The recent media investigation into the construction industry shone a much-needed spotlight on illegal practices and thuggish behaviours that have existed in the industry for far too long.  While serious allegations must be investigated and structural changes made to ensure this cannot happen again, this crisis provides an opportunity to do so much more.

For too long, the relationships between clients, unions/workers and industry have been marked by tension and a lack of trust, with each side trying to gain the upper hand. Often, when one wins, the others lose. This approach has led to significant inefficiency, mistrust and missed opportunities. But it doesn’t have to be this way. If we rethink how these stakeholders work together, we can change the construction industry from a zero-sum game to a win-win for everyone. The expanded National Construction Industry Forum (NCIF), which met for the first time this week, is a great forum to work out how to do this.

Bringing together government—the construction industry’s largest client—along with industry and unions, the NCIF provides a space to align our goals and pursue shared outcomes. This moment can be the turning point on the road to a stronger, more sustainable future for the industry.

In principle, the goals of each group are not fundamentally opposed. Workers want safe, secure jobs that pay well and provide good working conditions. This is not an unreasonable demand, and their well-being should be front and centre in any conversation about the future of construction.

On the government’s side, the priority is ensuring value for taxpayer money. Projects must be completed on time and within budget because when they aren’t, the public feels the impact—either through delayed infrastructure or increased costs. The government needs projects to run efficiently, without the disruptions or overruns that have plagued the industry in the past.

For the industry itself, the focus is on achieving a fair return on investment. Current profit margins for contractors are seriously low, hovering around just 2-3%. At these levels, a small problem can turn a project into a loss. With this level of return, it’s no surprise that companies struggle to invest in innovation, workforce development or the kinds of improvements that could drive long-term success. For the industry to thrive, companies need a better return than they could get by leaving their money in the bank!

The problem is that right now, the goals of these critical stakeholders are often seen as conflicting. If workers secure better wages and conditions without improvements in productivity, the industry’s costs go up. If contractors increase their prices at the tender box or through claims and variations, government budgets are blown. This creates a perpetual cycle of winners, losers, disputes and acrimony. But the fundamental objectives of the main players don’t have to be at odds with one another. They can complement each other.

This is why the Australia Constructors Association invited the national leaders of all major construction unions to the Foundations and Frontiers forum (FF24) in August. The forum, modelled on the COP climate and Davos economic summits and imagined well before the recent events, provided an opportunity for reflection and a fundamental reimagining of operations. The discussions held at the FF24 leaders’ roundtables are set to shape the development of Australia’s first National Construction Strategy (NCS). The NCS is the beginning of something transformative – but it is just the beginning.

Now is the time to reshape how the construction industry works. If the government, unions and industry can work together, the whole industry will benefit. Instead of fighting for short-term wins, we should focus on shared goals—like improving industry culture and increasing productivity—where everyone benefits.

In terms of productivity alone, in a submission to FF24, Oxford Economics estimated that the economy would be $62Bn a year better off if the construction industry could close the gap in productivity growth with other industries. That would be enough to pay for the National Disability Insurance Scheme with enough money left over to build an additional school and hospital in every State and Territory.

The construction industry builds the infrastructure we all rely on every day—roads, schools, hospitals and homes. But to continue playing this role effectively, we must shift away from the zero-sum mindset that has held us back for so long. A collaborative approach will enable us to address long-standing issues, such as low profit margins and project delays, while also improving working conditions and enhancing productivity.

The construction industry has the potential to be a true success story. Instead of seeing the current situation as a crisis, we should view it as a chance to build the foundations of an industry where everyone wins.

Opinion piece by Jon Davies, Chief Executive Officer, Australian Constructors Association

Originally posted via Infrastructure Magazine, October 2024