Will COVID-19 Cure the Poor Health of the Australian Construction Indust

WILL COVID-19 CURE THE POOR HEALTH OF THE AUSTRALIAN CONSTRUCTION INDUSTRY? By: Kiri Parr & Kevin Pascoe I.

INTRODUCTION

Rachael thumbed down the front page of the Australian Financial Review’s webpage on her mobile phone as she waited for her morning coffee.1 ‘Construction on brink of collapse, says John Holland CEO’, read the headline.2 No surprise there she thought! Her own contractor client was having a hard time with its Principal and the ensuing pressure was now being bought to bear on her design team. ‘Tier One contractors in Australia are not making any money, and governments across Australia keep having successive cost blowouts. We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse.’3 The Australian construction industry and its contracting practices have been in poor health for years. Projects are completed significantly over budget and experience lengthy delays in completion.4 Cash flow across the industry remains an entrenched issue requiring complex legislation to protect participants from each other,5 and quality has emerged as a significant concern.6 In recent times, the call for reform has become louder and more frequent from industry groups, the private sector, and government.7 At the heart of the call is the need to reconsider the whole approach as to how projects are conceived, procured, and delivered.

‘Rachael’ in this essay is based on a real industry professional.

Jenny Wiggins, ‘Construction 'on brink of collapse', says John Holland CEO’, Australian Financial Review (online), 18 March 2020 <https://www.afr.com/companies/infrastructure/construction-on-brink-of-collapse-says-john-holland-ceo-20200317p54b2b>.

3 Ibid.

4 See, eg, Anne Davies, ‘Sydney's light rail chaos: who is to blame for delays and cost blowout?’, The Guardian (online), 21 April 2018 <https://www.theguardian.com/australia-news/2018/apr/21/sydneys-light-rail-chaos-who-is-to-blame-fordelays-and-cost-blowout> ; ‘Scope for Improvement 2014: Project pressure points – where industry stands’, Ashurst, Australian Constructors Association & Infrastructure Partnerships Australia.

5 See eg, John Murray, ‘Review of Security of Payment Laws’ (December 2017) <https://www.ag.gov.au/industrialrelations/building-industry/Pages/review-of-security-of-payment-laws.aspx>.

6 See, eg, Australian Broadcasting Corporation, ‘Cracking Up’, Four Corners, 19 August 2019 (Sean Nicholls), <https://www.abc.net.au/4corners/cracking-up/11431474>.

7 See, eg, NSW Government Action Plan, ‘A ten point commitment to the construction sector’, June 2018. <http://www.infrastructure.nsw.gov.au/media/1649/10-point-commitment-to-the-construction-industry-final-002.pdf>; 1 2

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When the COVID-19 pandemic began to hit Australia in March 2020, few workplaces were immune — the construction industry and its projects being no exception. As the economy falters, government spending will be at the heart of economic recovery and infrastructure investment will be a key feature of that.8 It is essential that the post COVID-19 construction industry reforms to meet the even greater challenges that are now before it. But will it?

This essay examines the pressure points and impacts that COVID-19 will inflict upon the Australian construction industry, and what the key focus areas should be to meet the demands upon it in the years ahead. It is a call to action for all participants in the construction industry, such that COVID-19 could be the cure to the poor health of the Australian construction industry.

II.

AUSTRALIAN CONSTRUCTION IS A SICK PATIENT

Rachael finished her coffee and sighed. A full day ahead reviewing the change register and approving the endless notices. This project was poorly scoped in its rush to market and every time and scope variation claim is argued and negotiated. The complex contract administration requirements distract her and her team from what they do best – design infrastructure. She wishes she had more time to spend on guiding innovative design solutions – and of course more time with her family. The 60 hours weeks were wearing her down.

The poor health of the construction industry in Australia is akin to a chain smoking, alcoholic, obese person with chronic diseases. They both know they are ill and yet trapped in their own behaviours and unwilling to take the steps required for improvement. In recent times for the construction industry, this has extended to its inability to respond to global macro trends including climate change, political instability, social change, and the digital revolution.9 The consequences are all too predictable. A 2017 study by the University of Sydney for example, reported that $63 billion of road infrastructure projects in Australia delivered no identifiable

Consult Australia Model Client Policy (June 2018) <http://www.consultaustralia.com.au/docs/default-source/policy/modelclient-policy-web.pdf?sfvrsn=2>.

