The current issues facing the construction industry in Australia and elsewhere are not necessarily issues which haven't arisen before.
But often new manifestations on them arise and of course, there are constant, even if at times, slow, developments occurring as we proceed along.
The first, a perennial one, are rising project costs. These costs often vary because of things such as economic conditions such as increases in interest rates and the rising Australian dollar. In addition, cost increases in relation to purchasing of materials for projects have an impact.
Related to that is the fact that building contractors usually bear the risk of cost changes due to fixed price contracts and speculative home construction. The cost of land and raw materials can change rapidly. With rapid changes in prices, small construction companies have less leverage and are greatly affected by cost variations between the time the project commences and when it ends. This is the casse despite the fact that they are locked in, mostly, to the price originally provided.
Another ongoing issue in the industry is the constant, skilled labour shortages. This is a problem that has the potential to significantly affect the industry and one wonders how the issue is being addressed at a real fundamental level by government and or the industry itself, if it is being addressed at all. The problems in the education sector in respect of vocational training probably hasn’t helped, and so the necessary amount of skilled workers has not really been flowing through to industry.
Inefficiencies often result from lack of properly skilled and qualified workers. For example, time – and therefore money – can be lost as a result of having to deal with issues such as rectification of defective work which would not have to be dealt with if the staff doing such work were genuinely skilled and or qualified. Arguably, and finally on this point, the issue of a skilled labour shortage is more prevalent in the smaller sector of the construction industry.
Another problem which the industry has had to deal with for some time is corruption in the industry. There are many operators in the industry who are well above board and honest honourable business men and women. But as is so often the case, at play here are the exceptions to the general rule that most industry operators are honest operators, that can sometimes create a bad name for the industry and erode the public’s perception of it.
The next issue on the agenda is technology, or more accurately, technological change. As a general rule, the building and construction industry has been relatively slow to adapt to new technologies.
That is not to say by any means that this industry is alone there. Many industries at times struggle to keep up with the pace of technological change which at times seems to be proceeding along at a very rapid pace. The choice or not to keep up with technology (or the lack of resources or know-how to do so) can impact upon the choice of materials in a job.
The next issue the industry is perhaps the most critical, again often more prevalent in the smaller business section of the industry: that of cash flow. By way of example, besides the fact that often payment terms stretch out further and further, small construction businesses often have a problem regulating cash flow because they don’t employ suitable invoicing systems.
A progress payment schedule can help outline what is expected at different phases of the project and determine when each phase of the project is considered complete. Without regular progress payments you can have too many resources tied up in one job, which can significantly affect cash flow.
As to the next issue, it is often said that it is critical that those in any industry lay out a comprehensive business plan, though this is quite often not done. Such a plan should cover finances, operations, and marketing of your construction business, among other aspects. This will give you a clear perspective of your cash and manpower and help you not to overestimate or underestimate your capabilities.
You should map out the details of all your project stages to stay on track. For assistance with having a business or marketing plan prepared, of course see the relevant professional, primarily your accountant. However, some government licensing bodies in various states (by way of example, in Victoria, Business Victoria) can offer free or low cost assistance here.
Finally, a relatively common issue facing the Australian construction industry is quality control. In a market at times beset with poor productivity, the regulatory, law and legal system set up to regulate the quality of goods and services delivered at times struggles to provide a total package of compliance and regulation. This is partly because those in the industry at times lack focus as to establishing the best standard of products and services that should be delivered due to the fact that they are focused on other things such as cash flow and, frankly, survival.
Those in the industry who are on the front line in the fight for quality in the industry say the system is broken and it can well be argued that the cladding situation as it currently exists is testament to, and just an example of that.
This is obviously not a comprehensive discussion as to the current issues facing the building industry today, but it is certainly a discussion point or trigger for further thought.