Mitchell Brandtman team members from across our entire national network congregated at the Novotel Twin Waters Resort on the Sunshine Coast knowing that great things in business are not done by one person but by an united team
Mitchell Brandtman team members from across our entire national network congregated at the Novotel Twin Waters Resort on the Sunshine Coast knowing that great things in business are not done by one person but by an united team.
A weekend of Balloon Raft challenges, The Amazing Race ‘MB Style” and a Hawaii themed party ensured that it was a weekend our national team will never forget!
#oneteamunited#bettertogether#MB_ready
As the launch of Project Bank Accounts to the wider construction market draws near, the Queensland construction industry is being forced to address the complexities and gear up for the new environment. Mitchell Brandtman poses the questions ‘What cost impacts will this have?’ and ‘What effect will it have on the stability of the industry?
For those who may not be aware, the Queensland government states that these legal changes have been introduced to “safeguard progress payments, protect retention monies and allow for more timely payments to subcontractors”.
The intent therefore is to make sure subbies get paid and in a timely fashion, indeed one legal opinion suggests that this Act will “make Queensland legislation the most weighted in favour of claimants in Australia”.
Any time the Government intervenes in an industry, it is normally to fix a problem and oftentimes it’s a problem that the industry in question cannot fix within itself.
And so it appears within our industry today, that the amount of insolvencies and non-payments to subcontractors and the associated hardship created, has reached a level that cannot be ignored. Whether or not this legal measure will provide the solution required remains to be seen. There are mechanisms in place for review and adjustments to make sure it’s having the desired effects, but government is a broadsword not a scalpel, and it is historically slow and difficult for government to change tact mid-journey.
Our questions today are what cost impacts will this have, what effect will it have on the stability of the industry and is it likely to have the intended effect.
What cost impacts will this have?
This legislation will most likely raise costs in parts of the industry in which it’s being implemented. Not to a large degree as material, site labour and plant costs won’t be effected by this move. Financing and compliance costs are the effected inputs and head contractors will need to make sure that sufficient staff resources are available (and suitably qualified) to handle the additional compliance. The financial penalties for failure are quite steep as well as the reputational damage that could be done, so leading builders who operate in this space will want to ensure they get it right. Since this is being applied to large projects, most will require professional financing and it is certain that our financial institutions will ensure that all systems are in place to comply with legislation the same way they currently do with other due diligence issues such as insurance. The additional use of multiple accounts will further involve financial institutions in the entire project cycle and those services will need to be paid for somehow.
Any possibility that subcontractors will reduce costs as they are now more certain to receive timely payments is not likely to materialise in our opinion. All other factors that go into tender pricing remain the same, other areas of uncertainty that subbies take into consideration when pricing haven’t disappeared and, above all, subcontractors are business people. They are out to make as much money as possible from the work they do and tend to reduce tender pricing when they feel there is stiff competition or a lack of work generally. It is market forces that have the strongest effect on construction costs such as competition, innovation, an available workforce and extended economic considerations such as the general cost of living.
What effect will this have on the stability of the industry?
Currently this is aimed at larger building projects, so there are sections of the industry not effected. When introduced into the private sector in March 2019, any private sector project over $1M in value will require PBA’s, although civil, engineering and infrastructure projects are excluded. So many in the industry won’t need to concern themselves with the changes and whatever payment problems exist in those sectors will presumably continue.Most legislation has unintended consequences and it is most likely that this legislation will follow that pattern. In our opinion this will have a ‘shake-out’ effect where head contractors that do not have sufficient liquidity (or certainty of access to funding) will be caught out or be unable to effectively tender for certain contracts. Larger and more highly resourced companies will be able to use this to their advantage and effectively use the legislation to out-manoeuvre their competition. The realisation on the ground could be a period of less competition and industry consolidation with negative consequences for the companies and families on the losing end. Once everything’s bedded down, competition will continue with new and old participants slugging it out in the new reality as they always have.
While strong underlying economics continue to operate, there will continue to be strong demand for construction. Where that demand continues there will be companies willing and able to meet it and adjusting payment requirements won’t change that fundamental.
Will it have the intended effect?
There are already legal requirements in place which have varying degrees of effectiveness, some of which are ignored, flaunted or only complied with in an ad-hoc manner. Any legal requirement is only as effective to the level it is policed. Good industry players that treat their subcontractors decently and ethically have done so for many decades and enjoy the reputation and trust that comes from such behaviour. These participants would continue to do so if the laws remained the same and will do so when the law is changed. The intention is to catch the underhanded, the game players and to instruct those who may simply be uninformed as to their responsibilities. Those who are determined to behave in an unethical manner will probably continue to do so and the legislation will only be effective in such situations when there is the commensurate level of policing powers by the relevant statutory bodies.
