Cautious Optimism

Click to View in E-Magazine | Click to View Brochure

-By John Boley

Prospects for the construction and real estate industries right up and down the eastern seaboard, especially in the days immediately following the election of the Coalition government in New South Wales, are fair to middling, with a distinct upturn expected by the start of 2012. At least, that’s the view of Rod Burger, commercial director of Grindley Construction.

Rod has 27 years’ experience in the industry and has managed design and construction projects to the range of $150 million, including high profile Australian developments. He has responsibility for business development and project design management at a company which makes something of a speciality of health and Aged Care and spans a comprehensive range across the Independent Living, Commercial, Retail, Educational and Industrial markets.

He has spent a lot of the year to date at meetings and conferences and believes he has heard a good cross-section of opinions. “Most of the opinion is very cautious and tentative. I don’t really think confidence is back in any way in Queensland and New South Wales. We believe that in both markets – in both states – there will be a pick-up towards the end of the year but the reasons are different.”

In NSW “we believe the election has delivered a mandate for premier [Barry] O’Farrell to act quickly and that confidence will rise quickly. A lot of things that were on the shelf will start to get pulled out later this year. I think we are in for another slow 6-8 months but by this time next year the industry will be firing on eight cylinders and it will be back to business with a much more robust construction industry in NSW from both the residential and commercial points of view.”

Rod does forecast, however, “some casualties between now and then.” The general consensus, he says, is that there are a lot of “haves and have-nots” – still a lot of companies that have a lot of work – “and we’re one of them, because we have taken action to maintain our market position” – but there are also a lot of companies out in the marketplace that are “shedding workers. Some of them are major companies, some smaller,” and some operations are cutting back pending the onset of more encouraging times and “just battening down the hatches.”

Grindley Construction takes the view that while no one likes to work at cost for no profit, there are other factors to consider in addition to the bottom line; one of them is quality staff. The company employs some 120 people and there is a “family” aspect to management thinking – maintaining the team is important and as an example, Rod cites a 98-99 percent retention rate. “That loyalty can’t be bought. These people know they will never be laid off.” the company understands these people have mortgages and car payments to make and “we treat that with perhaps a higher priority than the absolute bottom line.” He notes there are a lot of people coming onto the market, which suggests not all Grindley’s rivals take such an approach.

Approximately 60 percent of Grindley’s $150 million turnover is represented by the aged care sector and according to Rod “we are the largest constructor in NSW.” The company pioneered a model of independent living unit development, starting with a 50-50 joint venture with Australian Unity with a deferred-management scheme: Constitution Hill (see sidebar) is a 430-unit independent living development, with a community centre, 120 age-care bed places, and all services on one site. The project was constructed in 10 phases between 2002 and 2007.

Grindley is currently looking at a number of similar though smaller such models on a joint-venture basis. “We do a significant amount of straight residential and aged care facility construction and we do that on several procurement methods.”

Another significant client of the firm’s is the Salvation Army, with whom Grindley adopts ECI (early contractor involvement), acting as design and construct partner in advance of the submission of development applications. “We have a pre-agreed negotiated contract strategy so we are not only building the project for them but on the design team from the master planning stage.” This, says Rod, allows buildability and cost and programming input from a competent builder who is on the team from day one “instead of waiting till you go out to tender to see if you have made errors or omissions.”

A new venture within the company is Grindley Interiors. Focusing on fitouts, refurbishments, building refits and Green Building upgrades, this division covers the Commercial, Industrial, Educational and Retail markets, with delivery services fully integrated from project inception to occupation.

Rod is confident that the industry is “a lot more stable than it was at the time of the last recession because of the regulations and the security payments legislation and the ratios we have to keep in order to trade and maintain our licence – particularly in Queensland.” That has meant the balance sheets of master builders have been more solid, enabling them to endure and weather the proverbial – and literal – storms of recent times.

Queensland suffered the floods and other catastrophes but even before that the receivers were quite busy in southeast Queensland, Rod reckons. “They are even busier now.” He knows of receivers who are moving staff up from NSW to QLD to cope with the extra flow of business there – “not only residential around the Gold Coast but all round southeast Queensland.”

The floods might have been expected to be good for Grindley’s business but Rod says he forecast immediately that “it won’t be good for Grindley or for anyone else, because the government and the insurance companies will sit and fight for six months about who’s going to pay for what.” The government, he says, is likely to sit on its money and/or redirect funds from other projects such as education or health, while the insurance companies will “keep people waiting as long as they can” and it will be close to the end of the year before funds are released.

It’s “very, very competitive in Queensland and really hard to get on tender lists and there really is some fear in the construction industry up there. We all know it’s going to bounce back big-time, but right now it has fallen in a hole.”

Despite this, Grindley remains strong. “We went into the financial crisis with a lot of work – a record profit margin in the year to June 2010. This financial year will be reasonably similar, though it won’t break a record. We do think next year, starting July, will be the toughest year for all the building industry because all the carry-over profits and work from pre-GFC days is now gone” as are stimulus programmes from the government (e.g. BER). “Political changes, especially in NSW, will be washing through. A tough six months is coming up. After that I think things will rapidly improve – setting aside any external shocks,” he added as a note of caution.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

August 19, 2018, 7:50 AM AEST