Infrastructure Stimulus Post Covid-19

The Pandemic and now likelihood of a depression to me shows the terrible and unfortunate situation that we as a globe and Australia in particular now face together. I have read many articles on the Covid-19 virus (I am almost fixated on it). We are now all seeing that this situation we live in is likely to go on for another 5 months - our Prime Minister has said this. Whilst many of us have seen the movies ‘Contagion’ and ‘I Am Legend’ none of us would have thought we could possibly live out our own ‘Robert Neville’ scenario.

So we are where we are today. But we all hope in 3 weeks or 3 months time that the virus in Australia is dormant and then eradicated and that we are able to lift limits that are currently being imposed on us. That domestic airline travel will become normal again and schools will reopen and we can go out for dinner or perhaps even the pub again. International travel will still be stagnant as will hotel accommodation and tourism.

It will be at this time that we will all need jobs!

Hospitality will slowly recover but after not eating out for 3 months this will take time for it to resume. AFL, NRL and the arts sectors may resume slowly. Retail will be stagnant as there will be little disposable income whilst we have all been through these 3 months of hell. The housing market will be quiet if not dead as Mum and Dad's won’t have money to build or renovate their house after making it through 3 months with no salary and liquidity drying up.

We will need jobs for ALL the Australians that are unemployed as small, medium and big business have been depleted over months of economic easing. We will also want the economy to grow and not continue to decrease. After all who wants a depression in a year coming into a state or federal government election?

In 2008, Rudd and Swann did a $88.7b stimulus to keep us out of the post GFC recession. They spent billions on infrastructure, schools and housing. I can see the government rolling out an economic stimulus in the infrastructure sector.

But, the sector is already at breaking point as Joe Barr in the AFR on the 18/3/20 rightly pointed out:

“Tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts” Joe Barr

“We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse.” Joe Barr

The carona virus has the potential to change our economy for the better as we come out of it. Politicians - please hear the construction industries cry for help.

We want more infrastructure projects and this is possible, but, it will take a BRAVE Client. We want the infrastructure to stimulate the engine room of the economy (small and medium businesses) that only a Tier 1 Contractor can use and maximise. “In Australia, there are more than 2.3m small businesses that account for 35% of Australia’s GDP and 44% of private sector employment. However, they face significant financial pressures.” Australian Broker

These days the procurement of government assets is beyond absurd. A project is announced and then it is finally procured with construction firms years later. This often ties up Contractors to find the project, team for the project, express interest in the project, bid for the project, submit a tender, negotiate the contract, (cross their fingers and hope that a new government doesn't get in and cancel the process), and then finally sign a contract - this is all before spades are in the ground. This timing is generally 3 years! 3 years of people’s lives lost. But, not just that we LOCK UP 3 TEAMS of people to do this. Projects tender costs are also another factor. A $1b project will cost each Contractor $10m to tender - that is $20m (2 loosing teams) of money we are throwing out of GDP for every $1b that is about 2% it is a large number. Procurement advisors call this “value for taxpayers”.

A project owner traditionally spends 5-6% to get to contract award. However, when an owner works with ONE TEAM then this number reduces to 3-4% of the overall value. Our clients spend a similar proportion to get a project to the right amount of documentation to engage with the market. They will have a solicitors firm, a procurement advisory firm, a probity advisor, a technical advisor, a reference design, the business case...

Why am I saying this?

The time is now to not only start to bring out projects to stimulate our economy, but, to also bring them out to work with ONE.

We cannot keep tendering in the same manner and hoping for a different outcome in the NATIONAL INTEREST. All we will do is put more people out of work as the industry implodes. I want all Contractors to make a profit, I want Governments to have 'value for money' and I also want the Australian economy to grow (our Tradies back to work) - they are not counter cyclical.

I give a personal example. My wife needed vocal laser surgery. It was scary, it was huge and it was important. I didn’t ring up 3 Doctors and ask for a Quote, their Qualifications, lead time, methodology, support staff, hospital certifications, who the anesthesiologist would be... I rang friends who had recently had a similar experience. My wife went to one Doctor for a consult. She worked with the One Doctor who did the operation. Guess what - She and I were very happy - in fact we were DELIGHTED.

So I plead with our Governments (and our ASX20 companies), stop tendering today. Pick ONE and work with that ONE to come up with a scope, program, delivery methodology and price.

Make Australia Great again by increasing our GDP together!