With yet another major Australian construction company entering voluntary administration this week, it’s becoming clear that just throwing money at projects and expecting the industry to take care of itself from there isn’t working. And what support is being given to the small to medium-sized contractors being caught up in all these collapses? It’s time to rethink how we manage our megaprojects.
Perth-based engineering and construction company, Clough, is the latest in a growing line of industry giants to run into financial difficulties and be placed into voluntary administration. The move comes after the recent sale purchase agreement between Murray & Roberts who own Clough, and Webuild, fell through.
This isn’t a small hiccup – Clough is involved in delivering some of Australia’s biggest construction projects, some of which are integral to the energy transition, including Snowy 2.0, EnergyConnect, and the Waitsia Gas Project Stage 2.
While Clough was founded in Australia, it was acquired by South African firm Murray & Roberts in 2013. Interestingly, ProBuild was also founded in Australia and bought out by a South African firm before its fall.
One of the main reasons several Australian construction contractors have been acquired by overseas companies could be put down to how much focus the Federal Government has on actually improving growth in the sector, which is to say not much.
The Government’s view of simply paying for infrastructure and expecting this to progress the industry, hasn’t worked.
Industry Growth Centres have been established for six key growth sectors, including advanced manufacturing; cyber security; food and agribusiness; medical technologies and pharmaceuticals; mining equipment technology and services (METS); and oil, gas and energy resources.
These Industry Growth Centres look at the best approaches to strengthen the industries they focus on. Every critical industry has been highlighted for growth except construction, despite our massive project pipeline and critical skill shortage.
A construction-focused growth centre could help produce productivity improvements to advance the industry and save millions of dollars. Just a 0.1 per cent productivity savings could free up $100 million from the $100 billion infrastructure pipeline nationally.
The risks fall to small and medium-sized contractors
When these major construction companies like Clough and ProBuild collapse, the industry and media look to the projects that might be delayed and the workforces impacted. However, there are barely any conversations around the small to medium-sized contractors who now have to deal with delayed payments and a potentially diminishing pipeline.
The way Australia procures its infrastructure with these larger companies and the poor practices we currently have do nothing to encourage local entrepreneurial contractors to invest further in their businesses as, from their point of view, all they are doing is multiplying their risk.
More support must be provided to these small to medium-sized contractors, as well as First Nations owned businesses, to protect them from these risks. The first step in solving these challenges lies in rethinking how Australia manages its large-scale investments.
Translating words into actions
With issues arising from all major construction projects, who is tasked with capturing the lessons learnt and steering the industry forwards? We’ve started to do this through our industry associations, with organisations such as Infrastructure Australia assessing where we should be focusing our attention, but the outcomes presented aren’t being translated into actions because there is no one to drive them.
All these innovative ideas to transform the industry – something that the Government should be driving – is being wasted. There is so much knowledge, lessons and experience that is in the graveyards, and with the current industry approach to projects, more will end up there, leaving the construction industry in this uncertain state.
Will we get to the point of the industry needing a Royal Commission before something is done? This happened with education and banking – but how many more companies will we see collapse and how many projects will be delayed in the meantime? We’ve reached the point where the industry can’t afford to wait.
Clough enters voluntary administration – it’s time to rethink how we manage our megaprojects
Shivendra Kumar is a global construction business advisor and owns the consultancy firm, Shivendra & Co, where he helps small to medium construction businesses increase their growth potential and profitability, improve their processes and execute business strategies.
Shivendra is using his extensive industry experience from previous roles at large infrastructure organisations including Siemens and Downer to transform the construction industry from the ground up and be a voice for small to medium sized contractors.