To call 2018 a bumper year for construction and engineering would certainly be something of an understatement. While residential construction has eased, transport and infrastructure spending has burgeoned: from rail, roads and water through to defence, health and just about everything else in between.
The east coast has been the big winner, with the major capitals boasting a broad cross-section of multibillion-dollar projects. Characteristically, the ‘big four’ have tended to forge ahead - although the second-tier players gained some decidedly fertile ground with major project wins.
Big players in a big year
Laing O'Rourke won arguably the first big transport project of the year in Sydney, adding another metro project to their books with the $955m Central Station Main Works upgrade.
They ended the year well in the defence sector, signing the contract for works underpinning Gladstone’s $800m Australia-Singapore Military Training Initiative in Queensland. Plus, the contract for the Future Submarine Construction Yard at Osborne in South Australia.
John Holland also enjoyed a buoyant start, winning the circa $300 million Batemans Bay Bridge replacement project in NSW. This win was followed by success on the Melbourne Metro rail project, where a consortium which included John Holland was awarded the $1 billion Rail Infrastructure Alliance's package of works by the Victorian Government.
Winning the $3.9 billion WestConnex Rozelle Interchange with CPB Contractors ensured John Holland headed into the Christmas break on a high.
CPB Contractors won the biggest Sydney Metro package awarded this year, picking up the $1.3 billion line-wide works for the City & Southwest project. This followed earlier wins in Sydney's west, which included works on the $1.6 billion Northern Road Upgrade and, in a joint venture with Lendlease, the early earthworks package for Western Sydney Airport.
The other big win for the company was in New Zealand, on the Waikeria Corrections and Treatment Facility PPP project.
Lendlease will be busy in South Australia, winning both stages of the $615 million Gawler Electrification Project. They also won the circa $350 million Martin Place metro station and towers, following a lengthy but successful unsolicited proposal process by Macquarie Group.
But possibly the biggest win of the year for Lendlease was in a joint venture with Samsung and Bouygues. The trio selected to deliver the mainline tunnels of the $7 billion WestConnex M4-M5 Link project.
Tier 2 wins
2018 was also an exciting year for many of the tier two contractors in Australia, especially those that traditionally sit just outside of the big four tier ones. These familiar industry names often competed for projects against at least one of big four and won. Time will tell if others can step up and make quality bids for projects yet to come.
Downer and Seymour Whyte notably won the jersey for the $450 miilion Berry to Bomaderry upgrade of the Princes Highway in NSW.
Further south, Fulton Hogan presented the winning tender for the $630 million Albion Road Bypass.
In Sydney, BMD won the Moorebank Avenue Upgrade as part of Qube’s game-changing Moorebank Logistics Park.
BMD and Fulton Hogan then combined forces to create the INLink joint venture and won the first package of the $10 billion Inland Rail project.
Meanwhile Georgiou, in a joint venture with Ertech, won its second contract on the Northern Road Upgrade.
Mitigating the risks
But with so many more projects coming on line, it’s important to discuss the risks and issues.
Light rail continues to dominate the media headlines in Sydney, and sometimes the unthinkable can occur - such as the demise of 120-year-old RCR Infrastructure.
Lendlease also experienced major share price drops and associated losses, creating the types of industry ripples that demand close analysis.
Business Advisor Peter Wilkinson gives credit to the extraordinary levels of delivery activity being displayed, but highlights some familiar themes.
“With the industry effectively at full capacity, project margins are still dropping, which is counter-intuitive to the typical supply-demand relationship,” he says.
“It appears the industry is still conditioned to display ‘feast or famine’ behaviour, with businesses finding it very difficult to say no.”
He added that recent new entrants have exacerbated this ‘feast or famine' behaviour and as a consequence, poor executions, losses and exits are starting to show up.
“It’s likely that we will see more of this in 2019, with consequent financing, backing and approvals challenges for major projects,” he says.
“From a tendering perspective, businesses that respond to this environment by carefully selecting and then focusing on their targets will improve their chances of sustainable success.”
The search for top talent
The never-ending saga of finding skilled workers, especially in engineering and construction, also continues to impact the industry and will need to be addressed in government-commercial apprenticeship schemes plus much more strategic thinking on staff recruitment and retention.
A report released by the Australasian Railways Association warned that more than 20 percent of the sector's existing workforce is expected to retire before 2028. The report also suggests that in 2023, at the peak of the construction boom, workforce gaps of up to 70,000 people may exist.
