Docstoc

Significant influencing factors to the Construction Industry

Document Sample
Significant influencing factors to the Construction Industry Powered By Docstoc
					Project Report
Supply & Demand Chain Mapping

For Fleurieu Peninsula Construction Industry

Prepared by Robyn Millar June 2005

Table of Contents
1 2 EXECUTIVE SUMMARY ........................................................................................ 3 METHODOLOGY.................................................................................................... 6
2.1 2.2 2.3 2.4 Process ........................................................................................................................ 6 Desk research .............................................................................................................. 6 Interviews ..................................................................................................................... 7 Analysis........................................................................................................................ 7

3

STRUCTURE OF CONSTRUCTION INDUSTRY .................................................. 8
3.1 Definition of the Construction Industry......................................................................... 8 3.2 Construction Industry Clustering.................................................................................. 8 3.3 Construction Industry Map ......................................................................................... 11 3.4 Dependency Networks............................................................................................... 12 3.5 Training ...................................................................................................................... 12 3.5.1 Group Training....................................................................................................... 13 3.5.2 Construction Industry Training Board .................................................................... 13

4

FLEURIEU PENINSULA CONSTRUCTION INDUSTRY ............................. 15
4.1 Size and Value of Fleurieu Peninsula Construction Industry..................................... 15 4.2 Summary of 2003/2004 Council Approvals ............................................................... 15 4.3 Regional Projects ....................................................................................................... 16 4.3.1 Alexandrina Council area ...................................................................................... 16 4.3.2 District Council of Yankalilla .................................................................................. 16 4.3.3 City of Victor Harbor .............................................................................................. 17

5

PROCESS MODELS ............................................................................................ 18
5.1 Preparation Process .................................................................................................. 18 5.1.1 New developments cycle....................................................................................... 18 5.1.2 Additions and alterations cycle .............................................................................. 18 5.2 Internal Processes ..................................................................................................... 18 5.2.1 Subcontractors to custom builders ........................................................................ 18 5.2.2 Sub Contractor to project builders ......................................................................... 19 5.3 Competitive Criteria ................................................................................................... 19

6

ISSUES AFFECTING DEMAND FOR SERVICES ............................................... 21
6.1 Desirability of Coastal Lifestyle .................................................................................. 21 6.2 Residential Home Options ......................................................................................... 22 6.2.1 Transportable homes............................................................................................. 22 6.2.2 Project homes........................................................................................................ 22 6.2.3 Custom built homes ............................................................................................... 22 6.3 Commercial Developments........................................................................................ 23 6.3.1 Types of construction............................................................................................. 23 6.3.2 Availability of land .................................................................................................. 23 6.3.3 Time between purchase and development ........................................................... 24

7

ISSUES AFFECTING SUPPLY OF SERVICES ................................................... 25
7.1 Availability of Tradespeople ....................................................................................... 25 7.2 Training ...................................................................................................................... 25 7.3 Retention of Tradespeople......................................................................................... 26 7.4 Barriers to Employing Apprentices............................................................................. 26 7.4.1 Desirability for school leavers................................................................................ 27 7.4.2 Motivation for employers to take on apprentices................................................... 27 7.4.3 Incentive to recommend apprenticeships .............................................................. 28 7.5 Retaining the value .................................................................................................... 28

8

RECOMMENDATIONS......................................................................................... 29
8.1 8.2 8.3 8.4 Industry Steering Group............................................................................................. 29 Increase Number Local Apprentices.......................................................................... 30 Provide Local Training Options.................................................................................. 30 Promote the Use of local Tradespeople .................................................................... 30 Interviews ................................................................................................................... 31 Reference Material..................................................................................................... 32

9 10

ACKNOWLEDGEMENTS ..................................................................................... 31
9.1 9.2

APPENDIX - CITB LEVY, APPRENTICESHIPS & TRAINING PLACES.............. 33

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

2

1 EXECUTIVE SUMMARY
In March 2005, Fleurieu Regional Development commissioned a study on the Fleurieu Peninsula Construction Industry, to be undertaken as part of a Supply Chain Analysis and Cluster development of key industries in the Fleurieu Peninsula. The report pursues the challenge to grow the regional Construction Industry. Contactors from outside of the region are completing a significant amount of the construction activity in the region. It recognised that by increasing the number of tradespeople and apprentices residing and working in the region, the supporting businesses and suppliers to the industry will also benefit. The Construction Industry is a highly competitive, mature industry in the Fleurieu Peninsula, as it is Australia wide. Businesses are becoming smaller and more specialised, which creates an inordinately complex network of subcontractors. These subcontractors form loose alliances with building contractors. Informal clusters develop amongst subcontractors and building contractors, as participants look for information on availability of work, skill development and current industry remunerations. construction activities. The ‘boom & bust’ cyclical nature of the Industry has created a culture of taking advantage of the ‘boom times’ to get what you can to cover when the work is hard to find. This impacts on the investment individual businesses are prepared to make in skill development and employing staff. In the 2004 financial year the Fleurieu Peninsula’s Construction Industry was worth in excess of $160 million, based on council application approvals. Residential activity is underpinned by significant amount of work in the pipeline, through proposed residential land divisions, which suggests the residential construction activity will continue at a high intensity in the short and medium term. Up to 50% of homes in the Fleurieu Peninsula are holiday homes or are not the primary residences of the owner. This influences the decisions on the use of local trades people, as many of the landowners are not local to the Fleurieu Peninsula and are more likely to live in the eastern suburbs of Adelaide. Commercial construction activity in the Fleurieu Peninsula is dominated by smaller retail and professional services structures, with some larger retail developments and tourist accommodation projects. Construction Industry participants network with other tradespeople in the same trade and also amongst tradespeople working on similar

