How civil construction spending by local councils benefits SMEs directly.
In our last blog post we discussed the vast amount of infrastructure spending from the Federal Government that’s currently happening around the country, namely the 99 major projects with budgets running from the hundreds of millions, to the billions of dollars. Many of these projects are such large scale that the major civil construction firms take on these projects and then engage subcontractors to get the jobs done.
While these Federal projects represent the majority of the infrastructure spending, there is also a lot happening at local and city council level which SMEs in the civil and construction industries can get involved with directly. Here's how these infrastructure projects will also affect you.
Local opportunities, Federal cash
One of the ways the Federal Government responded to the COVID-19 crisis was to push cash into local communities through the Local Roads and Community Infrastructure Program.
Through this initiative, $500million was dedicated for local councils across the country to bring forward projects in their existing work plans. The stated goal was to ‘...enable [councils] to undertake infrastructure projects additional to what they had planned to undertake ... to stimulate local economies and employment opportunities’.
Announced in May 2020, it took less than 5 months for almost all (97%) of the local and city councils to enter into funding agreements. 1,800 projects worth $340.4million were approved and payments of $155.4million had been made as of October 2020.
Large projects, such as Sydney’s WestConnex project, or the upcoming Western Sydney International Airport, are enormous undertakings that require extensive planning and a complicated permissions process. However, the Local Roads and Community Infrastructure project means hundreds of local projects such as playgrounds, public amenities, skate parks, recycling projects, and (of course) roads are being built all across the country with a lot less lead time.
Here's how civil construction works
Upcoming work for local and smaller businesses is readily available. For example, the City of Parramatta is currently calling for tenders on four different projects. These projects include stormwater drain improvement, street upgrades, a human resources management system, and security contracts.
Camden Council wants a principal contractor for a new BMX park. The Northern Beaches Council recently closed a submission for the redevelopment of the Mona Vale Surf Life Saving Club. These are just a few examples of what local and city councils all around Australia are working on.
The tenders are not always highly competitive either. For example, in 2019 the Northern Beaches council tendered for the development of a local skate park and only three companies submitted responses. It is not unusual to find tenders for which there are only one or two companies responding so, if you choose the projects that fit well with your expertise, you should be in with a decent chance of winning them.
There are 537 local councils in Australia, 55% of them rural, and it appears that close to every single one of them received some amount of funding from the Local Roads and Community Infrastructure program in 2020. It should also be noted that whilst the money appears to have been allocated generously, there are ‘Use It Or Lose It’ rules. This means that councils are motivated spenders, which is the best type of customer for a supplier.
The really good news is that the Federal Government extended the program into 2021 by putting an additional $1 billion behind it. It's going to be for local councils to develop the projects, spend the cash, and find efficient construction tenders. So check out your local council website to see if there are any civil construction tenders worth having a crack at!
What does it mean for my business?
Preparing a construction tender takes time and incurs costs, so you need to choose your projects carefully, but these council projects can represent a great opportunity for your business.
Often though, SME owners feel that their growth prospects are constrained by not having the right equipment or enough cash flow to fund working capital for these infrastructure projects. If that sounds familiar, and your business could do with some new equipment or extra cash flow to take advantage of these opportunities, Earlypay offers Equipment Financing, Invoice Financing and Trade Financing to help Aussie businesses like yours grow.
Please visit us at earlypay.com.au or speak to your Broker or BDM to learn more.