Contractors who deliver major civil and commercial construction projects throughout Australia are increasingly concerned about political interference, cost blowouts and project delays, a new survey has found.

Published the Australian Constructors Association (ACA) in conjunction with built asset consultancy Arcadis, the 2024 Construction Market Sentiment Survey has shown that the overall level of industry sentiment has dampened compared with both 2023 and 2022.

In terms of activity, survey respondents indicated that markets remain strong in sectors such as energy/power, water/sewage, defence, data centres and healthcare facilities.

All up, 81 percent, 71 percent, 67 percent, 43 percent and 38 percent of respondents indicated that the level of construction activity in each of these sectors is rising.

Across most commercial sectors, however respondents indicate that activity levels are declining or stalled.

(source: 2024 Construction Market Sentiment Survey, Australian Constructors Association and Arcadis)

Meanwhile, respondents indicated that conditions have now peaked (albeit at high levels) in the booming road and railways sectors.

Furthermore, the survey uncovered challenges which are evident across several areas.

Asked about the most significant issues which have impacted their business in the past twelve months, respondents nominated ‘political factors’ as the most substantial challenge.

This is followed by access to skilled labour and government red tape.

The survey did not specify which political factors are being referred to.

Nevertheless, two areas stood out in participant comments.

First, there is concern about recent changes in workplace relations.

Since coming into power in 2022, the Albanese Labor Government has introduced a wide range of amendments to the Fair Work Act.

Introduced in four separate pieces of legislation, the changes so far cover 37 areas of workplace relations (see here).

The government and unions argue that the changes are necessary to close loopholes and to ensure adequate worker protection.

However, employers have expressed concern that the amendments will give more power to unions and will add to cost and compliance burdens.

“[The] industrial relations environment is heading downhill with unreasonable power given to unions without any consideration of [the] productivity effects,’ one survey respondent said.

“Governments [that are empowering these changes] are then reluctant to take on any of the costs or risk that comes with the changing IR environment.”

Meanwhile, other contractors lamented the effect of ongoing delays and slowing project commitments.

“Several large government funded construction projects (road, rail, aviation) are stalled or delayed,” another contractor commented.

“Appetite for greater clarity of this forward pipeline is strong and will give confidence to invest in capability.

“There is a significant uplift in tenders for renewable projects. However disparate procurement processes and contracts makes it difficult to predict when this work will transact.”

Other challenges include the need to absorb cost increases on major projects and unfair allocation of risk in contracts.

On the first point, almost half of all contractors indicated that they had needed to absorb cost escalation of 10 percent or greater on projects throughout calendar 2023 even after the effect of contractual mitigations (contract variations etc.) has been accounted for.

On contracts, almost three quarters (71 percent) indicate that these fail to fairly allocate risk between contractual parties.

Matthew Mackey, Executive Director – Cost & Commercial Management at Arcadis said that the construction industry continues to experience challenge.

“Amidst the post-pandemic recovery, Australia’s construction sector continues to grapple with political turbulence and industrial strife, escalating costs and stifling productivity, which is threatening the very viability of projects and businesses,” Mackey said.

“Risk allocations including those associated with the changing IR environment are significant impediments to business viability with nearly three-quarters of respondents agreeing that current contracts do not adequately and fairly allocate risk between contracting parties – a similar result to last year’s survey.”

John Davies, CEO of ACAC says that better contracting and project planning is needed.

“We can’t afford to continue with business as usual,” Davies said.

“Project planning needs to be improved and construction costs need to be lowered to ensure the country can afford the infrastructure it needs.

“We need to double down on collaboration to solve project challenges together and we need to improve industry productivity as a matter of urgency.”

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