2018 Queensland Major Projects Pipeline
Queensland Major Projects Pipeline
A JOINT INITIATIVE OF THE QMCA, CSQ AND IAQ $M Total Pipeline 39,800,000,000 Annual Ave 7,960,000,000 Weekly Ave 153,000,000 Daily Ave 21,860,000 Hourly Ave 910,833
AT A GLANCE $7.9b per year
Scale of $21m per day Recurring Expenditure Unfunded split Total Pipeline Major project Value activity $39.9b $2.1m Major $152m per Projects working per week hour Jobs Funding split The funded pipeline will support $8.2b 12,700 workers $20.2b North Queensland each year on average $39.9b Public Projects $13.6b Total $19.7b Fully-funding the pipeline South East Queensland will support an extra Private Projects $3.8b 4,700 workers Surat Basin each year on average 14.3b Various
Major Projects Pipeline – Breakdown illion total (over 5 years)
Credibly Under Under Unlikely Prospective proposed Announced procurement construction projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at
Unfunded $16.1 billion Funded $23.8 billion $M Total Pipeline 39,800,000,000 Annual Ave 7,960,000,000 Weekly Ave 153,000,000 Daily Ave 21,860,000 Hourly Ave 910,833
$7.9b per year
Scale of $21m per day Recurring Expenditure Unfunded split Total Pipeline Major project Value activity $39.9b $2.1m Major $152m per Projects working per week hour Jobs Funding split The funded pipeline will support $8.2b 12,700 workers $20.2b North Queensland each year on average $39.9b Public Projects $13.6b Total $19.7b Fully-funding the pipeline South East Queensland will support an extra Private Projects $3.8b 4,700 workers Surat Basin each year on average 14.3b Various
Major Projects Pipeline – Breakdown illion total (over 5 years)
Credibly Under Under Unlikely Prospective proposed Announced procurement construction projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at
Unfunded $16.1 billion Funded $23.8 billion CONTENTS
Foreword 1 Executive Summary 2 Long-term Challenges and Recommendations 5 Economic Outlook 10 Long-term Queensland Major Projects Pipeline 24 Workforce and Employment Outlook 38 Implications, Challenges and Risks 46 Conclusion and Recommendations 60 2018 Major Projects List 64
This report has been produced by the QMCA, CSQ and IAQ (“the Industry Bodies”) with the assistance of BIS Oxford Economics. The report is based on information available as at end March 2018 from public and private sources including Project Sponsors and the Industry Bodies, Project Sponsors and BIS Oxford Economics provide no warranty as to its accuracy, reliability or completeness. To the extent permitted by law, neither the Industry Bodies, Project Sponsors or BIS Oxford Economics or any of their related entities accept liability to any person for loss or damage arising from the use of the information contained in this report. FOREWORD
We are proud to introduce the 2018 Queensland Major Projects Pipeline Report to you – an initiative of the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ).
Nowhere else in Australia do industry For governments, the consolidated Queensland is a decentralised and peak bodies consult so closely with picture of state wide major project vast Australian state which requires governments, government-owned activity in the next four years can help continued investment in infrastructure corporations and private sector guide policy formation, unlock the by both public and private sectors proponents to accurately chart potential for private sector partnerships to meet demands of a growing the status of all major projects in and leverage capital works investment. population and increase our global their home state. The fruit of this competitiveness. Experience from The greatest threats to a sustainable approach is an authoritative report successful countries and jurisdictions pipeline of projects are the which describes the scale, timing around the world show that when identification of investable projects, and location of all major engineering public and private sectors face availability of funds and timely projects being considered or infrastructure challenges together, investment decisions. This year’s developed in Queensland. the public and economy are the big report highlights much lower levels winners. Perhaps the real worth of our Sincere thanks to our partner of private sector investment than report is that it sends a strong signal BIS-Oxford Economics for their expert previous years, with $9.4 billion of to potential infrastructure investors guidance, compilation of the project projects classified as only prospective that a highly motivated engineering listings and the detailed independent or considered unlikely to receive sector exists, with contractors and analysis that underpins the report. funding. Until positive business cases service providers eminently capable This year, we have increased our and investment decisions are made, of preparing for and delivering world investment in the report format to mining and industrial projects such class major projects. enhance reading experience and as those in the undeveloped Galilee improve access to key report data Basin remain at risk. The value of As industry peak bodies we are through a dedicated website. The public sector projects which have committed to promoting Queensland new design and look of this report is positive funding announcements as a world leading destination for a statement of confidence in the future or are currently under procurement economic development and new of our partnership and the continued outstrips the private sector. The report infrastructure investment. We look relevance of our report to industry for also forecasts a significant 72% forward to working with all our years to come. reduction in private sector mining and stakeholders in 2018 to grow the heavy industry projects in the next pipeline of major projects in our For infrastructure designers, five years compared to the last. The great State. contractors and other project ability of governments to identify and participants, this report is an deliver on their planned infrastructure indispensable business planning has therefore assumed even greater tool, capable of guiding well-informed importance to the continued short- decisions to participate in chosen term sustainability of the major projects market sectors and geographic contracting sector. regions.