8 Euan Black, ‘Four economists explain what the post-coronavirus economy might look like’, The News Daily (online), 6 April 2020 <https://thenewdaily.com.au/finance/finance-news/2020/04/06/post-coronavirus-economy/>.

9 Kiri Parr, Running Towards the Future (October 2015) Society of Construction Law Australia, <https://www.scl.org.au/resources/running-towards-future>.

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improvement on economic output and were of questionable economic value.’10 Newspaper articles abound on distressed projects and read like the obituary of a once great project who suffered an all too common fate. The industry is in deadlock—to break it will require movement from all players.11 On three issues which are key to change, the health report reads the same.

Collaborative procurement and contracting approaches are still uncommon and traditional ‘hard dollar’ contracts used in the market are highly bespoke and drive adversarial outcomes.

In 2014, the University of Melbourne found that while 68% of construction contracts in Australia are based on standard forms of contract, 84% were amended.12 The most recently updated revision of the Australian Standard (AS) series of contracts (which makes up the great majority standard used in Australia),13 is now 20 years old.14 The contracts prepared by principals are typically amended to ‘shift the risk,15 ignoring the overwhelming evidence that this approach does not deliver better outcomes. Risk is assigned poorly and even when allocated appropriately in a contract is rarely managed during delivery.16 When it comes to innovation and the adoption of technology, the construction industry is a laggard by many measures. The labour-intensive formation and administration process of contracts has hardly changed in centuries – the sole advancement of which has been the invention of the typewriter, replaced a little over 30 years ago by the word processor.

Drawings produced from a specific computer program – a practice which became common 30 years ago – are still the most common form of design deliverable. Government principals require hard paper copies of drawings to be ‘wet signed’ by the hand of designers and constructors. Site construction equipment is operated manually by workers while directed by others. Meanwhile, in other industries, computer-based design is fed directly into robotised Garry Bowditch, Re-establishing Australia’s global infrastructure leadership (University of Sydney, February 2017), https://www.sydney.edu.au/john-grill-centre/our-research/infrastructure/initiative-publications/re-establishing-australias-global-infrastructure-leadership.html, 8.

11 Filipe Barbosa et al, ‘Reinventing construction: A route to higher productivity’, (Report, McKinsey Global Institute, February 2017), 127. <https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/reinventingconstruction-through-a-productivity-revolution>.

12 J Sharkey et al, Standard Forms of Contract in the Australian Construction Industry Research Report (University of Melbourne, 2014), <https://law.unimelb.edu.au/__data/assets/pdf_file/0007/1686265/Research-Report-Standard-formsof-contract-in-the-Australian-construction-industry.pdf>, 35.

13 Ibid 38.

14 See AS4902-2000.

15 Sharkey, above n 12, 39.

16 Kevin Pascoe, ‘Incorporating Active Risk Management in Construction Contracts’ (2018) 33 Building and Construction Law 333.

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assembly lines, automated mining haul trucks in the Western Australian desert are controlled by computer under the watch of a single remote human operator, and aerial drones improve agricultural efficiency via crop planting, monitoring, and spraying. The labour-intensive nature of construction means that its productivity growth has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in manufacturing.17 The poor mental health outcomes of Australian construction are also well known and documented. Tight timeframes for tendering and delivery of projects are the norm, creating an industry where long workdays and a six-day week is standard.18 The financial impacts of not meeting these standards puts livelihoods and businesses under constant threat of job loss and business failure. Such concerns have driven many industry participants to focus on mental health programs for their employees.19 In 2019 for example, Consult Australia published ‘Striving For Mentally Healthy Workplaces’ in which they called for a range of actions to tackle the poor mental health outcomes across the construction industry.20 Mates, is a mental health charity established in 2008 to specifically help prevent suicide in the construction industry. The reason it exists is sobering – 190 construction workers take their own lives every year and are six times more likely to die by suicide than an accident at work.21 Such was the state of the Australian construction industry in early 2020.

III.

AND ALONG COMES A VIRUS

By May 2020, the financial margin on several projects in Rachael’s group are under greater threat. Every staff member now works from home. Additional IT equipment has been purchased in bulk and productivity from her offshore design partner has collapsed. Checking her contracts, she sighs on realising that while she will have some relief from time performance, the additional costs of the impacts from this event will be to her account alone.

Barbosa, above n 11, 22.