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

3

KEY ISSUES FOR THE INDUSTRY 1. There is a lack of large building contractors based in the Fleurieu Peninsula, who potentially are the large employers of local tradespeople or subcontractors 2. The national skill shortage is accentuated in the Fleurieu Peninsula due to the sustained construction boom 3. The largest employers of apprentices - Group Training Organisations, do not directly recruit local apprentices 4. 5. 6. There are significant time delays to have a residence built by local contractors Proximity to Adelaide enables easy access for Adelaide based contractors The level of training conducted in the Fleurieu Peninsula is not currently proportional to the value of the CITB levy collected out of the region 7. There is no “knowledge based” training providers or facilities for school or post school learning in the Fleurieu Peninsula 8. 9. There is a lack of affordable, suitable and available commercially zoned land Decision on which tradespeople to use are being made by property owners whose primary residence is not in the local region 10. Demand is expected to continue at high levels for at least the next 10 years 11. To retain the $value of the Industry in the Fleurieu Peninsula the services need to be done by local tradespeople and they need to purchase their supplies locally. RECOMMENDATIONS The recommendations recognise the value of the Construction Industry in the Fleurieu Peninsula and its potential for growth. The focus of the recommendations is to stimulate construction activity to be undertaken by local tradespeople. 1. Construction Industry Steering Group The Fleurieu Peninsula Construction Industry needs an Industry Steering Group to oversee a regional vision to promote the local industry. The Steering Group would be responsible for lobbying CITB, AHA and TAFE to develop regional strategies and connect potential employers with apprentices.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

4

2. Increase the Number of Local Apprentices To build a local industry the apprentices must be sourced and employed within the local community. include: • • • Assist in the establishment of a local Doorways 2 Construction initiative Provide incentives for a local network of employers to host apprenticeships Develop marketing/information packages to encourage school career advisors to recognise students with the appropriate aptitude for trades and encourage entry into Doorways 2 Construction, school-based apprenticeships and prevocational training • • Actively encourage Group Training Organizations to promote themselves and recruit in the Fleurieu Peninsula Identify and assist potential local employers to employ apprentices Strategies to encourage local apprentice employment should

3. Provide Local Training Options Critical mass is required to make knowledge-based training cost effective and therefore viable. However achieving critical mass will only be achievable if there is locally based training. Improved access to training will support potential employers, help bring in new trades people, retain and up skill existing qualified trades people. The Fleurieu Peninsula Construction Industry requires local training providers for prevocational training, off site trade training, up-skilling in areas such as project management and technologies. 4. Promote Local Tradespeople Potential employers need to be confident that the boom will last, if they are going to employ apprentices and tradespeople. The development of a marketing profile and database to promote the vibrancy of the local industry, thereby encourage the use of local industry people. The communications will connect property owners, who live outside of the region and Adelaide based project homebuilders who reside outside of the region, with local tradespeople. The Fleurieu Peninsula Construction Industry has the capacity to make significant contribution to the strength of our regional communities. The recommendations above are reliant on the ability to establish an influential Industry Steering Group, as the local Construction Industry must drive the recommendations.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

5

2 METHODOLOGY
2.1 Process
The project has focused on identifying threats to the survival and constraints to the expansion of existing business and has developed practicable recommendations to assist businesses to overcome these constraints. The process has involved: 1. Developing an industry Cluster Model and dependency mapping for the Construction Industry, including identifying the support industries and industries that supply to the Construction Industry 2. Identifying Networking Clusters 3. Developing current process models for businesses in the Construction Industry and assessing the models for effectiveness, service levels and efficiency 4. Developing opportunities for Supply Chain efficiencies and addressing gaps in the Supply Chain. Information has been collected from existing reports, phone and face-to-face interviews with industry participants. The information acquired has been analyzed with opportunities identified and outlined in section 7 of this report.

2.2 Desk research
The purpose of the desk research was to identify, collect and analyse existing information. This provided the basis of assumed knowledge, which was developed during the interviews. There is significant information available on the Construction Industry for South Australia and Australia, as it is a major industry in terms of growth and economic impact to the state of South Australia. However, there is very little breakdown of information that goes beyond Adelaide metropolitan, that is, there is very little statistical data relating directly to the regional areas of South Australia and specifically the Fleurieu Peninsula.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

6

The key sources of information have been: • • Housing Industry Prospect Reports – April and September 2004 Approval data from Alexandria Council, The City of Victor Harbor and The District Council of Yankalilla • • Construction Industry Training Board 2003/2004 Annual Report Various Construction Industry Web sites.

2.3 Interviews
The objective of the interviews and surveys was to add depth and quality to the information that has previously been collected or assumed. Twenty-eight interviews were conducted across five key groups: • • • • • Building contractors and subcontractors Registered Training organizations and Group Training Organizations Planning and Building personnel at the regional councils Industry Associations Fleurieu Regional Development Board

2.4 Analysis
The primary and secondary information were brought together to assist in establishing preliminary opinions, which were developed during subsequent interviews. Not all the issues identified can be addressed within the region but it is important to recognise the impact that they have on the Region. The opportunities presented as recommendations, have been discussed with key stakeholders and can be realistically achieved with in the Region.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

7

3 STRUCTURE OF CONSTRUCTION INDUSTRY
3.1 Definition of the Construction Industry
For the purpose of this project, the Construction Industry Training Board’s (CITB) definition of the Construction Industry has been para-phrased. The Construction Industry includes companies and organizations that are involved with new or existing industrial, commercial or domestic buildings or structures, including the: • preliminary site preparation work for the construction or erection of any building or structure • construction or erection of a building or structure that is or is to be fixed to the ground and wholly or partially fabricated on site • alteration, maintenance , repair or demolition of any building or structure, the laying of pipes and other prefabricated materials in the ground and any associated excavation work • construction, erection installation, extension, alteration or dismantling of a transmission, distribution line, or plant facility/equipment used in connection with the supply of electricity; or an air conditioning, ventilation or refrigeration system.