Another aspect to consider is that of subcontractor behaviour. The intent of the legislation is to protect subcontractors, but head contractors and developers have also fallen foul of underhanded behaviour from subbies and the legislation appears to offer little in this direction. This will certainly be tested in court from multiple angles and it is certain that lawyers will do well as judges fine tune the implementation and set precedents.
The team from our Melbourne office hosted yet another memorable VIP party at QT Rooftop Bar. We would like to thank all of our Property Industry friends for sharing in a great night. It was a night to say ‘thank you’ and an opportunity to catch up face to face with all of our valued clients who have helped contribute to the success of Mitchell Brandtman.
Last week, BIM advocates across Queensland rejoiced upon receiving the news that the Queensland Government had formally put its position out to industry on BIM by releasing the paper on Digital Enablement for Queensland Infrastructure, Principles for BIM Implementation.http://www.dsdmip.qld.gov.au/r…
We’ve BIM Waiting…Part 2
Last week, BIM advocates across Queensland rejoiced upon receiving the news that the Queensland Government had formally put its position out to industry on BIM by releasing the paper on Digital Enablement for Queensland Infrastructure, Principles for BIM Implementation.
It’s been a long time coming. Our company, Mitchell Brandtman has persisted and helped drive the BIM conversation globally for over 10 years now and our 5D Cost Planning team has been forging ahead in the quantity, cost and time space.
For someone who is passionate about influencing positive change to benefit us all, it’s great to know that the Queensland Government has officially recognised the opportunities and benefits than BIM can provide.
…we are so ready for this!
Will increased infrastructure spending offset the drop in residential approvals, and what will be the impact on residential construction costs over the next 12 months? Mitchell Brandtman explore the current residential construction cost market for 2018.
National Escalation Forecast
National Commentary Residential Building Approvals
Regardless of where individual States sit, overall residential building approvals on the East Coast remain well above their long term averages. However the heat is starting to come out of the market and this is slowly starting to translate itself into reduced activity and confidence in some areas. When we look at approvals on a moving annual basis, we can identify that approvals for developments with more than 4+ Stories have been trending downwards for the last 12 months. While Victoria has bucked the trend with an upswing in residential approvals, the general feel is that national residential approvals will be off the previous high but still remain strong.
The following graphs highlight the turnaround in residential approvals across the East Coast. The market was being dominated by a proliferation of high density unit developments, however the focus on these developments took away the limelight from a strong growth in Townhouse developments. This sector, with the exception of QLD, still hasn’t found its peak and appetite remains strong.
It is worth noting we have seen a re-imagining of townhouse product to attract owner occupiers. There is increasing popularity of larger townhouses with 3-4 bedrooms and ample living and storage space. This change correlates to a changing product mix and target market for larger unit developments which had an impact on cost per unit over the last 2 years. Interestingly this change hasn’t yet followed through to smaller unit developments (3 storey walk-up product). It appears that this market is not at a stage where the increase in amenity would be reflected in increased sale prices. Developers that are seeing success at the moment are moving away from investors (particularly offshore) and embracing owner-occupiers, particularly in the more affordable middle to outer ring suburbs.
QLD Commentary QLD Building Approvals
Drilling into South-East QLD and Brisbane in particular, we are seeing both residential approvals and residential construction down off peak numbers, however this needs to be taken in context. We are still currently constructing nearly twice the amount of our pre-GFC high. Major projects such as Queens Wharf, and the Howard Smith Wharves, alongside an increase in infrastructure projects continue to provide a buffer for contractors. However, despite the significant size of some of these projects, activity in these other sectors is not expected to counteract the slowing in activity overall and subsequent declining pressure on construction costs.
We do not expect residential construction costs to drop off dramatically at the head contract level, although there may be some opportunity to recoup margin at the sub-contract level.
Despite rumours to the contrary, Finance is obtainable for projects that stack up, however we are increasingly seeing experienced developers taping into alternate funders. The Big-4 banks are struggling with APRA and Basel Accords, and how this plays out on lending criteria and flows through to impact areas such as pre-sales and resistance to off-shore (and even interstate) buyers. Developers, while initially reluctant to pay a premium, are now becoming comfortable with the alternate lending offering and flexibility it offers.
NSW Commentary NSW Building Approvals
NSW continues to go from strength to strength, across multiple sectors. Residential construction, infrastructure, commercial, and office all remain strong. While headline focus remains on roads and rail and the opening of new commercial hubs in the CBD, there is strength throughout the sectors.
