The current challenges of constructing in Western Australia

The WA construction sector has been smashed by many challenges of late. COVID-19 has caused large-scale impacts, including skyrocketing materials costs, severe labour shortages, and supply chain disruptions resulting in price and time “squeeze”. Further, in response to the pandemic, the Government here (as elsewhere) has stimulated the economy by funding State and local government projects and introducing various residential building stimulus packages. This created a “perfect storm” of a “profitless boom” with an abundance of work but delivery issues leading to projects being delivered at a loss.

We know from our links to organisations such as the Master Builders Association, the Civil Contractors Federation and discussions with our clients, that the current conditions have led to:

1. an increase in stress for builders;
2. an increase in the number of claims made against builders;
3. tougher contractual terms for builders; and
4. sadly, insolvency for a number of high-profile building companies.

Unfortunately, our “crystal ball” does not suggest these pressures will ease anytime soon, with on going challenges looming for builders this year, including:

Labour

• Skills shortages will continue to be one of the biggest challenges facing builders.
• Shortages of essential skilled workers, rising transportation costs, and disruptions contribute to project delays and unprecedented costs for builders and tradespeople.
• The market is relying on an increase in population growth and an influx of skilled workers from interstate or overseas to fill our labour shortages, but that takes time, and where will these workers live?
• Staff absences from the COVID-19 illness will continue to cause disruption to building businesses.
• Further, the cost of labour continues to be the most significant expense for builders. Wages will continue to rise, making it more expensive for builders to hire skilled workers.

Supply chain disruptions

• Since mid-2020, there has been a substantial worldwide growth in the demand for quality building supplies. This demand has been exacerbated by supply issues caused by COVID-19, global sanctions on trade, and natural disasters, such as floods in various locations around Australia and worldwide Government stimulus programmes.
• Material shortages have impacted the supply chain, from manufacturers and suppliers to contractors, subcontractors, and homeowners.
• International ports are closed or operating at a reduced capacity due to ongoing COVID-19 outbreaks amongst port workers, delaying the unloading and loading of materials.
• There are extensive manufacturing delays, particularly regarding timber, windows, steel products, and doors.
• Transporting resources such as materials and tools to remote regions such as Northern Western Australia is particularly problematic. When items must be ordered from interstate or overseas suppliers, that may take days or weeks to deliver items, with flooding impacting common transport routes.

BUT despite these challenges, there are still plenty of opportunities available for those willing to invest their time and energy into building projects throughout WA:

• The Western Australian Government has budgeted to spend a record $33.9 billion on vital infrastructure till 2026. The Western Australian population is forecast to grow from around 2.7 million to 4.3 million by 2042. The construction sector will be at the centre of each of these objectives.
• There will be plenty of mining and resources work – without which there will be no renewables revolution.
• There is also a trend towards and focus on sustainability as we move towards a zero-carbon construction industry.
• The industry continues to inspire and amaze with innovation. We are seeing product suppliers leading the way in developing new building materials that seek to address the current supply chain challenges. Examples include using lower-carbon concrete and lightweight rectified bricks, which will reduce transport costs and the amount of cement and mortar required by builders.

With careful planning and an understanding of all relevant laws and regulations, successful builders can operate within this environment AND importantly make money!

But it’s still tricky, with new and changing laws and ever-present red tape. We want to help you. We will be rolling out a series of articles providing guidance to principals, contractors, and subcontractors on the following topics, all with a focus on delivering quality, sustainable and profitable construction work:

• What can I ask for in my contract?
• What contractual clauses should I look out for and be careful of?
• What security options do I have?
• How do I track contractual warranties/obligations?
• What red flags should I look out for when doing business with another company?
• How do I know when my business is in trouble?

With our collective construction, restructuring, and insolvency experience, we can help you navigate these obstacles and protect yourself when doing business this year.

We understand that working with lawyers may be scary but working with us is not! Jackson McDonald lawyers speak your language, understand the pressures you are facing and the challenges you are dealing with. We are here to help. Give one of our team a call to see how we can help you.