See, eg Michael Kilgariff, Roads Australia Submission to the Royal Commission into Victoria’s Mental Health System, 4 July 2019, 3. <https://www.roads.org.au/submissions>.

19 Ibid, 4.

20 ‘Striving for mentally healthy workplaces’ (Consult Australia, 2019) <http://www.consultaustralia.com.au/docs/defaultsource/skills/striving-for-mentally-healthy-workplaces---web.pdf?sfvrsn=2>.

21 <https://mates.org.au/the-problem>.

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Home schooling her 10 and 13-year-olds adds more hours to her day. Her stress levels are rising.

Against a background of poor health of the Australian construction industry, a global pandemic was unleashed.

Other seemingly healthy industries such as entertainment,

education, and tourism ground to a halt and suddenly realised they must adapt and change to survive. The immediate impacts on construction were more limited with most projects continuing, however the chronic issues with construction will be exacerbated as the economy re-boots in a COVID-19 affected world. The following emerging issues are likely to have the greatest impact on the Australian construction industry and in some cases may even bring to it to a breaking point.

A. Shift from Private to Public Investment in Infrastructure In times of economic downturn, reduced private market activity requires that governments boost their spending to drive employment. The economic fallout of COVID-19 will further shift the weight of activity in the construction industry from the private to the public sector.

Governments know that: [e]very dollar spent on construction projects has a multiplier effect. It directly results in increased employment by the contractors and consultants engaged to do the work, increases demand for goods and services required to build the project and results in increased spending by the new workers employed. This in turn leads to further employment of people in the wider economy.’22

They have moved quickly. On 19 May 2020 for example, Queensland published its economic recovery strategy which included ‘a rock solid determination to maintain infrastructure investment at more than $50 billion over the next four years, despite the financial challenge …’23 A further $400 million Accelerated Works Program to deliver new road, bridge and pavement sealing works was also announced, along with other infrastructure programs.

Jon Davies, ‘Queensland Major Contractors Association’, ‘Construction 4.1 - The case for an urgent COVID 19 reboot of the construction Industry’, (20 April 2020), <https://qmca.com.au/construction-4-1-the-case-for-an-urgent-covid-19reboot-of-the-construction-industry/>.

23 Premier and Minister for Trade the Honourable Annastacia Palaszczuk, ‘Comprehensive strategy to unite and recover for Queensland jobs’ (Media Statement, 19 May 2020) <http://statements.qld.gov.au/Statement/2020/5/19/comprehensivestrategy-to-unite-and-recover-for-queensland-jobs>.

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Testament to the importance of public infrastructure to the Australian COVID-19 response, current Infrastructure Australia board member and former Productivity Commission chairman Peter Harris, was appointed CEO of the National COVID-19 Co-ordination Commission on its formation in late March 2020.24 Part of that response is expected to be an increase in the Commonwealth Government’s own $100 billion worth of pre COVID-19 planned infrastructure works.25 This shot of adrenaline for Australian construction is welcome news, however caution must be had for the challenges it will bring to an industry that already is suffering from poor health.

Forcing a sick patient to run when they must take considered steps with their treatments will create many bumps on the road to improvement.

B. Professional Indemnity Insurance Since 2017, the Professional Indemnity (PI) insurance market started tightening around the world. This has been driven in part by a series of natural catastrophes that led to broad losses across the market, and has been exacerbated by concerns about the fallout of the Grenfell Fire.26 The impacts on the relatively small Australian market has seen premiums, excesses and exclusions increase significantly, to the point where PI insurance is becoming unaffordable and professionals are leaving the industry.27 With the Australian PI insurance market in such poor health before 2020, the arrival of COVID-19 – itself a significant insurance event – will likely see it continue to deteriorate. One observation has been that: Soaring premiums and limited appetite for risk that have increasingly stopped insurers from offering cover to building certifiers and surveyors are now affecting other professions, such as engineers – and extra work coming from stimulus spending will leave them even more exposed.28

<https://www.pmc.gov.au/nccc/who-we-are>.

Shane Wright, ‘Infrastructure rebuild to form part of post-virus recovery plan’, Sydney Morning Herald (online) 7 May 2020, <https://www.smh.com.au/politics/federal/infrastructure-rebuild-to-form-part-of-post-virus-recovery-plan20200506-p54qc0.html>.

