1. EXECUTIVE SUMMARY

The Infrastructure Association of Queensland (IAQ) welcomes the opportunity to provide a written submission to the Queensland Productivity Commission’s (QPC) inquiry into construction productivity. Formed in 1994 as an independent, evidence-based and non-partisan association, IAQ is the leading representative body for the Queensland infrastructure industry. We foster private sector investment in infrastructure and help develop a deeper understanding between the public and private sectors.

IAQ’s valued member-base is actively engaged in planning, design, delivery and maintenance of infrastructure and provides extensive and varied experiences across the spectrum of construction in Queensland. We welcome this QPC inquiry undertaking to address sector-wide issues and enhance construction productivity across residential and non-residential sectors.

IAQ supports this undertaking aimed at improving infrastructure sector efficiencies, particularly to attract and facilitate private investment. We do note that infrastructure funding cannot be reviewed in isolation from broader institutional reforms. IAQ recommends adopting a comprehensive approach to investigating reforms that consider:

• policy settings for long-term planning
• infrastructure project prioritisation
• resolving project funding and financing issues.

Our submission presents an informed position on construction productivity issues and industry-ready solutions, offering a balanced and constructive perspective. Our submission also highlights the critical need to build the capacity of the public sector to effectively oversee complex funding, delivery and operating arrangements, addressing current challenges in coordination within the public sector. The focus on ‘greater delineation of roles and responsibilities’ among Games entities and the creation of a ‘Games Leadership Group’ for the 2032 Games, as supported by IAQ in its submission to Planning (Social Impact and Community Benefit) and Other Legislation Amendment Bill 2025, provide concrete examples of the coordinated decision-making models required to streamline processes and reduce inefficiencies across government.

In the timeframe available we have consolidated the diverse experiences of our members and welcome further collaboration to contribute to the development of effective policy recommendations, particularly related to provision of case studies and evidence to inform the Inquiry.

This submission will cover the following factors affecting construction productivity, derived from the QPC Construction Productivity Terms of Reference:

• Input Costs and Prices
• Supply Chain
• Regulatory Framework, Competition, Pipeline and Type of Development
• Industrial Relations Matters and Labour Force Needs
• Procurement and Tendering Arrangements
• Barriers to Entry and Innovation

2. INTRODUCTION

IAQ supports the intent of this QPC inquiry to identify meaningful reforms to lift construction productivity while maintaining safety, quality and public value. The purpose of our submission is to offer a collaborative and meaningful contribution which we see as a crucial opportunity for industry and government to work together to address long-standing challenges and unlock the sector’s full potential.

We note that the inquiry’s focus includes:

• state and local government legislation and regulation, including in relation to land use, urban planning, building, licensing and workplace health and safety
• state government procurement and contracting policies, including Best Practice Industry Conditions
• skills and labour force issues.

Given the critical role the effective use of economic infrastructure plays in promoting state and national productivity and economic growth, the consequences of not acting on construction productivity are serious. Infrastructure materially affects Australia’s competitiveness and the wellbeing and living standards of all Australians. In this context, the private sector has an increasing part to play in the provision of public infrastructure. The appropriate use of alternative funding and financing models will be essential to attracting much-needed additional private investment.

With a severe housing shortage and an ambitious infrastructure pipeline including projects for, and surrounding, Brisbane 2032 Olympic and Paralympic Games, construction productivity is constrained by complex factors including:

• inconsistent regulatory frameworks
• acute workforce and skills shortages
• a slow adoption of innovation and technology
• vulnerable supply chains exacerbated by rising material costs and regional disparities
• increasing complexity and customisation of modern homes compared to previous decades
• project funding and financing.

As highlighted in our inaugural report Industry Insights by IAQ Queensland Infrastructure Performance 2024 (QIP Report 2024) achieving worthwhile reforms critically depends on a robust, long-term infrastructure plan that provides certainty to industry and underpins sustained private sector investment. A coordinated and multi-faceted approach will be essential to addressing these issues. Collaboration between government and industry will be a vital part of implementation to achieve productive and sustainable construction capable of meeting Queensland current and future needs. This approach must focus on:

• strategic regulatory streamlining
• comprehensive workforce development
• incentivising innovation
• optimising procurement processes
• strengthening local supply chains.

Crucially, these reforms must be pursued while upholding the highest standards of quality and safety in construction. Particularly consideration is given to regional factors in this submission, however IAQ notes that cities (SEQ broadly) are responsible for around 80% of Australia’s population and GDP. The shape and form of our metropolitian areas is fundamental to the productivity of our state and is worthy of detailed analysis in this Inquiry.

