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Practice Profile: Construction lawyers in recovery mode

Practice Profile: Construction lawyers in recovery mode

With a newly-elected government in New South Wales and a string of natural disasters in Queensland, Claire Chaffey reveals construction lawyers are set for a serious upsurge in business.

With a newly-elected government in New South Wales and a string of natural disasters in Queensland, Claire Chaffey reveals construction lawyers are set for a serious upsurge in business.

OUT OF THE SHADOWS: Construction lawyers are preparing for an increase in front-end work & new projects
If you're a building and construction lawyer, chances are things are changing. As the nation finally shrugs off the sluggishness brought on by the global financial crisis (GFC), construction lawyers are transitioning from what was an acute increase in back-end work and litigation, to a definite upswing in front-end work and new projects.

Put simply, construction lawyers are finding they have less to do in terms of resolving disputes arising from projects which collapsed during the GFC, and are once again turning their attention to embarking on new and innovative projects in both the public and private sectors.

And while much of the construction industry across the eastern seaboard is still in downturn (or, at the very least, flat), cautious optimism is creeping into construction practices around the country as recent events make an upswing almost inevitable.

Man-made disasters

It's no secret that over the past few years New South Wales has reached a certain level of stagnancy in relation to both the public and private construction.


"Everyone continues to hold out some hope that the flood reconstruction works may change the situation"

Darren Ho, Partner, Mills Oakley

"There is a cautious optimism... people are starting to back private development again"

Nicole Green, Partner, Minter Ellison

"It is going to take some time for the new government to understand the state of business"

John Gallagher, Partner, DLA Phillips Fox

While the state was on a high following the infrastructure boom which preceded the Sydney Olympics, things went steadily downhill from there.

"If you look at where we were in the year 2000, we were so well positioned," says Sydney-based Minter Ellison partner Nicole Green.

"If we had just kept going, we would have been miles ahead. But if you look at how the Victorian economy has progressed over that same period, they are far better placed than we are ... The state government just hasn't done enough, so now we've got major freight issues, major transport issues."

In addition, the controversy surrounding the high-profile public private partnerships (PPPs) which produced the Lane Cove Tunnel and the Cross-City Tunnel did nothing to boost productivity as the private sector decided that investing in similar PPPs would, quite simply, be too risky.

Green points out that despite the difficulties surrounding the projects, the public still ended up with brand new infrastructure which didn't come at the expense of the state. However, she adds that if PPPs are to pick up again in New South Wales, things will most definitely have to change.

"The reality is that to do the amount of work the government needs to do, they are going to have to engage with the private sector," she says.

"I think we will see a number of PPPs going forward, but they will be PPPs with a different flavour to what we have seen in the past. The allocation of risk will have to be reassessed, because you won't get the private sector contracting on the basis it did before. You just can't do what we were doing in the past. You just won't get the private sector billing."

Cautiously optimistic

While the private sector in New South Wales might still be reluctant to embrace new projects in a state which has made doing business so difficult over the past few years, the recent election in which Barry O'Farrell's Liberal/National Coalition dramatically ousted the Labor Government has inspired renewed confidence in construction lawyers that front-end work will increase.

"If you look at central government, which is what a lot of people are looking to now with the new O'Farrell Government, I think it will certainly be the place to watch," says Melbourne-based DLA Phillips Fox partner John Gallagher.

"New South Wales hasn't had a lot of success in getting big projects up and running, but there are a number that have been identified as ready to roll, such as the widening of the M5, the Sydney Convention Centre, the possible sale of the Desalination Plant and the heavy north-west rail link."

However, Gallagher adds that while the new government's plans are exciting, it will take time to get them off the ground.

"It is going to take some time for the new government to understand the state of business, to identify priorities and get those projects procured properly. The first term of the new government is going to be exciting and very active, but I wouldn't have thought that in the first 12 to 18 months anything more than planning, feasibility studies and procurement studies would be done. I wouldn't expect to see much on the ground."

Green, for one, is quietly hopeful that things will be on the up sooner rather than later.

"We are in a different space now. We are post-GFC and we've got a nice new coalition government," she says. "There is quiet optimism, a cautious optimism, where people are starting to back private development again. There is a fairly big expectation that we'll see a lot more New South Wales Government work now. I think the next 18 months will be very exciting."

Natural disasters

While New South Wales' troubles have been largely man-made, Queensland has, of late, been at the mercy of Mother Nature. And while the recent floods and Cyclone Yasi have been devastating for the state, the fact is that they are sure to result in a boon for those in the construction industry - something which is greatly needed.

"Even with the government stimulus over the past couple of years, Queensland is still in the doldrums," says Brisbane-based Mills Oakley partner Darren Ho.

"And as far as the construction industry is concerned, I think the trend will continue to be, in the short-term, downwards."

However, like New South Wales, lawyers across the state are waiting for an up-turn, even if it may take time to kick in.

"Everyone continues to hold out some hope that the flood reconstruction works may change the situation, but it hasn't filtered through as quickly as one would like," says Ho.

"But the fact is that things have to be rebuilt. They may not be rebuilt in the same area, they may not be rebuilt the same way, but something has to replace [what was lost].

"Once people work out whether things should be rebuilt, and in the same manner, then they can get to the next step of getting on with it and building it. At that point, the industry must kick-up."

>> Click here to read about issues affecting the legal profession in our in depth Practice Profile series

Like this story? Read more:

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Practice Profile: Construction lawyers in recovery mode
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