3.2 Construction Industry Clustering
Michael Porters Clustering for Competitive Advantage model has been adapted, (by
Robyn Millar Feb 2005), as a planning schematic to identify the resources and linkages in

the Construction Industry in the region. Four key resource categories were identified that support the Construction Industry, ie: 1. Material suppliers 2. Complementary/support Industries 3. Industry Associations 4. Training Organizations.

See following model for detail.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

8

Construction Industry Clusters
The Construction Industry Cluster illustration is a planning schematic to map the resources and linkages that support and supply the Construction Industry in the Fleurieu Peninsula Construction Industry - commercial industrial, and residential buildings and structures
•
• • • • • • •

,
Industry Associations
Approximately 60 Associations exist incl: • Air Conditioning and mechanical contractors assoc of SA • • • • • • • • • Association of building consultants Assoc of consulting Architects Assoc of consulting Engineers Aust Assoc of wall and ceiling contractors Aust institute of Quantity surveyors Building designers assoc Construction Industry institute Housing Industry Association Master Builders Association

Material Suppliers
• • • • • Building equipment hire Building supplies Electrical fittings Premix Concrete Plumbing supplies Transport

Building contractors Project home builders
Bricklayers Carpenters & Joiners Concrete contractors Electricians Plumbers & Gas fitters Roof Construction

•

Complementary & support Industries
• • • • • • • • • • • • • • • Accommodation Building inspection & consultants Building Designers & Draftsmen Engineers Floor & Wall Tilers Insurance brokers Landscape designers/ contractors Painters & Decorators Property services Real estate agents Rubbish removal Sewage & Waste water Solicitors Town & Regional planning Offsite Fabricators

• Master Painters, decorators & sign writers assoc • Master Plumbers & Mechanical Services assoc

Training Organizations
• • • • • TAFE Group Training Organizations Registered Training Organisation’s Universities Construction Industry Training board

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

9

3.3 Construction Industry Map
The Construction Industry is characterised by small and specialised trades, which creates inordinately complex networks and clusters. The following diagram expands the previous cluster diagram to illustrate the specialisation path tradespeople in the core Construction Industry take. like to “stick to with what they know”. There does not seem to be much movement once an apprentice enters a pathway. Tradespeople

Construction Industry Clusters

Support Industry

Industry Assoc & training orgs

Core Construction

Suppliers

Bricklayers Concrete contractors Electricians

Carpenters & Joiners Roof Construction Plumbers & Gas fitters

Commercial
Shops, offices and schools - 35% of state-wide activity

Civil
Roads, bridges and tunnels - 15% of state-wide activity

Residential
Retirement villages, houses, flats, - 50% of state-wide activity

New structures

Change of use / refurbishment

Project homebuilder

Custom homebuilder

As the Construction Industry is becoming more specialised sub contractors / tradespeople tend to work primarily with only a couple of Building Contractors. These Contractors tend to specialise in either Civil, Commercial or Residential activities. However as the level of commercial activity contracted locally is minimal, the residential specialists also work on smaller commercial projects.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

11

3.4 Dependency Networks
Cluster Networks in the Construction Industry participants evolve to keep in touch with availability of work, skill development and industry remunerations. Participants will network with other tradespeople with the same trade and also amongst tradespeople working on similar construction activities. Networking within their own trades provides valuable support for individuals, who are often working alone. registrations. While most belong to an Industry Association, they are not necessarily actively involved, outside of reading their newsletters and paying their Within their own peer group they work out the $rates, discuss new products or techniques and find out who is available to assist in projects. The network clusters that evolve around the Building Contractors become the Supply Chain for the contractor. It is not unusual for Building Contractors to work regularly with up to 40 different subcontractors, most operating as a single entity or with a small “gang”.

3.5 Training
The following diagram demonstrates the training opportunities for participants in the Construction Industry. When school leavers have the opportunity to start in an Entry Level program they are more likely to continue in the industry and continue to develop skills. However, even with training, up to 30% of experienced tradespeople leave the industry for another vocation.

D2C – Cert 1

Apprentice– GTO or direct

Employee or subcontractor

CITB training

Employer

OR School leaver Trades Assistant – Sub contractor or direct employee

30% Moves on to another trade or drops out of industry

Training has a high profile for the Construction Industry through the CITB, Master Builders Association and the sixty odd Industry Associations. If an industry participant is interested in training, it is available and normally at a subsidised cost.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

12

The post apprenticeship training opportunities appear to be well utilized by the larger organisations (not represented in FP). However the challenge is to encourage the individual subcontractors (who are well represented in FP) to access the services and move on from the entrenched attitude of “sticking to what you know”. 3.5.1 Group Training Group Training is an employment and training arrangement where an organisation employs apprentices under an Apprenticeship Contract and places them with host employers. It has been developed to: • • create additional employment opportunities for apprenticeships provide for continuity of employment of apprentices through to the completion of their Apprenticeship/Traineeship Training Contract • improve the quality and range of training available to apprentices, particularly small and medium business. The Group Training organisations are responsible for meeting the obligations of the employer, managing and monitoring arrangements with host employers and provide care and support throughout the apprenticeship. They also: • rotate apprentices among host employers to ensure continuity of their Contract and enhance the quality and range of the training experience • provide access to apprenticeships to the disadvantaged in labour market.