Peter Anusas Brett Schimming Steve Abson President Chief Executive Officer Chief Executive Officer Queensland Major Construction Skills Infrastructure Association Contractors Association Queensland of Queensland
Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 1 EXECUTIVE SUMMARY
Welcome to the second Queensland Major Projects Pipeline Report (the Report) developed by the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ). During this period, Queensland experienced a substantial boom and bust cycle in construction activity and major project work.
The key finding of this Report is Industry can feel more confident that major project work has risen about investing in new equipment, Given rising major by 58% in 2017/2018 to $6.9 billion productivity enhancing initiatives and project activity in after two successive years of low skills development if they are given activity. Subject to level of funding reasonable lead times to prepare in other states and the commitments for 22 credibly proposed the form of a clear, long-term major need to meet growing projects, activity in 2018/2019 is projects pipeline – and if governments demand in Queensland, forecast to be retained at a similar and procuring agencies implement governments need to level. However, recovery in activity may supportive policies. consider how they can be short-lived and decline again in This year’s Report provides a raise additional funding 2019/2020 due to an identified lack comprehensive list of major project of viable replacement projects. for infrastructure work, together with analysis on the projects, accelerate Maintaining recent momentum is corresponding level of construction existing projects or therefore the core challenge facing activity this entails and the subsequent the state, requiring a range of demand for skilled construction labour. stimulate private initiatives to improve levels of funding This analysis is based on both the investment for infrastructure, ensure capability completion of existing projects and and capacity to manage a growing the likelihood of potential projects pipeline and, fundamentally, provide proceeding. A complete list of major positive conditions and frameworks projects considered for this analysis, that support the economy’s growth and the explicit assumptions for each engines: public and private investment. project regarding work done and Given rising major project activity construction workforces employed in other states, and the need to each year, are provided in the provide infrastructure to meet Appendix at the end of this report. growing demand in Queensland, As well as presenting the pipeline, the governments need to consider how Report discusses the key economic they can raise additional funding for settings where major project activity infrastructure projects, accelerate is taking place, for Queensland and existing projects or stimulate private Australia, together with global trends. investment. Maintaining a stable and mildly growing pipeline of major project work from here will not only support economic growth and the sustainability of the major projects industry, but importantly will likely cost the government much less than if the projects were undertaken later in the cycle or in a more heated environment.
2 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook KEY FINDINGS
—— The total value of 190 projects —— Northern Queensland has the identified in the 2018 pipeline is strongest growth prospects in the $39.9 billion (Engineering Value), pipeline for all regions (including funded compared to 166 projects valued and unfunded work) compared to at $39.1 billion in the 2017 pipeline. the past five years, but South East However, the value of funded work in Queensland still commands the largest the pipeline is only $23.8 billion, with share of major projects activity 98 public and private projects still (Figure 3). awaiting funding commitments.
—— New public and private investment —— Queensland still lags New South – including projects in the Major Wales and Victoria in terms of Projects Pipeline – is having a funding and delivering infrastructure. broader, stimulatory effect on As New South Wales and Victoria the Queensland economy. further ramp up infrastructure investment over the remainder of this decade, challenges may re-emerge —— Public and private sector in procuring construction services investment – focused in roads, rail, in Queensland. This is a challenge telecoms and electricity – is driving the that will be compounded not only by current recovery in major project work. digital disruption but by Queensland’s and Australia’s changing —— While major project activity has demographics – and in particular the risen from the 2016-2017 trough – ageing of the workforce, as identified the main challenge will be keeping in the workforce implications section activity at sustainable levels into the of the Report. future given the weak outlook for currently funded work (Figure 1).