IAQ recognises that this Inquiry is undertaken in the context of significant fiscal constraints facing governments at all levels, alongside competing arrangements and priorities across different tiers of government. As detailed in IAQ’s recent submission the timey delivery of Brisbane 2032 venues and related transport infrastructure is paramount. Efforts to ‘join-up’ planning and pipeline management are crucial and should be actively encouraged and incentivised to optimise resource allocation.

The following sections of this submission explore the key drivers and barriers, highlighting potential actionable strategies and solutions that IAQ is well-placed to assist government in enhancing construction productivity.

3. KEY DRIVERS AND BARRIERS TO CONSTRUCTION PRODUCTIVITY – THE IAQ EXPERIENCE

IAQ has considered the Terms of Reference for this inquiry and now presents the factors driving, and limiting, productivity for construction in Queensland for this submission.

3.1 Input Costs and Prices

3.1.1 Challenges

The infrastructure sector faces significant pressures from input costs and pricing issues. Input costs and pricing for construction is a complex factor that arguably is affected by many of the other factors discussed in this submission.

Notably, hyperinflation in regional Queensland areas, attributed to elevated costs for essential supply of materials to regional projects and a lack of competition presents a significant element of rising input costs and prices for the sector. For instance, for our Brisbane-based members that provide expertise throughout the state, supply costs for regional Queensland projects can be 3-4 times higher than those within 100km of Brisbane. The further out from metropolitan centres, the more difficult is it to plan and implement projects to ensure delivery is on time and on budget.

A specific, but insightful example, is the availability of sand. This key building material is highly specified on many projects which results in limited supply of the right materials. Limitations in local resources, such as the limited availability of thermal sand deposits with specific insulation properties presents the need for expensive long-haul transportation. To broaden this example, high haulage costs of delivering large components to regional sites such as steel and other materials further compound these pricing challenges for project construction.

Labour costs are also a notable substantial driver of overall construction costs affecting the price of materials as well. Queensland’s overall construction costs are also more expensive compared to other states, driven by higher material and labour expenses.

3.1.2 Opportunities for Improvement

Addressing these challenges requires a multifaceted approach. A dedicated approach to doing things differently starts with a government commitment to – and an appetite for – innovative construction methodologies. Industry believes a strategic approach to amending technical specifications for projects to foster greater flexibility, in adopting locally available materials and resources, while maintaining safety and quality standards, would also go a long way to decreasing input costs and prices for construction.

Greater adoption, and effective application, of digital tools presents an opportunity to mitigate rising construction costs, with some estimates suggesting potential reductions of 15% in public construction costs and 40% in unbudgeted changes. To extend take-up a range of approaches are recommended including:

– workforce capability enhancement including embedded aspects in trade and university education settings, targeted training and shared development hubs for SMEs

– remove contractural and commercial barriers (particularly in relation to data)

– explore options for sharing of information (to address reluctance by some to share what they consider to be proprietary IP)

– encourage pilots and trials, with promotion of efficicences and outcomes to be shared with the sector

3.2 Supply Chain

3.2.1 Challenges

The supply chain of construction presents both cost and availability challenges. We have vulnerable supply chains compounded by rising material costs and regional disparities across the state, and nation. Current government procurement practices determine largely how suppliers can tender for projects and use available supply chains. Fluctuations in the availability and cost of materials can disrupt project timelines and budgets. There are also potential future constraints on resources, such as rare earth minerals, which are critical for emerging technologies like humanoid robots.

3.2.2 Opportunities for Improvement

To enhance supply chain resilience and improve productivity, IAQ notes a greater emphasis on circular economy principles and sustainability goals could maximise the lifespan of assets while minimising waste and improving environmental outcomes. This requires a commitment to enhancing capacity and optimisation of local supply chains as well as embracing modern methodologies of construction and learning from other states and global entities using and excelling with emerging technologies.

Providing all parties with a forward pipeline of projects would allow industry and all levels of government to plan for supply chain investment, stimulate regional economies and importantly ensure adequate supply capacity. The absence of this supply chain confidence undermines investment certainty and limits expansion of existing suppliers.

3.3 Regulatory Framework, Competition, Pipeline and Type of Development

3.3.1 Challenges

Interrelated factors of regulatory frameworks, competition, pipelines and types of development all contribute to the cost of construction, which directly and indirectly hinders productivity.

