CONTRACTORS in Western Australia have a problem, and its one that many other businesses would like to have.
CONTRACTORS in Western Australia have a problem, and its one that many other businesses would like to have.
Most contractors are already experiencing a tight labour market and are wondering how the industry is going to cope when the expected surge in project spending occurs in the next two to three years.
About a dozen contractors dominate the civil market in WA and the slow progress made by new entrants shows it isn’t easy to break in, despite the plentiful volume of work.
The largest player in the market continues to be Leighton Holdings and its satellite businesses.
Their success on Chevron’s Gorgon project over the past 18 months highlights this.
Leighton subsidiary Thiess won a $500 million site preparation contract, Leighton Contractors won an $800 million civil and underground contract, and a Leighton-Saipem consortium won a $1 billion contract for a 2.1 kilometre LNG jetty off Barrow Island, to name just a few of the group’s contract wins.
Leighton subsidiary John Holland has also been winning new work, including the $360 million Perth City Link rail project in an alliance with GHD and the Public Transport Authority. John Holland expects revenue of $310 million from this project, meaning it will do the lion’s share of the work.
Macmahon Holdings, which is part owned by Leighton, has taken a knock recently after incurring losses on one of its Pilbara rail contracts, but otherwise continues to be a major player.
Its recent wins include a rail contract with Karara Mining and the Great Eastern Hwy/Roe Hwy interchange project for Main Roads.
Outside the Leighton orbit, the major contractors include BGC, NRW Holdings, Laing O’Rourke, Brookfield Multiplex and Abigroup.
The experience of Abigroup and its sister company Baulderstone in establishing WA businesses virtually from scratch is instructive.
They were recently bought by Lend Lease after their German parent put the businesses on the market.
Abigroup has slowly built its WA business over several years, with its latest win being a $65 million earthworks contract at Rio Tinto’s Cape Lambert port project, in a joint venture with indigenous contractor Geraldton Line Haul.
Baulderstone has been chasing engineering construction projects in WA after opening a Perth office last year, but recently suffered a setback when local company Georgiou recruited its WA general manager, David Brough.
Private companies like Georgiou and Doric will be looking to build their business, in the way that the likes of BGC and NRW have achieved.
BGC Contracting’s newly appointed chief executive Greg Heylen believes the group’s private ownership continues to be one of its main competitive advantages, as it enables quick decision making.
“As we grow, the key differentiator is that we will still be quick,” Mr Heylen told WA Business News.
BGC Contracting is no slouch, with 1,500 staff and annual turnover of $800 million, which is about one-third of the overall BGC group.
Mr Heylen said most of the big growth opportunities were in the resources sector, where BGC ensured it had the appropriate pre-qualification so that it could bid for work.
“All the big numbers are with the resource sector clients,” he said.
The group has won several large contracts on the Sino Iron project south of Karratha, and has recently won a $100 million contract on Atlas Iron’s Turner River Hub.
Mr Heylen said labour supply issues were alright at the moment but anticipated demand would increase rapidly as planned iron ore and LNG projects got under way.
“I think the boom this time around will be bigger than the last boom before the GFC,” he said.
“If we don’t get more people into Australia, some projects are not going to happen.
“My view is that the big companies will be alright, it is the smaller groups that will be squeezed out when the crunch comes.”
John Holland’s western region general manager Adam Harry has a slightly different take on the market.
“Although it may appear John Holland has won a lot of work over recent times, the reality is, we are a large, extremely diverse organisation and we actually need to secure more work to ensure ongoing opportunities for our people,” Mr Harry said.
John Holland will complete more than $500 million worth of infrastructure projects in WA over the next few months.
“We need to replace these with new project opportunities to keep the business moving and growing,” Mr Harry said.