—— The value of public sector projects that have funds committed or are currently under procurement now outstrip the private sector by a factor of 6 to 1. The ability of governments to identify and deliver on their 17% planned infrastructure has therefore of the overall assumed even greater importance project pipeline to the continued short-term ($6.9B) is unlikely sustainability of the major projects contracting sector. to proceed
Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 3 Figure 1
Major Projects Work Done: All Segments
$ Billions 20 60%
18 50% 16
14 40% 12
10 30%
8 20% 6
4 10% The total value 2 of 190 projects 0 0% identified in the 2020/21 2021/22 2010/11 2016/17 2017/18 2018/19 2019/20 2011/12 2012/13 2013/14 2014/15 2015/16 2018 pipeline is Funded Total Credibly Proposed Total Prospective Total Unlikely % of Public Funding (RHS) $39.9b
Figure 2 – Outlook by Sector
Total Pipeline of Work Over the Next Five Years
Defence
Water Sewerage
Non-Water Utilities
Rail Habours
Roads Bridges
Mining heavy Industry
0 2,000 4,000 6,000 8,000 10,000 12,000
Funded Unfunded Compared to Previous Five Years (% Change)
Figure 3
Outlook by Region Over the Next Five Years
Gladstone
Bowen
Galilee
Northern Queensland
Surat
South East Queensland
0 3,000 6,000 9,000 12,000 15,000
Funded Not Funded Compared to Previous Five Years (% Change)
4 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 4
Major Project Work Done and Queensland State Economic Performance 20,000 10
18,000 8 16,000
6 14,000
12,000 4
10,000
2 8,000
6,000 0
4,000 -2 2,000
0 -4 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Funded Not Funded SFD A%ch GSP A%ch
LONG-TERM CHALLENGES AND RECOMMENDATIONS
While investment in major It’s unsurprising that there is a Apart from the short-term impacts, engineering projects has improved in correlation between major project investment in critical infrastructure Queensland, the general outlook for work done and Queensland’s major projects can also boost long- growth in investment, employment economic performance – with the run economic growth by improving and the broader economy is not latter represented by growth in productivity (e.g. reducing transport exactly spectacular. Rather than SFD and GSP. Major project work times and costs). This boosts the the high growth rates experienced has strong multiplier impacts on economy’s “speed limit” before it during much of the 1990s and the economy, particularly when it runs back into capacity constraints. 2000s, economic growth (as uses local labour and resources. Overall, sustaining growth in the captured by Gross State Product Essentially, additional major project Queensland economy requires or GSP) is expected to average work requires other industries to putting into place plans and policies around 2.8% per annum through boost their outputs also – both that will encourage and sustain both the next five years, with Queensland directly to service the initial increase public and private investment in the State Final Demand (SFD) growth in construction output, and then state over the long-term. This means averaging a slightly better 3.3% per indirectly to satisfy the subsequent addressing funding issues highlighted annum. Historically, Queensland expansion in the other industries. in the 2017 Major Projects Pipeline has significantly outperformed The overall gross multiplier (or total Report, continuing to develop the Australian economy, however direct requirement) for heavy and civil new productive infrastructure the next five years only sees very engineering construction is over two, projects, and providing a supportive marginal outperformance overall. suggesting that every dollar increase environment for privately funded in major project work “requires” an projects to proceed. overall boost of over two dollars across the broader economy.
Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 5 Port Drive upgrade
There has been a 64% reduction Meeting the infrastructure challenge in credibly proposed projects from requires all levels of government $11.5 billion identified in our 2017 to develop policies that align their Report to just $4.1billion in this year’s infrastructure priorities and streamline Report, which indicates challenges approval of their project funding to sustaining major project work at co-contributions. This is particularly Encourage the 2017/2018 levels over the next two important in Queensland as the split adoption of new years. In the short-term, funding in policy between Commonwealth for $4.1 billion of credibly proposed and State on long-term asset leasing technologies projects is required and detailed and capital recycling means using this that increase the business cases are needed to further option to raise infrastructure funding productivity of the support $5 billion of prospective is not possible in the medium term, construction industry project investment decisions. unlike the high-growth states of New South Wales and Victoria. Policies are Over half of the private sector projects also required that encourage private identified in the Pipeline are either sector proponents to invest in their Prospective or unlikely to receive existing infrastructure while attracting funding approval in the medium new investment to Queensland. term. This is leading to a distinct lack of replacement projects for those currently under construction and is skewing the investable project ratio towards public sector projects. The challenge is to understand the barriers that are preventing greater private investment in existing or new private infrastructure – be that regulation, approvals, risk on financial return, perception of sovereign risk or confidence in the long-term outlook for the region.