26 PWC, ‘Strengthening the professional indemnity insurance environment for building industry professionals in Queensland’ (Interim Report, Department of Housing and Public Works, 24 June 2019) 19. <https://www.hpw.qld.gov.au/__data/assets/pdf_file/0021/4917/safebuildingspwcreport.pdf>.

27 Ibid 37.

28 Michael Bleby, ‘The hurdles facing COVID-19 stimulus projects’, Australian Financial Review (online), 26 April 2020, <https://www.afr.com/property/commercial/the-hurdles-facing-covid-19-stimulus-projects-20200310-p548pv>.

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The underlying assumption in the construction industry that risk can be cheaply and easily be transferred to third party insurers is no longer true. Without project principals pro-actively taking on and managing their project’s risk, it is likely that projects will become even more costly and that participants will continue to leave the industry.

C. Mental Health Challenges of a Pandemic Impact In the midst of COVID-19, the Australian Government appointed its first deputy chief medical officer for mental health.29 Dr Ruth Vine will work alongside the National Mental Health Commission to deliver the National Mental Health and Wellbeing Pandemic Response Plan,30 recognising that ‘Australia’s mental health and wellbeing is equally as important as our physical health and safety during the COVID-19 pandemic.’31 The mental health of the construction industry has come into sharper focus in recent years.

It is particularly challenged by long work hours, transient project-by-project work, an adversarial culture, and systemic financial pressure. Research shows that levels of depression, anxiety and stress amongst construction professionals are significantly higher than population norms.32 Negative moods of anger and fatigue are also 2½ times higher than the normal population, and 59% of survey respondents were unsatisfied with their work-life balance.33 COVID-19 will further impact the mental health of construction industry participants.

Everything that was an issue before will become intensified as people’s livelihoods and businesses are further threatened by ensuing economic and other pressures.

D. Supply Chain Risk Perhaps one of the greatest unknowns is the impact that COVID-19 will have on the supply chain for the construction industry. Building industry insolvencies were already at a 3½ year

Stephanie Dalzell, ‘Australia creates new deputy chief medical officer position amid coronavirus mental health fears’ Australian Broadcasting Corporation (online), 13 May 2020, <https://www.abc.net.au/news/2020-05-13/australia-deputychief-medical-officer-coronavirus-mental-health/12241264>.

30 Australian Government National Mental Health Commission, ‘The Commission welcomes and supports the National Mental Health and Wellbeing Pandemic Response Plan’ (Media Release, 15 May 2020) <https://www.mentalhealthcommission.gov.au/news/2020/may/national-mental-health-pandemic-response-plan>.

31 Ibid.

32 Luke Downey and Con Stough, ‘Measuring the psychological impact of work related stress and related occupational factors in the Australian infrastructure construction industry’ (Study Outcomes, Swinburne University of Technology, 2018), 5.

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Ibid.

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high at the end of 2019.34 According to McKinsey, the efficiencies that have emerged from global interconnected supply chains have also come with the risk that ‘global disruptions have meant that in every year over the past several years, at least one company in 20 has suffered a supply chain disruption costing at least $100 million.’35 Whilst international travel restrictions obviously impact the tourism and education industries, it will also impact global labour movement, which for a long time has been a key mechanism for bringing in the specialised skills needed for large complex infrastructure projects. With the impact of COVID-19, the Australian Treasury ‘has forecast an 85 per cent drop in net overseas migration in 2020-21’, which has led the Government to consider changes to the visa migration system to attract skilled workers.36 The construction industry will have to grapple deeply with its supply chain and buildt greater resilience to meet the risks that may emerge in future.

E. Changes to Thinking, Behaving, and Working COVID-19 is not like the risks construction projects usually experience. It is global and systemic, affecting every element of the construction industry and global economy at the same time. It is not a risk that any one contractual party or industry participant can suffer, manage, or overcome in isolation. In just three months the way society and the construction industry live and work has changed significantly. They have adapted to remote distributed working, accelerated decision making, and adopted new technology.

Just as society has come together to share information, work on treatments and cures, and not take advantage of one another, so too has the construction industry. The UK Construction Leadership Council (CLC) for example, asks in its Best Practice Guidance of 7 May 2020 ‘that industry works together to support the long-term health of the sector by constructively resolving all contractual disputes arising from the pandemic.’37 The FIDIC Contracts Michael Bleby, ‘Coronavirus will increase construction failures’, Australian Financial Review (online), 12 March 2020, <https://www.commercialrealestate.com.au/news/coronavirus-will-increase-construction-failures-939825/>.

