The Age: Truss sees infrastructure tenders at half the price. October 15, 2014. Jamie Freed
“Windows of opportunities:” The time is right to invest in infrastructure projects as construction companies have slashed prices to gain work, says Minister Warren Truss. Photo: Andrew Meares
The federal government believes now is a good time to invest in infrastructure because the cost of building projects has fallen by up to 50 per cent as construction firms desperately seek work after the end of the mining boom, says Infrastructure and Regional Development Minister Warren Truss.
“What we have found is that when we have been calling tenders for projects over the last 12 months or so, we are getting prices sometimes as low as half the cost that we were being asked to pay three or four years ago, or maybe two or three years ago,” he said at the Citi Investment Conference in Sydney on Wednesday. “This provides us with a windows of opportunities in the pricing to get really good value for money.”
The government has announced plans to invest $50 billion in critical transport infrastructure. The projects include Sydney’s Westconnex and NorthConnex, Melbourne’s East-West Link, Brisbane’s Gateway Upgrade North, Adelaide’s South Road, Perth’s Gateway and Port Freight Link and Darwin’s Tiger Brennan Drive.
Mr Truss said construction contractors had been competing intensely to gain work.
“There are construction companies that don’t actually have their next job in the bag, which wasn’t the case a little while ago,” he said. “Almost universally now tenders are coming in under our estimates and projects are being completed under our estimates.”
Mr Truss said the estimates had been based on the sort of prices being paid two or three years ago, during the peak of the mining boom.
“We have been able to build bigger projects or do more with the money than was anticipated, or have savings that could be moved into other projects,” he said, citing the recent case of a $200 million ringroad around Townsville.
Mr Truss said the federal government and the Queensland government thought they would be able to fund only two-thirds of the project, but were able to fund the entire project because the tender price was lower than expected.
He said the government was looking to take advantage of pricing opportunities while it could, with further pressure on contractors expected when three large liquefied natural gas projects at Gladstone are completed over the next 12 months.
“Now, we do want our construction companies to make a profit too,” he said. “We want them to be viable. But they want to be around as well for the next boom. Therefore they will be particularly competitive over the weeks and months ahead.”
He said there was “no better time in Australia to be building infrastructure than now.” But he also warned the time might come eventually where the government will have to step back from such investments, due to pent-up demand from the private sector that would rightly take place when economic conditions allowed.