Andrew Heaton: Prices of Construction Tenders Rising

Tender prices for major construction projects are set to continue to rise as the devaluation of the Australian dollar places upward pressure on material costs and the growing pipeline of work is seeing subcontractors and trade contractors become more selective in the type of projects which they choose to undertake, a new report says.

 

Quantity surveying outfit WT Partnership says the overall outlook for building activity is generally positive notwithstanding tighter lending standards being applied by the banks. That tightening comes amid a combination of improving demand for office space, continued roll-out of large-scale infrastructure projects, the likely reintroduction of the Australian Building and Construction Commission and the continued delivery of residential, retail and healthcare projects.

WT says tender prices are generally under pressure as strength in overall levels of building activity stretches the availability of certain trades, whilst the cost of some materials was being affected by the relatively low level of the Australian dollar.

“Tier 1 contractors, particularly in Sydney, continue to report challenges in attaining adequate subcontract and supplier tender interest and both the tier 1 and tier 2 contractors are reporting increased trade pricing cost when tender acceptance periods expire,” WT says in its report.

“The weakening Australian dollar continues to have an impact on cost escalation for some overseas sourced elements such as facades, lifts and mechanical and electrical plant. Exchange rate fluctuations are continuing to be heavily qualified in tender submissions for these elements.”

In terms of states, WT says tender price pressures are strongest in Queensland, New South Wales and Tasmania, with prices expected to rise by between four and five per cent throughout those states over each of the next three years.

On a state by state basis, according to WT: more

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