35 Knut Alicke et al, ‘Is your supply chain risk blind—or risk resilient?’ (Article, McKinsey & Company, 14 May 2020), <https://www.mckinsey.com/business-functions/operations/our-insights/is-your-supply-chain-risk-blind-or-risk-resilient>.

36 Michael Koziol, ‘Migration 'reset' looms in budget as government eyes super-skilled talent’, Sydney Morning Herald (online) 23 May 2020, <https://www.smh.com.au/politics/federal/migration-reset-looms-in-budget-as-government-eyessuper-skilled-talent-20200521-p54vcl.html>.

37 <https://www.constructionleadershipcouncil.co.uk/wp-content/uploads/2020/05/Construction-Leadership-CouncilCovid-19-Contractual-Best-Practice-Guidance-7-May-2020.pdf>, [1.2].

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Committee also published a Guidance Memorandum in April 2020 recognising that ‘COVID-19 presents an extraordinary challenge and [that] FIDIC commends all members of the construction community to be focused on the successful delivery of the project before them in a way that sustains the long-term viability of the construction community.’38 As the initial phase of the COVID-19 pandemic passes and a return to ‘normal’ is contemplated, the conversation that is emerging is; to what should life and work return, can it be better, can the gained agility be preserved, and what improvements can be further built upon? This shift in attitude has the potential to make a sick construction industry patient follow the treatment plan for a change in health and deliver the permanent reshaping of behaviours needed.

IV.

TREATMENTS (IF NOT A VACCINE)

Whilst home schooling her kids during the COVID-19 ‘shutdown’ was not very productive, Rachael’s design teams now work from home with relative ease. Staff catch-ups and client meetings are easily arranged and efficiently run via video conference. Rachael knows that the way the construction industry works in the future will not be the same and that it is up to senior leaders like her to make the positive changes that are necessary. She remembers a famous construction worker called Winston Churchill who once said, ‘Never let a good crisis go to waste’.39 The impact of COVID-19 upon the ailing Australian construction industry will play out in the months and years ahead. Many traditional pre COVID-19 ways of doing things in construction are likely to change, just as they will for many industries. The industry already has a tremendous suite of recommendations to implement that can drive positive change.40 Many more are emerging because of COVID-19.41 Of those there are three specific areas for focus

<https://fidic.org/sites/default/files/COVID%2019%20Guidance%20Memorandum%20-%20PDF.pdf>, 4.

Winston Churchill, also Prime Minister of the UK during World War Two, was an amateur bricklayer and qualified member of the Amalgamated Union of Bricklayers <https://winstonchurchill.org/publications/finest-hour/finest-hour157/churchill-as-bricklayer/>.

40 See, eg, Juliano Denciol, Andrew Davies, and Illias Krystallis, ‘What are the Causes and Cures of Poor Megaproject Performance? A systematic Literature Review and Research Agenda’, (2020) 51(3) Project Management Journal 328, <https://journals.sagepub.com/doi/10.1177/8756972819896113>.

41 Kevin Sneader and Shubham Singhal, ‘From thinking about the next normal to making it work: What to stop, start, and accelerate’ (Article, McKinsey & Company, 15 May 2020) <https://www.mckinsey.com/featured-insights/leadership/fromthinking-about-the-next-normal-to-making-it-work-what-to-stop-start-and-accelerate>.

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which have the capacity to overcome the challenges and seize the opportunities posed by COVID-19 more than any other. These are collaborative procurement, innovation and technology adoption, and strategic leadership.

A. Collaborative Procurement COVID-19 has highlighted the importance of collaboration between all parties when impacted by a common risk or threat. In virus treatment and vaccine development, ‘competitors are collaborating in ways never expected’… and ‘companies are banding together … to advance innovation.’42 Neither global health nor Australian construction are a zero-sum game.

Having its origins in the UK’s North Sea Oil and Gas industry, collaborative procurement in Australian construction first appeared in the mid-1990s.43 The early-2000s saw an enormous uptake of the alliance model, which has since reduced to a more measured level.44 With the benefits having been well outlined in the National Alliance Contracting Guidelines in 2015,45 much opportunity remains to use collaborative procurement strategies more extensively.