3.5.2 Construction Industry Training Board The Construction Industry Training Board (CITB) provides the majority of post apprenticeship trade training. The CITB was established under the South "Project Owners" Australian Construction Industry Training Fund Act 1993.

(generally the Building contractor or the owner builder), contribute 0.25 percent of the value of building and construction work revenue, over the value of $15,000. The levy is managed by the Board to support up-skilling and crossskilling. In 2003/04 the CITB collected $9.69 million; including $581,400 (6%) from the Fleurieu Peninsula. 1.93% of the total training places were filled by Fleurieu Peninsula trades people, including 2% of the apprentices. See appendix for detailed diagrams on levies, apprenticeships and training in the regions of South Australia.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

13

The CITB provides approximately $3.4 million each year to support Entry Level Training initiatives. These initiatives include: • • • • • Tuition Incentive Funding for all construction apprentices Quality funding for employers of more than 29 construction apprentices Career advice on jobs in the industry and how to get started Access and equity programs Target works - For unemployed or students at risk – currently working on Granite island shelters at Victor Harbor • Doorways2Construction (D2C) - year 11 Schools program. The D2C is a VET program, which incorporates the nationally accredited certificate 1 in construction. As at 30 June 2004 D2C had 21 cluster programs covering 70 schools in South Australia. While there are currently no participating schools in the Fleurieu Peninsula, two schools just out of the region are participating - Willunga and Tatachilla Lutheran College. It is anticipated that the Investigator High School in Goolwa will be ready to commence the D2C by the end of 2005. A key strategy for CITB has been to integrate D2C into industry employment outcomes. CITB supported Group Training Organisation’s (GTO’s) are required to recruit 10% of each new intake from D2C.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

14

4 FLEURIEU PENINSULA CONSTRUCTION INDUSTRY
4.1 Size and Value of Fleurieu Peninsula Construction Industry
Residential building approvals in the Fleurieu Peninsula in 2001 to 2004 averaged 837, whilst commercial and industrial building approvals averaged 73. The total number of residential building approvals for the three-year period to June 2004 is 2,510 and $332 million in investment. Commercial and industrial approvals have totalled 219 and $56 million investment during the same period, FRD’s Investor Profile, 2004. The Construction Industry is the fifth largest employer in South Australia with 49,100 employees. 99% of businesses in South Australia’s Construction Industry have less than 20 employees and 62% do not, employ any staff, Construction Industry Training
Board 2004 Annual Report.

Whilst we do not know exactly how many Construction

Industry tradespeople are employed locally we do know that 67 Construction Industry apprentices are employed across the region. The growth, investment, value and size of the Construction in the Fleurieu Peninsula can be effectively quantified by the value of the applications approved by council. However as a significant proportion of this value is in materials and labour imported into the region it is difficult to substantiate the actual $value to the region.

4.2 Summary of 2003/2004 Council Approvals
Alexandrina Council approvals City of Victor Harbor approvals District Council of Yankalilla approvals

New dwellings Dwelling additions Class 10* Commercial & Industrial developments Land Divisions other

458 332 561 41 121 1561 applications approved $98.4 million

222 50 331 24 86 21 734 applications approved $46 million

127 (220 dwellings) 44 181 18 45 15 430 applications approved $17.2 million

* Includes non habitable building or structures including private garages, sheds, fences, swimming pool etc

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

15

4.3 Regional Projects
4.3.1 Alexandrina Council area The Alexandrina Council area’s most significant current developments include the Hindmarsh Island Marina, Goolwa Wharf Precinct upgrade, Goolwa Shopping Centre and the Goolwa Library and Council Office upgrade. Development proposals are currently being reviewed for the Horseshoe Bay Foreshore Upgrade, the Port Elliot New Primary School, the Goolwa Brewery and the Goolwa Wharf. Also in the pipeline is the Goolwa Beach car park re-development, possibly to include new a kiosk/residence and a Car park at Middleton Point. Retirement villages continue to generate significant activity, with three under construction: • • • Elliot Gardens - Montpelier Terrace, Port Elliot - 250 dwellings Thornbury Park - Wilmett Road, Goolwa - 109 dwellings Seachange Village - Gardiner Street, Goolwa - 207 dwellings

Council has also approved the following land divisions • • • • • • • Hayborough - 24 allotments Port Elliot Heights (old Drive-in site) approx. 60 allotments Port Elliot Rise - (Rosetta Terrace) approx. 20 allotments Middleton Shores (Morrison Ave/Boettcher Rd) approx. 70 allotments Strathalbyn - Garwood LD, approx. 50 allotments Gerard LD, Milnes Road, approx. 40 allotments Industrial LD – Dunreath / Milne, Milang Lakes, approx. 30 allotments

4.3.2 District Council of Yankalilla Major Developments include South Shores with 93 units, a wind farm that was refused, rebuilding of a supermarket, and continued land division in the Links development at Normanville, one of which comprised of 140 allotments. There has been considerable discussion about Wirrina with This is likely to expand considerably in some preliminary applications. the 05/06 year.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

16

4.3.3 City of Victor Harbor Construction activity is booming in the City of Victor Harbor with considerable activity commencing in 2003/04 and more in 2004/05. In 2003/04 this included three major developments: • • • The Bayline Shores Apartments – Hindmarsh Rd The Bi-Lo shopping Centre Upgrade – Seaview Rd Ross Roberson Nursing Home Upgrade – Corhill Rd.