Significant development opportunities still exist around both the new Western Sydney airport and Norwest rail link (due to open at the end of 2019). There will be significant amounts of stock coming online in these areas.
This is placing considerable pressure on both labour rates and trade availability. In particular finishing trades and formwork. There is no sign that this will ease in the near future and may be negatively impacted as infrastructure projects move into their build phases.
Regions such as the Illawarra and Hunter continue to thrive off the back of both the growth in the Sydney market and increases in local amenity. Supply of residential apartments and subdivisions in these areas is growing in line with demand. Some units in these areas are starting to find their price ceiling and the challenge going forward will be keeping product affordable.
VIC Commentary VIC Building Approvals
Infrastructure continues to compete for the limelight with the residential sector in an already buoyant Victorian construction market. Resi approvals kicked again, and it is interesting to look closer at the detail. Headline articles have painted larger apartment projects as in decline. While these have been lumpy, the medium term trend remains positive and any short term losses were partly being offset by strong gains in the townhouse sector. The recent kick in 4+ Storey Units may not be sustainable given that it is heavily influence by a small number of large projects being bought to market.
While there remains wage growth pressure, the slight shift from large scale unionised projects to mid-rise residential and civil projects is having a dampening effect, as is the slow release of non-residential projects.
Representatives from our 5D Quantity Surveying team were invited to present at this year’s BILT ANZ 2017 in Adelaide. With over 380 delegates in attendance and a huge array of quality speakers, it was great to again be part of such a collaborative conference.
BILT is an annual event, run in multiple regions around the globe, designed to cater to the needs of those who design, build, operate and maintain our built environment. As a community of professionals, it is dedicated to improving the way industry works together.
As an educational and networking event, BILT provides a variety of opportunities to learn and share, to probe and challenge, to listen and to be heard. The sessions focused on the use of best-in-class tools, processes and workflows, behaviours and leadership.
2017 was an important year as the conference incorporated an ‘Estimation Stream’ to bring estimators and Quantity Surveyors into the conference. It was exciting to share our knowledge of both 5D and 4D Quantity Surveying and to be immersed in conversations around technology and where the QS profession is heading. It was really humbling to hear across many forums, that Mitchell Brandtman are know as the cutting edge QS firm that educate and encourage other QS’s to upskill in the use of these technology tools.
Scott Beazley, Digital Technologies Manager / Resident Celebrity, presented two, 75 minute presentations on ‘Modelling for 5D’ and ‘IFC used in Anger’. They were both very well received and spurred great conversations.
Natalie Chaves, 5D Quantity Surveyor and Caitlin Shields, 5D Quantity Surveyor and Associate, presented ‘ Virtual Construction Management’ , which spoke through the workflows of a QS at Design/ Tender and Construction Stages. With many great questions from the floor, this lead to discussions flowing into the break.
Mitchell Brandtman are very proud of the investment we have made for over 10+ years in the use of technology in our industry and how we can share this with our colleagues.
We would like to thank the organises of BILT ANZ 2017 for hosting such a great conference, the sponsors and the many speakers who all shared their time and knowledge. A special thank you to Peter Clack, AIQS President who attended the the BILT conference, offering a message to our peers and consultant friends that the AIQS is getting serious about the importance of technology and its use in our industry.
We all walked away buzzing with excitement as to what the future holds, our involvement and the new friendships formed with like minded colleagues.
Thank you from the Mitchell Brandtman Melbourne Team
Each year in April, Mitchell Brandtman Melbourne enjoy hosting a VIP event to thank our clients for their continued support.
Mitchell Brandtman would like to thank all of our Property Industry friends for sharing in a great night at Mon Bijou Melbourne. It was a night to thank you and an opportunity to catch up face to face, network and socialise on a balmy Melbourne evening.
It was a fabulous night and it is great to know that our clients appreciated Mitchell Brandtman hosting this event also,
‘Thank you for a fabulous evening. It was great to have the opportunity to meet some of your colleagues and clients. The venue was fantastic and the Mitchell Brandtman hospitality was incredibly generous. Thank you once again and I look forward to catching up in the future.’
‘Thank you for a wonderful night yesterday. Your company was extremely generous to host such a function and the venue was fantastic.’
We look forward to seeing you all again next year.
Mitchell Brandtman’s thoughts go out to everyone impacted by Cyclone Debbie and the resultant deluge that hit South East QLD and Northern NSW yesterday. Our team have been on the ground this morning assessing the impact to our sites and are in the process of contacting clients to offer any assistance.