In the UK, there are a series of widely used collaborative contract standard forms such as; NEC, PPC 2000, and JCT.46 In recent years, there has been substantive research into collaborative procurement in construction which continues to demonstrate its benefits – notably that by Blockly and Godfrey in 2017,47 and Mosey in 2019.48 Meanwhile in Australia, there is no industry wide standard Australian collaborative contract, thus leaving the market dominated by bespoke contracts.49 Some principals have stepped forward to use the NEC

Matt Craven, Mihir Mysore, and Matthew Wilson, ‘COVID-19: Implications for business’ (Executive Briefing, McKinsey & Company, May 13, 2020) 8. <https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-forbusiness>.

43 The Wandoo Alliance being an early example, https://www.mediastatements.wa.gov.au/Pages/Court/1996/08/WandooAlliance-commended-on-completion-of-oil-storage-structure.aspx>.

44 David Mosey, Collaborative Construction Procurement and Improved Value (Wylie Blackwell, 2019) 393.

45 Australian Government, Department of Infrastructure and Regional Development, ‘National Alliance Contracting Guidelines’ (September 2015), <https://www.infrastructure.gov.au/infrastructure/ngpd/files/National_Guide_to_Alliance_Contracting.pdf>.

46 A comprehensive review comparing these contracts was undertaken in 2008 by Arup Project Management and can be found at <http://ppc2000.co.uk/wp-content/uploads/2016/12/partnering_contract_review.pdf>.

47 David Blockly and Patrick Godrey, Doing it Differently - Systems for rethinking infrastructure (ICE Publishing, 2nd ed, 2017).

48 Mosey, above n 44.

49 Sharkey, above n 12.

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contract in the Australia market, the first being the Mt Mercer Wind Farm,50 and in more recent times by Main Roads Western Australia,51 and by Sydney Water.52 One step further on from the UK’s collaborative contract standard forms is Project 13 – an industry-led response to failing infrastructure delivery models which ‘seeks to develop a new business model – based on an enterprise, not on traditional transactional arrangements’.53 Rather than being framed solely around the construction contract, it considers all the elements and principles that together create a collaborative procurement approach. Sydney Water is a notable recent example in Australia adopting this approach, with its Partnering for Success strategy – a 10 year strategic approach to its operations which simplifies its supply chain purchasing and builds deeper relationships with suppliers.54 Sydney Water’s plan includes the adoption of both NEC4 and the principles of Project 13.

Similarly, the Australian Department of Defence, introduced the Major Service Provider Arrangement in 2018 as a means of ‘delivering larger, longer-term and more integrated work packages.’55 This approach was taken for the development of partnerships to better deliver capability.56 Further glimmers of hope can be seen in the NSW Government’s ten-point action plan for the construction sector in which the first point is that ‘the member agencies commit to work together … to procure and manage projects in a more collaborative way’.57 For the Australian construction industry, collaborative procurement models and contracts exist and have reached a mature state. As the market in coming years will be stretched by the impact of COVID-19, innovative approaches by project principals will be required.

Collaborative procurement is a key treatment for addressing a range of industry problems,

NEC, The first NEC project undertaken in Australia (3 March 2015) <https://www.neccontract.com/About-NEC/Newsand-Media/The-first-NEC-project-undertaken-in-Australia>.

51 NEC, Main Roads Western Australia trials NEC (14 May 2019) <https://www.neccontract.com/About-NEC/News-andMedia/Main-Roads-Western-Australia-trials-NEC>.

52 NEC, Sydney Water selects NEC4 to support its Partnering for Success program (5 April 2015) <https://www.neccontract.com/About-NEC/News-and-Media/Sydney-Water-selects-NEC4-to-support-its-Partnering-forSuccess-program>.

53 <http://www.p13.org.uk/>.

54 Eliza Booth, ‘Sydney Water’s new procurement strategy looks to partner for success’, Utility Magazine (online) 11 July 2019, <https://utilitymagazine.com.au/sydney-waters-new-procurement-strategy-looks-to-partner-for-success/>.

55 <https://www.defence.gov.au/CASG/DoingBusiness/Industry/Industryprograms/Major%20Service%20Provider.asp>.

56 Department of Defence (Cth), ‘Defence streamlines service provider arrangements’ (Media Release, 5 February 2018) <https://www.minister.defence.gov.au/minister/christopher-pyne/media-releases/defence-streamlines-service-providerarrangements>.

57 ‘NSW Government Action Plan - A ten point commitment to the construction sector’, June 2018. <http://www.infrastructure.nsw.gov.au/media/1649/10-point-commitment-to-the-construction-industry-final-002.pdf>.