The rate of development is expected to continue with at least four major developments being approved in the 2005 financial year: • • • • The frontage apartments – Hindmarsh Rd McCracken Country Club conference facility Gemtree Properties – 17 Apartments – Port Elliot Rd Nevarc nominees 24 Apartments – Investigator crescent

There are also several significant development in the pipeline • • • • • • New Council civic Centre & Library Apartment Complex – Flinders Parade 16 apartments – Hindmarsh Rd Major extension to the Woolworths complex Land Division at old Victor Harbor Trotting Track Retirement village of 40 dwellings on Inman Valley Rd

The residential boom is expected to continue with new land divisions generating considerable activity: • • • • Mill Rd with 184 allotments Encounter Waters with 187 allotments Chippendale Stage 9 &10 with 115 Allotments McCracken with 60 allotments

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

17

5 PROCESS MODELS
All subcontractors require the infrastructure to manage a business, as well as their trade skills; these skills are not inherent to a tradesman’s training. Some of the surveyed businesses spent over 50% of their time on quoting, scheduling & material procurement. More efficient use of skills could free up valuable time & resources on either supervising or doing the job. 5.1 Preparation Process

The following diagrams demonstrate the process building contractors work through with their clients, prior to construction. The process is more extensive for new dwellings, than for additions and alterations to existing structures. 5.1.1 New developments cycle New Residential Dwellings account for 53% of the activity in the Fleurieu Peninsula for 2003/04.
Concept
Feasibility

Finance

Design

Negotiation

Constructio

5.1.2 Additions and alterations cycle Once a structure is established, it will require maintenance, then upgrading, before it is recycled or redeveloped.
Maintenance
Upgrading

Recycling

Redevelopment

5.2

Internal Processes 5.2.1 Subcontractors to custom builders Subcontractors involved with building custom built homes or commercial projects will generally tender for each new job. Depending on the relationship with the head contractor this may be very detailed and protracted, or quite brief.

Quoting

Commit & schedule

Order material

Perform Job

Invoice, collect & Pay

Return for warranty

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

18

5.2.2 Sub Contractor to project builders The main difference for sub contractors who work exclusively for Project Builders is that the head contractor orders the materials and the subcontractor does not need to quote individual jobs, as they have an agreed ‘piece’ rate. The reduction of processes required is reflected in the lower remuneration rate paid to sub contractors.

Commit & schedule

Perform job

Invoice

Return for warranty

5.3 Competitive Criteria
The survey conducted as part of this project reviewed six competitive criteria. The participants were asked to compare the degree of importance to their business of each of the six criteria and then rate their business relative to the best in the business. This method identifies the difference between intention and achievement. Quality of workmanship They rated quality the most important criteria to the success of their business and also believed they compared very favourably to the best in the industry. However only a few of those surveyed had completed any further skill development since they finished their apprenticeship training. Competitive delivery price This was considered to be the least important competitive criteria to the success of their business, and they rated themselves quite low on how they compared with their peers in the industry – recognising that they probably were more expensive. Time taken to do Job The participants interviewed felt under pressure to complete their tasks quickly, although they didn’t think it was particularly important for the success of their business, they did however believe they compared well to the industry.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

19

Ability to be flexible Flexibility varied depending on the trade. For example a second fix carpenter who worked on project homes believed he was very flexible, but this was based on that he would change his daily work plan if the contractor asked him to. While a project homebuilder said their architectural plans were not flexible as this would cut into profits. Service provided The sub contractors saw ‘”getting the job done” was the service and they did just fine at that! While the Building Contractors were more conscious of the combined efforts of all the quality criteria, being ‘service’. Innovation The participants did not see themselves as needing to be innovative nor did they see their industry as being innovative.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

20

6 ISSUES AFFECTING DEMAND FOR SERVICES
The increasing population trend, the influence of government regulation, interest rates and council planning are the significant influences on demand for construction services in the Fleurieu Peninsula. Statistically, building activity outside the Adelaide Statistical Division (ASD) is increasing. The biggest growth has been in areas adjacent to ASD – Barossa, Mount Barker and Victor Harbor & Goolwa. 17% of South Australia’s building approvals for 2003/04 were in outer ASD; this represented a 14% increase. (Housing Industry
Prospects Report - assumptions and factors underpinning 2005/6 forecasts, September 2004).

6.1 Desirability of Coastal Lifestyle
The recent high level of activity in the Fleurieu Peninsula can, in part, be attributed to the desirability of coastal holiday homes, along with the general housing sector boom. The Fleurieu Peninsula has the added benefit of being in close proximity to Adelaide, with good transport routes for commercial and domestic use. Up to 50% of homes in the Fleurieu Peninsula are holiday homes or are not the primary residences of the owner, according to data supplied by councils. This influences the decisions on the use of local trades people, as many of the landowners are not local to the Fleurieu Peninsula and more likely to live in the eastern suburbs of Adelaide. New dwelling activity in the Fleurieu Peninsula is underpinned by a significant amount of work in the pipeline. council. There are substantial residential land allotments, held by private investors, in the Fleurieu Peninsula that have not submitted building plans to This suggests that the residential construction activity still has significant potential through out the Fleurieu Peninsula in the short and medium terms. While new dwelling construction in the region remains at high levels, it is expected to decline state-wide, as part of a cyclical downturn, however the Alterations and Addition’s market remains strong and is expected to remain strong into 2006, (Housing
Industry Prospects Report - assumptions and factors underpinning 2005/6 forecasts September 2004).