For those that can’t get out to sites, a general update and some feedback from site:
– So far the majority of sites that were out of the ground have only suffered minor storm damage and water ingress and will dry out over the weekend however there are numerous sites across the South East with flooded basements and excavations
– Only a small number of sites are reporting significant damage
– The Gold Coast has been hardest hit so far with site flooding – some units are viewing water a lot closer than planned
– Subbies are back onsite at approx. 75% of sites
– Most cranes in Brisbane are not working today due to wind
– Multiple reports of site and safety barriers blown over and in the process of being repaired
– Scaffolding teams have been working since midnight fixing loose scaffolding and inspecting bases positioned on water-logged ground
– Pumps and tankers are in demand and are working away at numerous sites
– Developers and Contractors are all dusting off their contracts and reading the fine print on rain (and the effects of rain) delays
– We are hearing 2-10 days clean up time in general, however the worst impacted sites could be significantly longer
– There has been a change in recent years for Contractors on larger projects to take on the risk of all rain delays – check your contract
– Generally Developers will wear the time delay and contractors the cost of the clean-up, however the extent and definitions will vary between contracts
– Contractors are generally still entitled to be paid for work completed but damaged in the storm – insurance may be available to offset the impact to the contractor of repairing the damage but the impacts of this are outside of the contract progress claim process
– Civil contractors are busy calculating the damage and maybe be considering if self-insuring was the way to go
– Body Corporates are busy marking up water leaks and are already on the phone to builders’ maintenance teams – this the biggest rain event that many newly constructed buildings have experienced
– Contractors that were already under stress didn’t need this
Stay dry and if you have any questions don’t hesitate to call one of the team 1800 808 289. Here are a few photos of our sites today.
As current market tenders become more competitive and harder to win, developers and contractors are looking toward innovative technology in order to streamline the entire tender process.
In today’s Urban Developer, Matt Hemming Partner, Mitchell Brandtman, shares his knowledge on this topic.
Technology such as Building Information Modelling (BIM) – especially 5D and 4D BIM – allows developers insight into project time, cost and quality. All elements that can be the critical difference between delivering a project on time and on budget.
In the tender phase, a developer can utilise BIM technology to provide contractors and subcontractors with 3D design models that help them understand the project and create a more accurate, reliable, cost-effective and certain tender.
Accuracy
Since BIM’s deliver a digital representation of the physical and functional characteristics of a project, the accuracy this technology provides is almost second to none.
With a digital representation of the project, the high level of detail allows contractors and subcontractors to accurately estimate the elements of the project to deliver tenders that will be true to the realities of the build – making for a highly competitive market tender.
In February 2017, the Queensland Government released the Building Information Modelling – draft policy and principles for Queensland with a request to read and provide feedback here.
This is a long awaited step forward taken by the Queensland Government. Mitchell Brandtman wholeheartedly supports this initiative and what it can mean for the Queensland development and infrastructure landscape.
In reading through the draft it is clear that the Queensland Government has a positive purpose for the implementation of BIM and understands the potential for their future assets and for the industry as a whole.
With Mitchell Brandtman being BIM advocates for well over a decade now, this initiative is encouraged and celebrated and we cannot help but to reflect on the journey that Queensland has travelled to get to this point.
Prior to 2013, the Queensland Government’s professional design and building department, Project Services, was actively engaging in BIM discovery and implementation in close consultation with the private sector. On the Quantity Surveying front, a small working group was established made up of public and private sector, including Mitchell Brandtman, and was meeting regularly to brainstorm collaboration platforms, frameworks and protocols for projects. With the Queensland Government leading by example in BIM development at that time, good headway was made which encouraged the private sector, in at least the QS space, to engage more with BIM and the various disciplines it involves. We also expected a document such as this would come sooner given the momentum at that time, which further pushed industry to listen closely.
This momentum came to a grinding halt late 2012 with the then new Government redeployingmany government jobs including within the Project Services department.
But the private sector carried on, pushing the boundaries of BIM and collaboration further, overcoming many of the teething problems of a new workflow in a very staunch industry. So Government is well positioned to now leverage off this progress both locally and internationally, by this re-engagement with the private sector. We are ready, well most of us are… after all, nothing drives change like a looming mandate.
We note that buildingSMART have publically released their draft response to the document here.
Reading through their response, we entirely agree with their recommendations.
This is a great initiative, which Mitchell Brandtman supports entirely. We are working on a formal response to the Queensland Government and encourage any discipline that advocates positive change to have their say too.