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including the problem of PI insurance.58 Collaborative contracts will be an increasingly attractive vehicle for project delivery – ones which the principals and those industry professionals who service them in developing projects, should look to adopt more widely.

B.

Innovation and Technology Adoption

In March 2020, COVID-19 forced the construction industry, like many others, to rapidly adopt remote working and embrace previously available but underutilised technology. On-line video meetings became the norm rather than the exception. Project design teams were spread across dozens of home office locations rather than contained within a dedicated workplace.

Widespread adoption of innovation and technology has been slow to arrive with much research already having been undertaken into how it would affect the construction industry generally, and construction law specifically.59 McKinsey has outlined ways in which the industry can use information and technology to drive productivity improvements in construction.60 These include: 

Maximising digital collaboration between participants.



Making 3D Building Information Modelling (BIM) universal and mobilising 5D BIM across the project lifecycle.



Using aerial drones for scanning, monitoring, and mapping, and automating other site equipment.



Leveraging the Internet of Things to fully connect sites via communication, sensors, and advanced analytics.

But there are two longstanding underlying issues that have constrained the construction industry’s adoption of technology such as BIM and Artificial Intelligence (AI).

‘Professional indemnity insurance market challenges’ (Association of Consulting and Engineering New Zealand, 20 May 2020), <https://www.acenz.org.nz/professional_indemnity_insurance_market_challenges>, 7.

59 See, eg, Jennie Baker and Aleesha Way, ‘The Rise of the Machines … Artificial Intelligence and the Evolution of Moral and Legal Dilemmas in the Construction Industry’ (Paper presented at SOCLA 2017 National Conference, Gold Coast, 28 July 2017); John Lancaster and David Pritchard, ‘The potential role of Artificial Intelligence in project planning and the minimisation and mitigation of project delay’ (Paper presented at SOCLA 2017 National Conference, Gold Coast, 29 July 2017).

60 Barbosa, above n 11, 64.

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Firstly, ‘insufficient and asymmetry of information is the single issue that reduces economic incentives on the design and production of the built environment’.61 Traditional procurement approaches create silos, with each party operating inside a rigid hierarchy of relationships and communication channels. In such a hierarchy only specific and limited information flows up and down and around the participants. There are numerous consequences of this, including slow and poor decision making, and information hoarding and hiding with common mindsets such as ‘I will only tell you what I want you to know’. At an industry scale this also leads to the limited development of open data sets which are necessary to leverage the full benefits of technology and AI. Secondly, conservatism and excessive risk transfer stifles innovative outcomes.62 The shifting of the risk of any uncertainty ‘drives behaviours and decisions which are conservative and counter-innovation’.63 Adversarial contracts, with their intolerance for error of any kind, are a fundamental disincentive to the adoption of technology or the willingness to try anything new.

If the industry can begin to address these constraints, innovation, and the adoption of technology in construction will flourish.

C.

Strategic Leadership

The adoption of collaborative procurement approaches and innovation and investment in new technology must be the dominion of senior leaders in the construction industry taking a long-term approach to how their projects are procured and delivered. The need for focus on project leadership in the construction industry has been explored in depth,64 and in the midst of the COVID-19 outbreak, a new UK paper has called for a fundamental change in how infrastructure is run in the face of climate change and the socio-economic recovery from COVID-19.65 This paper calls for a recognition that the purpose of infrastructure is human

Finn Ostravik, Incentives for Innovation in Construction (Jon Wiley & Sons, 1st ed, 2015) ch 2.

‘Scope for Improvement 2014: Project pressure points – where industry stands’, Ashurst, Australian Constructors Association & Infrastructure Partnerships Australia, 21.

63 Parr, above n 9, 5.

64 Sergey Asvadurov, et al, ‘The art of project leadership: Delivering the world’s largest projects’ (Report, McKinsey & Company, 14 September 2017) <https://www.mckinsey.com/industries/capital-projects-and-infrastructure/ourinsights/the-art-of-project-leadership-delivering-the-worlds-largest-projects>.

65 ‘Flourishing Systems’ (Centre for Digital Built Britain, May 2020), <https://www.cdbb.cam.ac.uk/news/flourishingsystems>.