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

21

6.2 Residential Home Options
Consumers will make a decision to use a local contractor, or not, once they have decided on the type of construction. The decision of what type of residential home is to be constructed on their Fleurieu Peninsula land depends on how much time they will be spend there, whether it is an investment property, their budget and the speed they want the construction completed. 6.2.1 Transportable homes

Transportable or kit homes have always been popular in regional areas as a functional and cheap way of getting a “holiday shack” on to a property in a relatively short time. The Fleurieu Peninsula councils do not encourage these constructions, nor are they as popular with the increase in affluence of the population. transported in. 6.2.2 Project homes Transportable homes rarely provide any input for the local Construction Industry as they are constructed out side of the region and are

The vast majority of Project homes are planned and managed by Adelaide based building contractors, although a few local contractors are moving into the project home sector. Empirical observations suggest the project homebuilder activity is increasing at a fast rate. Three new display home sites have opened in the region over the last year (approximately $1 million plus per site). Project homes are popular particularly as “holiday homes” for Adelaide residents. They normally don’t offer much flexibility in design, but can be completed in 24 weeks (after council approval). 6.2.3 Custom built homes

The Custom builders specialise in one-off homes for people moving or retiring into the region. Most of the Custom builders who are constructing residential dwellings in the Fleurieu Peninsula are local. Very few Adelaide custom builders or their subcontractors are prepared to travel, even with cash incentives. Tradespeople who work for Custom builders expect (and generally receive) a higher rate than that paid to Project homebuilders. The impact of the higher rates is the higher cost to consumers. The building contractors pay the higher rates to maintain availability of the tradespeople. If they aren’t prepared to pay the higher rate the tradespeople will work with another building contractor who is.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

22

Even at the higher rate these subcontractors are still in high demand and the builders will often have to wait for their availability. A custom built home in the Fleurieu Peninsula is taking on average 12 months from concept to completion.

6.3 Commercial Developments
The Fleurieu Peninsula does not have an industrial centre, although it does have a number of commercially zoned areas. structures. The commercial construction activity in the Fleurieu Peninsula’s is dominated by smaller retail and professional services The region also attracts tourist accommodation construction and major retail developments, such as Woolworths in Goolwa 2004 & Strathalbyn in 2005/6 and a proposed major refurbishment of the current Woolworths centre in Victor Harbor. 6.3.1 Types of construction Potential commercial development comes from the small business currently working out of small home or commercial sheds. The move into an industrial site requires considerable investment and requires a significant increase in production and infrastructure. This growth provides opportunities for the business but the value to the Construction Industry is minimal. The demand for commercial construction in the larger manufacturing or industrial industries is limited, primarily due to the lack of access for B Double trucks in some areas and the availability of land to establish new facilities. 6.3.2 Availability of land The single biggest issue for new businesses commencing construction activity in the region is the lack of affordable, commercially zoned land. Three years ago an industrial zoned block could be purchased for $35,000 - $60,000, the same block is now selling for $160,000. A developed block purchased three years ago with basic facilities – hardstand, shed and fence for $160,000 is now on the market for $380,000. Whilst the demand for retail is growing, it is primarily for main road strips, unless the location has a traffic generating large supermarket. In addition, developers are purchasing land previously zoned commercial to construct mutli-residential dwellings, as the land has the highly desirable coastal positioning.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

23

6.3.3 Time between purchase and development There appears to be a larger time lag between purchasing and developing commercially zoned land, than residential land. Even though vacancy rates in established industrial parks are low. The cost and risk of developing commercially properties is accepted as being higher than that of residential properties. This creates a smaller pool of potential investors. So while the risk remains lower for residential investment the commercial will continue to lag and businesses looking for developed properties will look to other regions for appropriate accommodation. Due to the limited number of commercial projects reviewed a trend for the use of local sub contractors is not clear, except that the Building contractors and Project Managers for the large projects are Adelaide Based.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

24

7 ISSUES AFFECTING SUPPLY OF SERVICES
The challenges for supplying construction services in the Fleurieu are similar to those for all of South Australia. However where the demand for services is flattening for most metro and regional areas in South Australia, the demand continues in the Fleurieu Peninsula. Therefore the issues outlined are focussed on how the Fleurieu Peninsula Construction industry can continue grow, when most other regions are preparing for a decline.

7.1 Availability of Tradespeople
The September 2004 Housing Industry Prospects Report suggest that even in areas where the boom has flattened, (which does not include the Fleurieu Peninsula), that there are still going to be skill shortages in some key trades. Even though the previous chronic shortages are easing in the short-term, the longer-term outlook remains of major concern to the industry. Local builders recognise a shortage of trades – particularly tilers, bricklayers and carpenters and to a lesser degree painters, plumbers & heavy machine operators earthmovers; so they are prepared to wait for their regular tradesperson. It might be loyalty, but if they don’t wait they may not get them next time or be able to find any one else. The larger Project homebuilders regularly servicing the region tend to use local trades people, if they are available, but this will depend on the volume and frequency of the demand. It is common for Adelaide based builders to pay incentives to Adelaide subcontractors to travel into regional areas. The proximity to Adelaide has its advantages and disadvantages. The movement of labour from Adelaide can minimize the skill shortages but this does not develop a sustainable regional industry.

7.2 Training
Apprentices receive on-the-job training and also attend formal classroom training. The on-the-job ‘skills based training’ (eg practical use of equipment & techniques) can be done on site by qualified tradesman, normally employed by the same business as the apprentice. Where ‘knowledge based training’ is conducted with between 9 and 20 students in a classroom environment, with a qualified trainer. The more students the more cost efficient it is for the training provider.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

25

The Fleurieu Peninsula is considered a regional centre under all definitions in and out of the Construction Industry but it is one of the few regional centres that don’t have any local trade training options offered through TAFE. Apprentices are required to travel to Adelaide, even though the Fleurieu Peninsula Construction Industry is one of the most active in the state. Whilst not quantified It would be expected that the requirement to travel outside of the region is inhibiting the uptake of apprentices and causes employers to cover more unproductive time. There is a movement towards prevocational training that requires students to undertake some of their ‘knowledge based training’ prior to commencing employment. This does not however reduce the apprentice contract duration and it is also not available in the Fleurieu Peninsula. It is however, very attractive for employers who appreciated that a new apprentice does have some basic starting skills.

