% were residential projects, 18% were for authorities and 13% were for hospital, health or welfare related buildings.
Almost half of all open tenders awarded in the quarter were located in either Brisbane (26%) or the Far North (21%). The Northern, Wide Bay Burnett and Moreton South/Gold Coast regions accounted for a further 14%, 12% and 10% of open tenders awarded respectively.
[ View tender activity table ] [ View
open tenders by region ] [ View open tenders by project type ]
Projected Programmed Spend Per Week – Construction
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.
Information available to the Department of Public Works’ Building Policy Unit indicates that the average weekly spend to meet the current construction program for the period Q2 2008/09 to Q1 2009/10, on a straight line analysis, is approximately $20M per week (as at 16 September 2008).
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 ]
Building Price Index
The Department of Public Works forecasts indicate building cost movement for the September quarter 2008 increased by 0.5%. No cost rises are forecast for the December 2008 and March 2009 quarters.
Building cost rises are however expected, from June quarter 2009 through to June quater 2011, with the Department forecasting quarterly increases of between 0.5% and 1.5%.
The Building Price Index tracks and forecasts tender price movement for typical Queensland Government buildings to a maximum of $50M.
[ View the table ]
Building Materials Cost Comparison
During the September quarter 2008 the only building material cost increase was steel sections – beams which rose, as expected, by a significant 40.1%.
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 mild steel sections - beams (57.2%), 200mm std concrete block (21.4%), F14 structural timber (15.1%) and face brick - settler range (14.4%).
[ View the full table ]
Building Policy News
Capital Works Management Framework
A number of Capital Works Management Framework (CWMF) policy advice notes have been released in the September Quarter.
Centralised Program and Project Coordination: Bundling and Scheduling of Medium and Lower Value Government Building Projects was released in August 2008. This policy advice note was developed to provide departments with further information regarding the government initiative (reflected in CWMF policy requirement 1) for centralised workload smoothing and program management for medium and lower value projects ($0.5 million to $20 million).
Identifying the Signs of Contractors under Financial or Managerial Stress was released in August 2008. The purpose of this policy advice note is to provide departments with information regarding the ongoing implementation of CWMF policy requirement 14 (i.e. that departments inform the PQC Registrar of any indication of contractor financial or managerial stress).
Estimate Categories and Confidence Levels: An Initiative to Improve Budget Formulation for Government Building Projects was initially published in March 2006 and was re-released in September 2008. The estimate categories table has been revised to incorporate six categories and additional advice has been provided with respect to the use of estimate categories and confidence levels.
Contractor PQC Performance Reporting was released in October 2008. This policy advice note has been developed to provide departments with updated information regarding the ongoing implementation of CWMF policy requirement 13 (i.e. that departments complete performance reports for each contractor engaged through the PQC System during and at the end of the contract).
All policy advice notes have been issued to departments in electronic format and made available on the Department of Public Works' website. To access this website, please click here.
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
The Maintenance Management Framework (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.
The second edition of the MMF policy document was recently released (available by clicking here), together with a number of revised guidelines and policy advice notes, including:
A revised Building Condition Assessment guideline has now been finalised and is available on the Department of Public Works' website.
To receive a hardcopy publication of the revised MMF policy document or to arrange a briefing on the MMF, please contact the Principal Policy Manager (MMF), Building Policy Unit on telephone (07) 3224 8673.
Building Asset Performance Framework
Recently released, 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 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.
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.
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