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flourishing and that the industry must envision and manage the systems associated with its delivery and use accordingly.66 The barriers to changing how projects are led in the construction industry and the outcomes it achieves rests at its heart with its willingness to address the culture of the industry. A recent report into the relationships between consultants and contractors in Queensland’s infrastructure industry concluded that there is a culture problem, and that: The problem is centred on ‘toxic male masculinity’ and the failure of companies and Clients within the industry to adequately realise the importance of and promote positive business culture.

This problem can only be addressed through a concerted effort by industry to identify the necessary cultural changes required within the industry and to put in place plans to achieve that change. 67

Importantly there are already examples of changes in attitudes as to how projects can be led to drive improvement in the market. Sydney Water’s Partnering for Success strategy and the NSW Government’s ten-point action plan mentioned above are just such embryonic developments. Another is that of Roberts Pizzarotti CEO, Alison Mirams. When bidding for the Sydney Concord Hospital, her company took a strategy of submitting two prices, one based on a five-day working week with an extra 10 weeks allowed to complete the job, and the other the usual six days.68 Alison took a ‘bold step to disrupt the construction industry’, with the drive behind the approach being to improve productivity and to address mental health issues in the industry.69 Roberts Pizzarotti won the project based on the five-day program and has now joined with the NSW Government to fund an ongoing research project to measure how wellbeing innovations such as a five-day working week with no weekend work impacts the wellbeing of construction workers and their families.70 This is the type of strategic leadership of which the Australian construction industry needs more.

Ibid 3.

Porter, ‘Truth and Reconciliation: How Anthropology can Improve Relationships between Consultants and Contractors’ (Report, QMCA, February 2020) 20, <https://qmca.com.au/wp-content/uploads/2020/02/Truth-andReconciliation-Report-Final.pdf>.

68 Jane Southward, ‘What's the key to better health and safety in the construction sector?’ (Article, The Company Director, 1 April 2020) <https://aicd.companydirectors.com.au/membership/company-director-magazine/2020-backeditions/april/whats-the-key-to-better-health-and-safety-in-the-construction-sector>.

69 Ibid.

70 ’Project 5: A weekend for every worker’ (Australian Human Rights Institute, 4 May 2020), <https://www.humanrights.unsw.edu.au/news/project-5-weekend-every-worker>.

66

67Kevin

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V.

CONCLUSION – THE PATH TO BETTER HEALTH

Once the COVID-19 pandemic subsides, it is possible that the construction industry will attempt to continue with its unhealthy lifestyle. Few people, nor industries like sudden change, particularly when having to deal with the immediate challenges that COVID-19 presents. But a pre COVID-19 business-as-usual approach will not shift the construction industry’s poor performance outcomes, particularly in the areas of collaboration, productivity, innovation, and mental health which are desperately needed to drive change. It will not help rebuild the Australian economy effectively as governments divert billions of dollars into infrastructure spending to drive employment growth. Principals and their advisers who bring yesterday’s adversarial contracts and attitudes to the table are not changing the outcomes for the patient. They are condemning not only the industry, but all its participants to a poorer work and home life.

Given the disruption facing a COVID-19 affected construction industry, there is no better time for its leaders to drive strategic change. Collaborative procurement approaches which in turn facilitate the adoption of new technologies and better mental health outcomes are the key treatments that are readily available – many of them off-the-shelf. It is the medicine required to improve the health of the whole construction industry. No-one expects miracle cures nor a convalescent industry to suddenly leap from its sick bed into the construction industry Olympic stadium, but if all participants in the industry can take steps towards change, then perhaps it can make some progress toward being a competitive athlete.

VI.

EPILOGUE

Five years since the COVID-19 outbreak, Rachael can scarcely believe the transformation of the Australian construction industry. Her leadership is now focussed on encouraging her team to innovate with each new project and helping the client develop the best contracting strategy for their next project. Collaborative procurement strategies are the norm and project management effort has reduced by half now that everyone in the contracting chain works on a common data platform. Artificial Intelligence schedules video meetings, notes minutes, and assigns actions and deadlines as they are discussed. She loves how everyone on site has the real time design on their devices which they can see spatially before them as they are building.

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Rachael now works from home 2-3 day per week. She is happy and healthy and has even found the time to build a brick wall in her garden â&#x20AC;&#x201C; just like a former UK Prime Minister!71

This paper was written in May 2020 and was awarded a Commendation in the Society of Construction Law (Australia) 2020 Brooking Prize.

71

Churchill, above n 39.

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