7.3 Retention of Tradespeople
32% of Construction Industry workers over 45+, which is older than the general workforce profile and the Construction Industry workers are more likely to retire early. In fact an estimated 6000 building tradesmen are expected to retire or leave SA in the next five years. Apprenticeship levels within the Construction Industries have not increased over the past five years to match the number of trained workers leaving the industry, according to a Federal Government National Industry Skill Initiative, of those qualified in the trades, 30% were now working in non-trade occupations, (Jim Barron, CEO Group Training Australia). It is not clear whether 30% is higher than other specialty industries but it is of concern when there are trained people leaving an industry that is suffering from skill shortages.

7.4 Barriers to Employing Apprentices
A major contributing factor for the skill shortage in the Construction Industry is the lack of apprentices being employed, not just in the Fleurieu Peninsula but in the total Construction Industry. After a recent pike the numbers are down again in 2005. While the largest employers of apprentices – Group Training Organisations, do not directly recruit and support local apprentices the growth potential of the regional industry will continue to be severely inhibited.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

26

Three broad areas have been identifies as barriers: 7.4.1 Desirability for school leavers The emphasis in recent years has been for students to stay in school and get into university but not every one that goes to university gets a job. Apprentices get assistance to train for three and a half years and there is a job at the end,
(Independent Weekly “Affluent, successful and on the tools” Nov 7-13 2004).

The outdoor activity is appealing for many people but the requirement to work in all conditions does reduce the number of people interested in being employed in the Construction Industry. As the greater part of the formal training is in Adelaide first year apprentices are required to have a reliable vehicle to travel to training and work sites. The Construction Industry has a reputation not being a secure employment option as the industry well known for putting people off as soon as there is a down turn in activity. 7.4.2 Motivation for employers to take on apprentices The entrenched use of the sub contractor system in the industry is a major negative factor in the capacity of the Industry to support traditional apprenticeships. 62% of the Construction Industry does not currently have any employees. Most tradespeople who have the potential to employ do not have the human relation (HR) skills, or desire for the general responsibility of managing staff, safety supervision and paperwork compliances. Employers say finding the right person who is motivated to learn a trade is time consuming and the investment is wasted if the apprentice leaves. A Group Training Officer suggested that Construction Industry participants have a shortterm view – “they only want to employ tradespeople and they don’t care where they come from - they are not interested in training apprentices”. A concern for all Construction Industry employers is what to do with employees who do not work out or due to the cyclical nature of the industry (and individual businesses) when there is not enough work to pay their way. While most of employment management issues are minimised by using a Group Training Organisation, the cost is high and employers still need to manage other qualified employees and the infrastructure required to profitably manage a small to medium size business, as compared to a micro business.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

27

7.4.3 Incentive to recommend apprenticeships Schools tend to mirror the wider society’s priorities in respect to ‘old economy’ versus ‘new economy’. Consequently, there has recently been a shift away from traditional trades to the more popular and trendier occupations – such as IT, finance, tourism and hospitality. The school system must embrace the idea that a pathway into an apprenticeship or a traditional trade is just as rewarding as a pathway into higher education or a new economy trade, Jim Barron, CEO
Group Training Australia.

It has become more difficult for schools to encourage real work experience with on-site construction businesses due to insurance / safety liabilities. If students don’t get a real feel of the industry it is difficult for them to take a Construction Industry career path. The nature of the Construction Industry is at odds with the current focus on school retention numbers as most entrants into the construction industry leave school at year 11.

7.5 Retaining the value
To retain the value of the Construction Industry in the Fleurieu Peninsula (>$160 million in 2003/04) not only do the services need to be done by local tradespeople but the supplies need to be purchased locally. It is observed that local trade services use local trade suppliers (where they are competitively priced), where Adelaide based tradespeople purchase their supplies in Adelaide.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

28

8 RECOMMENDATIONS
The following recommendations recognise that the Construction Industry is already a major regional industry, but it is also under-achieving in retaining the value in the local communities. The opportunity is to grow the regional Construction Industry, by increasing the number of tradespeople and apprentices residing and working in the region. By growing the base of the core Construction Industry the support businesses and suppliers to the industry also benefit. The opportunities identified through the review process recognize the value of the Construction Industry in the Fleurieu Peninsula and its potential for growth. It recognizes some infrastructure needs and blockages, where skills need to be developed and it identifies how businesses should be supported to enable the Constriction Industry in the Fleurieu Peninsula to prosper.

8.1 Industry Steering Group
The Fleurieu Peninsula Construction Industry needs an Industry Steering Group to oversee a Regional Vision for the local industry. It is unrealistic to expect individual businesses to take on visionary approach for Industry. industry to develop local strategies. However industry representatives facilitated by Fleurieu Regional Development could assist the local As the Construction Industry boom settles the more experienced / long term builders may ease back their work commitments. This is a time when they will potentially have the time take on a mentoring or peer role. The agenda for this group would include: • • • Developing regional strategies on training and marketing Lobbying CITB, AHA and TAFE to also develop regional strategies Find ways of ensuring the training levies collected for activity in the region is spent in the region • Encourage organic growth of the local industry by connecting school leavers and apprenticeships with direct and host employers • Connect employers with schools for work experience

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

29

8.2 Increase Number Local Apprentices
To build a sustainable local industry apprentices must be sourced within the local community. Strategies to encourage local apprentice employment are: • • Assist in the establishment of a Doorways2Construction initiative Provide incentives for local employers to host apprenticeships by implementing a scholarship programme, administered by the “Industry Steering Group” • Develop marketing packages to encourage school career advisors to recognise students with appropriate aptitude for trades and encourage entry into Doorways2Construction, school-based apprenticeships & prevocational training • Actively encourage Group Training Organizations to promote themselves and recruit in the Fleurieu Peninsula

