The discussion with Daniel Spencer focused on construction industry dynamics, particularly concerning:
- Building materials
- Labour
- Financial transparency
Daniel noted the volatility in labor costs while asserting that materials prices had stabilised. He recommended requesting financial statements from construction companies and inquiring about their ability to deliver on pricing estimates. Moreover, he suggested asking for details about price variations in recent property projects to gauge accuracy. Daniel introduced the concept of "eye certification," a new independent rating system for builders and developers in Sydney, aimed at improving industry standards and encouraging incremental progress.
The discourse also touched upon contract adjustments in response to the pandemic. Daniel pointed out that larger companies like Maritime and Metricon handled these differently, with Metricon facing challenges due to committing to a large number of projects at once. Smaller building firms were sometimes hindered by having founders oversee procurement, leading to missed price change notifications. Variations in contract types emerged, with some opting for cost plus 20, fixed, or even 18-month fixed contracts, depending on the company's confidence in pricing. Daniel advised inquiring about refund clauses and how deposits are handled if projects remain incomplete.
Another theme discussed was builder partnerships. Smaller firms were seen forming alliances to support each other with tradies and complete unfinished projects. Daniel highlighted the significance of transparency in price adjustments and the timing of those adjustments. He emphasised the importance of incorporating a maximum variation clause in contracts to mitigate unexpected costs. Smaller builders typically adopted a cost plus 20 approach, while larger entities absorbed variations due to their higher volume and capacity to manage fluctuations.
Daniel addressed the ongoing "war on talent" within the construction industry, indicating that the main challenge lay in securing skilled labour. He anticipated the forthcoming implementation of the "eye certification" system, which had seen success in Sydney and was expected to spread across the industry within the next two years. The conversation highlighted the need for transparency, adaptability in contracts, and improved industry standards in response to changing circumstances.