6 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook There are initiatives that governments can undertake to boost their funding capability and deliver the infrastructure Queensland requires, including:
——Continue to mature the development of ——Improve identification of specific markets, independently prepared business cases and networks or regions where privately-led ensure that public infrastructure projects are infrastructure proposals can provide critical selected through transparent cost benefit infrastructure. For different reasons, the analysis (CBA). To ensure continued regional State-sponsored Market-led Proposal investment, regional projects in existing areas initiative and the Commonwealth-sponsored or networks with low populations or relatively Northern Australia Infrastructure Facility low initial demand may require more careful initiative have yet to stimulate substantial consideration of business case benefit-cost- increased economic investment and major ratios of less than 1, taking a longer term and project activity. Rather than await proposals, wider view of the project benefits. the formulation of specific prospectus by government that invite interest in developing desirable infrastructure may assist both international and domestic private investors to actively participate.
——Provide increased certainty of long-term ——Research, identify and work to remove Commonwealth funding streams through barriers to private sector infrastructure expanding the number of City Deals. The investment. The current value of funded Townsville City Deal struck in December 2016 private sector projects announced or being was the first in Australia and an important start. procured is less than 20% than those A South East Queensland (SEQ) Regional City funded by the public sector. This indicates a Deal has the potential to be the foremost City significant skew from the historical average Deal in the nation involving eleven separate of 50-50 public-private investment in major Councils. This second generation City Deal can engineering projects. provide a structured, coordinated plan for the long-term funding of SEQ infrastructure by all ——Do not rule out infrastructure debt for tiers of government. capital investment. In the right circumstance where productive economic infrastructure is identified through an independent business case, increased debt funding can have a powerful impact on economic growth.
——Provide increased certainty of Commonwealth ——Maintain strong oversight and monitoring of and State contributions to funding of transport government capital works expenditure and projects on the National Land Transport breaking the underspend pattern on planned Network. Since last year’s Report, there have infrastructure investment. As highlighted in been further public disagreements by the the previous Report, there continues to be respective governments on major contributions sharp differences in planned public investment towards funding major projects on the M1 (measured as ‘purchases of non-financial motorway and Cross River Rail. This decreases assets’ in various Budgets) and actual spending confidence and leads to uncertainty of the outcomes. The 2016/17 State Budget, for transport projects in the Pipeline. example, planned for $8.3 billion in such investment, which the recent 2017 Mid-Year Fiscal and Economic Review (MYFER) confirmed to be $7.3 billion – around a $1 billion shortfall.
Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 7 Logan Enhancement Project
The existence of a highly skilled and efficient engineering and contracting market in Queensland can help to stretch tax-payer funds and attract private sector proponents looking to develop low-cost infrastructure and exploit global markets. For these reasons governments, private sector proponents and major project participants could collectively explore how to drive out waste, improve productivity and improve project risk allocation through the following:
——Utilise accurate capital planning, state ——Develop and maintain a plan for construction infrastructure plans and long-term project materials so that the demand and supply pipelines such as in this Report to give industry balance for scarce products can be quantified, the best possible chance of participating mapped and emerging gaps identified early in in major projects. the process. Similarly, attention needs to be focused on the development and maintenance of a construction transport and logistics plan to ——Increase collaboration between infrastructure avoid bottlenecks, delays and rising costs for developers and the construction industry, construction materials as a result of congested through the use of contract forms that seek road transport networks. to maximise value through reduction in waste, reward innovation, lead to genuine improvements in productivity and best allocate risk.
——Increase efficiency in procurement of ——Encourage the adoption of new technologies infrastructure projects through use of more that increase the productivity of the construction selective and collaborative tender processes that industry. These can include offsite modular recognise the significant cost involved in bidding construction, automation, digitisation, use of for large infrastructure projects (costs that Building Information Modelling (BIM) to enhance ultimately need to be recovered either through supply chain collaboration and investigate better direct reimbursement or mark-up). forms of knowledge transfer.
——Strengthen the focus on workforce planning ——Encourage the development of formal dispute and skills development initiatives so that avoidance strategies that include the use of demand for key onsite skills can meet the effective collaboration to develop construction infrastructure activity. price certainty and allocate project risk using best practice.
8 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 9 EC N C TL
Population ro t is a on t e i est o t e de eloped econo ies ic as elped underpin ouse old consu ption and de and or d ellin and in rastructure construction