8.3 Provide Local Training Options
Critical mass is required to make knowledge-based training cost effective and therefore viable. However achieving critical mass is only achievable if there is locally based training. Improved access to training will support potential employers, help bring in new trades people, retain and up skill existing qualified trades people. The Fleurieu Peninsula Construction Industry requires local training providers for: • • • Prevocational training Trade training Up-skilling in areas such as project management and technologies

8.4 Promote the Use of local Tradespeople
Potential employers need to be confident that the current growth cycle will continue, if they are going to employ apprentices and tradespeople. encouraging the use of local industry people. The development of a marketing profile and data base will promote the vibrancy of the local industry, thereby The communications will connect property owners, who live outside of the region and Adelaide based project home builders who reside outside of the region, with local tradespeople. This strategy would include: • • Marketing communications on the breadth and quality of the industry Development and management of a database of local industry people, made available via Fleurieu Regional Development and council office data bases.

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

30

9 ACKNOWLEDGEMENTS
9.1 Interviews
Alexandrina Council Jo Nightingale, Ian Riches, Dennis Zanker, Cherry Getson, John Lewis Bass, Jim Bayley, Shane Callum, David Cerchi Abbie Clark, Gary Davey, Alan Keith Darwin Edwards, Des Farron, Mike Freeband, Paul Gladwin Terry Hall, Brad Hall, Peter Hickling, Glen Heinrich, Mark Houlahan, Mark Irvine, Brian Larkins, Stephen Jelfs, Paul Mills, Grant Monka, Ted Pegler, Geoff Rove, Justin Steinhert, Bev Stork, Barry Virgin, David Flexible Construction Industry Training and Assessment (RTO – TAFE alternative) Seaview Constructions (Carpenter) Master Builders Association (Director of Operations) Maxima Training Group (Field Officer) GE Constructions (Carpenter) Davey Homes (Commercial Builder) Fleurieu Peninsula VET Coordinator Des Edwards Pty Ltd (Commercial Builder) Construction Industry Training Board (Doorways2Construction Coordinator) Bricklayer/plasterer Peer Group Training (Training Manager) In Line Constructions (Carpenter) City of Victor Harbor Fleurieu Regional Development, Development Officer Fleurieu Regional Development, Business Adviser Tiles by Design (Wall & Floor Tiler) District Council of Yankalilla Construction Industry Training Board Paul Jelfs Designs (Building Draftsmen/designer) Grant Mills (Carpentry) Planning SA Stateside Group Training (Field Officer) Rivergum (Building Supervisor) BCS Electrical Victor Foundations (Concrete Subcontractor) KL Virgin & Sons (Commercial Builder)

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

31

9.2

Reference Material

Construction Industry Training Board 2003/2004 Annual Report - incorporating the 2004/2005 annual Training Plan Construction Industry Training Board Web Site Construction Industry Training Board Regional Forum 2003 – 2004 Fleurieu Regional Development Annual Report Fleurieu Regional Development Investor Profile Group Training National Register Web Site Housing Industry Prospects Report - assumptions and factors underpinning 2005/6 forecasts September 2004 LJR Cole - The future of the Construction Industry Report 1998 – 2100 Planning SA Web Site

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

32

10 APPENDIX - CITB LEVY, APPRENTICESHIPS & TRAINING PLACES
The following graphs were taken from the CITB’s regional presentation.

CITB levy collected by Region
Metropolitan Councils
Adelaide Hills Regional Development Board
Barossa Light Development Inc
Eyre Regional Development Board Inc
Fleurieu Regional Development Board Inc
Kangaroo Island Regional Development Board Inc Limestone Coast Regional Development Board Inc Mid North Regional Development Board Inc
Murraylands Regional Development Board Inc
Northern Adelaide Development Board Inc
Northern Regional Development Board Inc

Barossa Light Development Inc 5% Adelaide Hills Regional Development Board 3%

Fleurieu Regional Development Northern Adelaide Board Inc Development Board 6% Inc
6%

Other 8%

Metropolitan Councils 61%

Riverland Development Corporation Inc 2%

Training Places by Region
Limestone Coast 5.40% Adelaide Hills 4.76% Northern Adelaide 5.18% Barossa Light 1.71% Riverland 2.14% Fleurieu 1.93% Other 14.17% Eyre 1.93% Yorke 1.94%

Northern Regional 1.69% Port Pirie 1.08% Mid North 1.03% Whyalla 0.60% Kangaroo Is 0.26% Murraylands 2.00%

Metropolitan 68.34%

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

33

Apprentices by Region

Metropolitan Councils Adelaide Hills Regional Development Board Barossa Light Development Inc Eyre Regional Development Board Inc Fleurieu Regional Development Board Inc Kangaroo Island Regional Development Board Inc Limestone Coast Regional Development Board Inc Mid North Regional Development Board Inc Murraylands Regional Development Board Inc Northern Adelaide Development Board Inc Northern Regional Development Board Inc Port Pirie Regional Development Board Inc Riverland Development Corporation Inc Whyalla Economic Development Board Inc Yorke Regional Development Board Inc

Apprentice Number by Region

Barossa Light Development Inc 2% Adelaide Hills Regional Development Board 5%

Fleurieu Regional Development Board Inc 2% (67) Murraylands Regional
Development Board Inc 2% Northern Adelaide Development Board Inc 6%

Other 8%

Metropolitan Councils 63%

Supply/Demand Chain Analysis and Cluster Development for the Construction Industry

34


				
DOCUMENT INFO