Executive Search Consultant Dan Mousley says 2018 is another year characterised by skill shortages, particularly in rail and technical disciplines such as high voltage electrical engineering.
“As competition for talent intensifies, the candidate experience will become ever more important as applicants will have more choice in a very competitive and buoyant rail industry,” Dan says.
“Organisations need to continue embracing innovation and developments in technology that will assist with identifying, attracting, assessing and integrating talent, but should never lose sight of the most important aspect of any recruitment campaign - the human touch.
“There will always be roles where industry and local experience is paramount, but hiring managers may need to challenge traditional thinking and consider transferable skills from associated industries such as aviation, automotive, defence and manufacturing.”
A glimmer of the future
The good news for the transport industry is that both the Newcastle and Canberra light rail projects began testing and commissioning of their respective CAF vehicles.
In Melbourne, Downer and CRRC Changchun, as part of the Evolution Rail consortium, began testing of the new High Capacity Metro Trains, which will ultimately be housed at a new purpose-built depot in Pakenham East.
The first Sydney Metro station is also complete. Tallawong Station in Rouse Hill is one of 13 new Sydney Metro Northwest stations to be built. The others stations are nearing completion.
In Sydney's inner west, major underground drilling started on the two Sydney Metro railway tunnels that will run below the CBD and harbour as part of the City & Southwest program of works.
Further afield in regional NSW, construction began on the Inland Rail project, with a formal ground breaking ceremony in Parkes only last week. The once-in-a-generation project will complete the national freight network between Melbourne and Brisbane via regional Victoria, NSW and Queensland.
Major transport tenders submitted by teams but not yet awarded include Parramatta Light Rail, Regional Rail, and the Sydney Ferries contract. While those bidding for the other Sydney Metro integrated station developments continue to battle it out for projects including Victoria Cross, Waterloo and Pitt Street.
In Brisbane, it was a who’s who of major contractors and consultants recently, as teams submitted their bids for packages of work on the $5.4 billion Cross River Rail project.
2019 promises to bring some exciting announcements.
Technology also continues to deliver exciting possibilities for the engineering industry. Sydney Trains and Roads and Maritime Services are trialing the use of drones to quickly and safely check assets and infrastructure, and Transport for NSW is trialing autonomous vehicles at three sites including Sydney Olympic Park.
2019 also looks set to maintain the ongoing momentum for digital engineering.
BIM is almost a given on multimillion-dollar projects, and the augmented reality and virtual reality spaces are the favoured methods of testing concepts and customer experiences. More and more delivery teams are also designing with precision and planning construction sequences in 4D.
Digital Engineering Manager Matt Drake says virtual, mixed and augmented reality are becoming increasingly popular, cheaper and easier to set up and use on projects.
“Contractors are starting to see past the novelty of this technology and use it for practical purposes. Being able to virtually overlay a design while out on site is extremely powerful,” he says.
“Businesses are strategically recruiting and training people with these skills to eliminate repetitive tasks and create multiple design options in a fraction of the time.”
A flagship of the NSW Government, TfNSW launched its innovative Digital Engineering Framework Program in June 2018.
“The digital engineering framework released by TfNSW is an exciting step forward for the digital engineering community in NSW,” Matt says.
States like Victoria and Queensland have released statements and documents regarding the mandate of digital engineering on all projects over $50 million.
“The more we can transfer digital engineering processes to site and to our supply chains is also really exciting and very achievable in 2019. The link between digital engineering, procurement and asset management has enormous potential cost savings.”
Standing out from the crowd
The east coast continues to lead the charge on major construction opportunities, but it’s been par for the course recently to have delays that make the planning of tenders a challenge to coordinate.
And even though we’ll see the NSW Government enter caretaker mode until March 2019, some exciting plans are in the works for next year.
Contractors will be circling all things ‘west’ in Sydney – with the Western Sydney Airport, Sydney Metro West and the Western Harbour Tunnel, bringing significant activity.
The Inland Rail project will also provide further opportunities for tendering success.
As a busy year in construction and engineering comes to a close, it’s worth considering the needs of individual industry segments, in order to create quality tender submissions that grab attention and communicate dynamic but realistic and competitive solutions with clarity.
With 2019 looking to have a bumper crop of projects on the go, consider how you’ll be presenting tenders that stand out from the crowd.
Merry Christmas and a happy new year from us all at Bluegum Communication