A lack of competition, particularly in regional areas, exacerbates cost-related issues and is felt across a wide range of areas of construction costs for infrastructure projects. One pain point includes competition for labour from the existing pool of skilled labour that will need to be shared between upcoming public infrastructure projects – especially those associated with Brisbane 2032 – and residential construction capacity.

Uncertainty surrounding project pipelines, regulatory frameworks and type of development, traditionally aligned to cyclical nature of government election cycles, can negatively affect private appetite for investment. This applies to supply chains referred above, infrastructure projects and the myrid of associated developments that come with major projects (such as utilities, housing, health, transport etc).  This lack of certainty regarding government commitments to long-term plans, a point consistently raised in QIP Report 2024, means key industry players cannot adequately invest in the development and success of new processes, materials and workforce skills that may not eventuate in the next election cycle. This uncertainty is further compounded by diverse and sometimes competing arrangements and priorities at different levels of government. A key concern leading up to 2032 is the unique pressures of the “immovable deadline” for venues and transport infrastructure recently noted in IAQ’s submission to Planning (Social Impact and Community Benefit) and Other Legislation Amendment Bill 2025 demands a robust and consistent framework to support large-scale, time-sensitive projects.

Modular construction is one area many in the sector believe to be a crucial part of decreasing costs and improving productivity, but without solid support and commitments from government, this area will continue to be a challenging space for projects. The risk of facing financial difficulty or even voluntary administration due to factors including market fluctuations, costs and project delays is a real threat to companies in the modular construction space in Australia.

Specific to residential homes, features such as solar panels, batteries, water tanks and ducted air conditioners, alongside more stringent AS/NZS and building codes have changed design considerations, material requirements and construction timelines compared to traditional builds. Research shows that these changes can have a a positive impact on building lifecycle costs, maintenance and occupant health. However, there is an opportunity to streamline regulations and look to outcomes, rather than prescription of specifications to promote innovation and alternative approaches, which could address upfront cost and time issues.

Finally, inconsistent or out of date regulations and policies in general affect the overall productivity of construction due to less appetite for change, risk and innovation. An example of this is the openness of new approaches and innovation. Industry notes that there are regular examples of innovations exiting Queensland and taken up in other states and abroad, as the operating environment limits, and can be prohibitiative, new process, approaches and products.

3.3.2 Opportunities for Improvement

To foster a more stable and competitive environment, it is crucial to provide certainty regarding the project pipeline of not just Brisbane 2032 and the longer-term legacy projects but also the other areas requiring construction in Queensland. As advocated in IAQ’s QIP Report 2024, this long-term commitment from the government, underpinned by sound policy settings and institutional reforms to enhance investment decision-making, will allow for increased commitments from the private sector for funding, world-class solutions with local expertise as well as an appetite to take on more risk.

The Queensland Government’s objective to ‘streamline the planning approvals process’ for 2032 Games infrastructure, as supported by IAQ in its recent submission. IAQ noted that the approach adopted for the Gold Coast Commonwealth Games 2018 was streamlined planning and coordination delivery of Games-related development through a Priority Development Area. IAQ strongly urged in that same submission that the early identification and careful planning of Games-related transport infrastructure was critical to mitigating risks associated with “cost and availability of materials and labour, delivery timeframes, coordination of project delivery and driving innovation”.

More specific opportunities for improvement at the forefront of IAQ member’s solutions include pre-qualifying companies on panels, using the information once (avoid duplicatative effort), which can streamline procurement processes, promote benchmarking and encourage value-for-money solutions, rather than a race to the bottom on price. Industry notes that the cost of tendering in Queensland is higher than other jurisdictions, and the absence of contemporary procurement approaches is a major source of productivity drain.

Outcome-based delivery models are also seen as a solution to further incentivising performance and efficiency to increase overall productivity for construction. Strategic and well-thought-out staging of large infrastructure projects would also assist in easing current skill and material shortages.

Government incentives to encourage increased productivity could be valuable in the planning, design, contruction and implementation phases across the infrastructure sector. Outsourcing of regulatory elements, such as independent assessors, would be welcomed by Industry.

A review and reform of regulations that negatively affect productivity, cost, or timely delivery are also necessary to increase confidence and ability to abide by a standardisation of regulations across the sector. A specific example is zoning adjustments could enable increased dwellings per square metre and contribute to an increased housing supply and potentially driving productivity gains in residential construction.

