Queensland Report - March 2010

Anticipated activity survey
During January, the CCF circulated a survey to all Queensland members, to provide estimates of the gross value of construction projects they expect to undertake, over the two years 2010 - 2011. The survey also sought information on confidence in the industry in the short to medium term and how this is impacting on staff numbers. 36 companies responded, representing a range of sizes and scopes, across both the metropolitan and region areas, in similar proportions to the overall Queensland CCF membership.
The results provide some useful information about expectations across the various civil construction sectors, and a valuable insight into confidence levels within the industry. Information was also gathered about issues affecting civil construction companies, which will assist the CCF to determine future resource needs and services.
It is not realistic to extrapolate the data from a portion of CCF members to estimate the total future value of civil construction projects, nor is there any way of confidently estimating private sector activity, such as subdivisions. While some government departments publish project timelines and expenditure, these cannot be relied on for future estimates of contract value as these are not always achieved.

 ‘Other’ - major government housing projects

There is an expectation of reasonably strong activity in the subdivision market on par with the utilities sector and exceeded only by the transport sector. Mining and marine infrastructure make up the bulk of other expected projects. A number of government housing contracts (“Other”) are being undertaken by larger multi-sectoral companies. Only about a quarter of projects anticipated over the next two years have been contracted so far.

It is concerning that around two thirds of companies anticipate a reduction in gross income or no growth, while costs continue to rise.  This is reflected by low levels of confidence within the industry especially in the first half of 2010.  However the outlook is expected to improve, particularly in 2011.
Confidence remains relatively low in the regions compared with Brisbane, and there are mixed expectations on the Gold Coast.

In 2011 much of the anticipated improvement for CCF members is in the subdivision and mining sectors, contrary to Australia-wide forecasts in the most recent AIG Construction Outlook Survey Report (Oct 2009). This local confidence seems to be supported by recent results for housing approvals in December 2009. Reasonable levels of activity are expected in the utilities and marine sectors.
A number of members involved in the mining, subdivisions and marine infrastructure, reported they were recruiting staff or at least holding numbers steady. However there appears to be limited confidence in the transport sector, despite this being the sector of greatest value, with some larger companies with significant exposure in this area anticipating reduced project and staffing levels in the next two years.
A number of CCF members are concerned about declining opportunities to win significant subcontracts in the transport sector, with major contractors increasingly moving to comprehensive project management, rather than subletting sections of the contract which could be managed and constructed by tier 2 or 3 companies. Many transport infrastructure projects are still being tendered as major works rather than being broken down into components suitable for delivery by medium sized construction companies.
Confidence levels are reflected in responses about current staff recruitment activities. Overall staff numbers appear to be steady on average with 28% hiring, 22% laying off and the remainder not anticipating changes. Few regional companies were hiring staff. In fact a number were laying off staff, which is consistent with lower confidence in the regions. Generally Brisbane companies were recruiting, whilst those on the Gold Coast were steady.  
Industry issues
The major concerns within the industry, which are key drivers of confidence, are illustrated below. Current economic conditions and low profit margins are pressing concerns. Many CCF members depend on subcontracts from the tier 1 construction companies. Most report that margins are getting tighter and companies are tendering at minimal profit levels in order to win work to generate cash flow in this highly competitive market. Some anecdotal reports suggest that, on occasions, winning bids are well below cost price, which threatens the long term viability of many players in the industry.

New staff
Civil Train continues to expand its staff and range of courses. The member services team is now at full strength with a new member services manager Mark Swinbourne who, along with the workplace health and safety office Belinda Binnington and environment and sustainability manager Sheila Donaldson, are engaged to provide CCF members with advice and support. 
Members are looking to CCF to advocate on their behalf on issues about the economy and procurement as well as industrial relations. The recent appointment of policy manager Michael Duff, will greatly assist Queensland CCF to advocate on a wide range of issues. Members also responded that they are looking for advice and training, particularly in contract law, industrial relations, safety and environment.