Considering the diverse and sometimes competing priorities of different levels of government, providing certainty through strategic policy and institutional reform could offer a truly integrated and efficient approach to infrastructure development and investment. Building the capacity of the public sector to oversee complex funding, delivery and operating models are also essential to improve coordination within and across government to streamline processes and reduce inefficiencies. Other jurisdictions offer examples that are helpful in improving productivity. For example, Infrastructure Australia has a capability tool that has been beneficial in assisting Western Australia analyse its ability to deliver.

The initiatives surrounding the 2032 Games, including efforts to ‘increase the clarity of roles and responsibilities among the Games entities’ and the ‘creation of a Games Leadership Group…similar to the governance model for Paris 2024’ (as detailed in IAQ’s recent submission), also provide valuable blueprints for strengthening inter-governmental coordination and accelerating project delivery.

3.4 Industrial Relations Matters and Labour Force Needs

3.4.1 Challenges

Without a fundamental shift in contractual mindset and behaviours, the sector faces the risk of increased disputes and entrenched behaviours, which can negatively affect productivity both in the detail of a project to the overall approach to procurement, innovation and risk. Examining past industrial relations challenges, such as those in other states, can provide valuable lessons for avoiding counterproductive practices.

The industry also faces significant skills gaps across consultants, contractors and government agencies. IAQ shares concerns about the capacity and skills of the workforce, noting observed trends that will have far-reaching effects and will present real challenges to any infrastructure reform agenda. This shortfall in the workforce will affect all parts of the “infrastructure chain” including planning, problem identification, policy development, option identification, modelling, project identification as well as approvals and contracting. An aging workforce and difficulty in attracting younger workers, who may not perceive a viable future in certain trades further contributes to this labour shortfall.

This generational skills shortage, discussed in industry for more than two decades, extends beyond simply quantity of personnel to significant gaps in specific skills, qualifications and experience. It also highlights a critical challenge in succession planning, where valuable knowledge often leaves the industry with experienced retirees, and the general competitive cultures among contractors and consultancies in the sector.

When looking at a lack of confidence in pipelines and industry capabilities, a limited number of precast suppliers and the labour to deliver construction projects also affects costs and delivery timelines.

3.4.2 Opportunities for Improvement

Cultivating a shift in contractual mindset and behaviours within the industry and government is crucial to fostering a more collaborative and productive environment. This is something that IAQ is keen to assist the government in understanding further as part of this inquiry and potential reform suggestions.

Addressing labour force challenges requires a focus on modernising education and skilling programs encompassing digital design, manufacturing, logistics and assembly. Government regulation opportunities could include a mandate for inclusion of specific subject matter in university and TAFE courses that lead to trades and professional qualifications addressing critical skills shortages. Key topics that could significantly improve sector-ready graduates include:

• Risk Management: Awareness of risks, identification and mitigation strategies and how to apply to a range of project delivery models.
• Construction Planning: Fostering a deeper understanding of process optimisation and the importance of each planning element.
• Project/Construction Management: Emphasising a balanced approach that prioritises quality alongside time and budget constraints.
• Procurement: Providing robust education on sourcing, tendering and purchasing best practices.
• Small Business Management: Offering tailored training for sole-trader trades to improve business acumen.

Increasing competition among contractors and educating the workforce on productively working with AI is also an area IAQ members are seeing as important to future-proof the construction industry and increase productivity. Additional solutions include promoting wellbeing as part of the industry culture and facilitating access for overseas workers to be trained to Australian standards. Developing a long-term policy framework for overseas labour can contribute to a sustainable workforce strategy.

3.5 Procurement and Tendering Arrangements

3.5.1 Challenges

BPIC settings (and similar procurement and contracting arrangements) can affect productivity within the construction and wider infrastructure sectors.

From an industry perspective, procurement processes can often lack adequate risk allocation and fail to encourage confidence in providing innovative solutions. Short-term approaches and commitments decrease suppliers’ ability to invest in and deliver innovative solutions.

A specific factor contributing to project inefficiencies and disputes comes from poor awareness of risks including how to effectively identify and mitigate them. This can result in inadequate ‘gating’ to proceed to the next stage of project pursuit or delivery, a tendency to tender for non-core business without tangible business advantage and reliance on ‘industry standard’ contingencies and margins rather than project-specific, deterministic or probabilistic values.

Another specific factor that often decreases overall productivity of a project is the construction planning. When lacking an understanding of process optimisation and including too heavy a focus on time and budget pressures, quality and productivity decreases due to costly reworks and a culture of “asking for forgiveness rather than permission” to circumvent obligations.

Examples such as the UK’s mandatory BIM Level 2 on government projects highlight the potential of progressive procurement policies to drive positive change.

3.5.2 Opportunities for Improvement

Regular review and improvement of BPIC settings are necessary to enhance productivity without compromising safety or quality.

Enhancing procurement practices for mega-projects with a shift in government mindset to underwrite the risk associated with innovation would increase the opportunities for better productivity. This shift in mindset to appropriately de-risk different stages of a project’s lifecycle will attract greater private investment and foster innovation that improves overall productivity and effectiveness. Enhancing public sector capabilities in complex procurement, contract management and project oversight is equally important to maximise the benefits of improved procurement practices. To maximise opportunities for the public and private sectors to collaborate together, IAQ, in its recent submission, suggests strategies such as ‘developing an industry reference group for feedback, resolving issues, and collaborating on solutions,’ and to ‘develop and publicise opportunities for industry involvement on specific venues, villages and Games-related transport infrastructure, such as delivery cases/project validation reports, reference designs, peer reviews, and market sounding for construction.’ These approaches will foster confidence and allow suppliers to better integrate value-for-money and productivity into their offerings.

One example IAQ members understands from industry that could significantly increase site and overall project productivity is the ability to incorporate technologies like site cameras that are used for more than timelapse of construction progress. Allowing new technologies like site cameras with AI capabilities to track logistics and timeframes to be fully considered as part of the procurement processes could increase confidence of the private sector to invest in technologies that would increase productivity and accountability for construction deliverables.

Longer-term thinking and certainty are essential to enable suppliers to adapt and incorporate value for money and productivity into their procurement offerings. Increasing MMC-specific procurement streams, aggregated procurement and transparent pipeline visibility can further improve outcomes.

3.6 Barriers to Entry and Innovation

3.6.1 Challenges

Restrictive definitions of what innovation entails and government appetite for embracing innovative technologies on projects can decrease the likelihood of private industry adopting and developing new methods. A perceived lack of incentive to experiment with new approaches, resistance to modular construction due to perceived union issues and lack of precedent means Queensland is not well-placed to take full advantages of innovation to increase productivity.

Local examples of companies developing IP in Queensland and scaling it globally demonstrate the potential for innovation to drive both local and international growth.

Building infrastructure for the future has a particular aspect in Queensland with the increasing impact of natural disasters – flood, bushfire, cyclone, storms. To improve productivity means targeting investment and resources to new and upgrading infrastructure. However, we are caught in the rebuild phase after each natural disaster or major weather event.

3.6.2 Opportunities for Improvement

Fostering an appetite – both for industry and government – for risk and innovation is crucial to increasing productivity in construction and infrastructure projects. Governments actively sponsoring innovation and providing confidence and long-term planning to encourage experimentation and investment in new technologies and methods would significantly increase private sector confidence to invest and develop these for the benefit of Queensland.

Clear MMC-friendly pathways, fast-tracked assessment processes, regulations that recognise pre-fabrication standards would all be advantageous undertakings. A dedicated MMC advisory body could also facilitate the adoption of modern methods strategically and productively. Mandating BIM and digital twin technologies on all public construction, investing in digital infrastructure and standards, supporting open data platforms, grant programs for pilot projects and establishing a national information framework for infrastructure assets can further drive innovation.

Similarly resilience should not be seen as a fringe concept in infrastructure planning, rather a central element and required for any investment. Adopting approaches to achieve resilient infrastructure, as the norm rather than exception, would have widespread productivity gains across diverse industries and avoid major disruption to communities and local economies. In part, to achieve resilient infrastructure we need to actively manage assets – this means not only doing cyclical maintenance, but clear asset improvement strategies. There is much research and evidence around the benefits of resilient infrastructure, including the OECD, which highlights the significant role for local government in building climate resilience.

4. CLOSING COMMENTS

IAQ thanks the QPC for receiving our submission. We acknowledge the complex nature of multiple factors discussed in this submission.

We welcome the opportunity to contribute further to the inquiry’s next phase. As a leading representative body for the Queensland infrastructure industry, our members have deep experience in infrastructure and construction and welcome the opportunity to further engage to provide case studies, reviews and private-public collaboration.

As evidenced by IAQ’s QIP Report 2024, we have strong collaboration and engagement with our members who are keen to work together for construction productivity and wider infrastructure sector improvements.

We look forward to continuing constructive collaboration to improve productivity outcomes.