The Crane Owner Panel at the 2018 CICA conference gave valuable insight into the challenges the crane sector faces today. Cranes and Lifting was there to get all the details.
One of the most popular and well attended sessions at the CICA conference was the Crane Owner Panel. Facilitated by Nick Morris, Boom Logistics the panel featured Danny Adair, Asharn, Paul Roche, Diamond Valley Mobile Crane Hire, Marcus Rigney, Load 28 Crane Hire, Malcolm Smith, Tutt Bryant, and Greg Lee, Lee Crane Hire. The panel covered a number of challenges facing the industry including the skills shortage, traineeships the life cycle of fleets.
Nick Morris: Do you feel the crane sector, whether mobile or fixed, is adequately represented in construction? If not, what can we do to change that?
Marcus Rigney: In terms of resources, I think we are adequately supplied, but I also think we can do better. My comment is more from an association awareness point of view. In SA we have been working hard on improving awareness of what we do as association. We all work hard voluntarily inside our association, and I really want builders to understand some of the work that work. We did this with an industry day, providing a platform for us to open communication with our builders and it was very successful. As an association, if we focused a little more on that I think it would help the industry.
Danny Adair: In general, I think we are doing a good job. Each state is communicating better and we are making a lot more inroads with government bodies. It is a hard task and there are a lot of people who have put a lot of time and effort in. NSW findings have been flowing into Queensland, and work done by the Queensland committee will flow back to NSW.
NM: Where the client has a year or more of work, it is now common for them to dry hire a crane. Is this affecting our routines and crane hire business?
Malcolm Smith: Everyone has a business model and we’ve had to adapt ours to changing markets over several years. Long-term dry hire can certainly mean less of a return on investment because you are actually earning a constant rate. It’s also been quite difficult to get that constant utilisation. The other major reason for dry hire is the flexibility it offers the customer. Flexibility of labour for example; they can bring in their own labour and employ them if it’s long term. The customer has the ability to use the labour to do other things onsite not just drive the cranes; flexibility to get out and drive other equipment, do other tasks on the job site.
Greg Lee: Yes, similar comments to Malcolm. We’re getting a lot of clients wanting all the advantages of dry hire, but wanting us to supply our experienced operators and only pay a dry hire rate. They don’t realise how hard it is to take experienced operators out of your wet hire fleet to operate one of their cranes. We had one particular job where we supplied all the dry hire cranes and they wanted us to supply the operators and absolutely refused to use their own men.
DA: In Sydney we’re seeing a fair amount of dry hire equipment coming into the market. They put four cranes on jobs with only three crane crews, so they save on one crew and then multi-skill the guys around the job. With the cost of labour, that’s only going to worsen. There are major infrastructure projects all over Sydney some might requiring 15 to 20 cranes. During a recent meeting there was talk about the infrastructure and need for up to 300 cranes in Sydney. We don’t have enough people. They’ll end up dry hiring gear, with people operating three or four bits of plant, and that’s going to cut their costs.
A survey two years ago found the average Sydney crane company had labour costs at over 50 per cent of turnover, some up to 58 per cent, that’s just a slow death. Three crews operating four cranes on major projects is driving very aggressive site agreements which is driving a lower cost option. I hear it every day of the week, ‘Your labour is a bit costly’. ‘I’m happy with the crane price but what can you do on labour?’ It does affect our businesses.
GL: It’s becoming more difficult to attract decent people and competent operators; we’re having to put people on lifestyle rosters, which is certainly changing the way we do business.
Remunerating crews is restrictive in some ways but there are other markets where you can pay someone what you think he’s worth as opposed to his classification. Providing these lifestyle agreements ties in with the total cost of employment, which affects the hourly rate you’re paying, versus their costs on site.
One of the biggest problems we face is the skills shortage; we can’t get enough labour.
Paul Roche: Our business is a little different. Obviously there are some major infrastructure projects in Melbourne, and these are attracting good money. Some guys are earning really good money labouring on the rail projects, for example, so trying to keep them – and keep them happy – is difficult.
MR: Yes, we’re probably unusual as we have a lot of specialised equipment and specialised guys. Being niche provides us with the ability to charge a bit more in that respect and consequently we don’t see a very high turnover in our business.
International versus local
NM: There are several trainee programs in the wider construction industry, including the Major Skills Guarantee, which is pushing for local engagement. We’re seeing the renewables energy target driving wind farms and a lot of these new projects have the Major Skills Guarantee listed, which means a certain percentage of your work force must be trainees.
Are these initiatives enough to see stronger employment, or are we going to see international expertise coming in for wind or tunnel boring machines (TBMs)? Clearly, there are projects requiring specialised equipment and specialist operators. Are we making the right progress in terms of training as opposed to importing international skill?
DA: I think traineeships have to go forward; we don’t have a choice. Nationally, there’s a skill shortage and every company is currently putting on key people. Factor in the amount of older people retiring from the industry and we are going to be flat-out topping up the labour force. I believe that those people who bring in specialised gear are going to bring skilled people with them. If companies are going to bring in specialised equipment and people for TBMs, large cranes for wind farms, trainees will need to work with that scenario and maybe in a decade we won’t need imported labour.
The Victorian guarantee is sitting at 10 per cent, so one in every 10 guys has to be a trainee on a project. That sets a pretty hard level to meet, particularly for a sub contractor or a mid or lower-tier builder.
MS: In WA traineeships aren’t really the driving factor. I certainly take on board there is a labour shortage. With the major infrastructure happening on the east coast and another mining boom expected next year in WA, I’m not sure where the labour is going to come from. We’d normally look to our friends in New Zealand but don’t have workers to spare. In the past we saw FIFOs from QLD, NSW, and VIC into WA, but that’s no longer available because there’s now a shortage.
Australian Industry Participation (AIP) is something the majors hang their hats on to comply with government, but at the end of the day it’s a bit of a farce. All these contracts are being awarded, worth billions of dollars, and what percentage is actually labour? Probably 85 per cent, the rest is in materials and sub contractors.
The government needs to supply legislation to change work safe and the way tickets are issued. There are traineeships for plumbers and electricians, so why can’t we have them in our industry? We just can’t seem to win that battle.
GL: The shortage of skilled labour is becoming a problem. We’ve trained a lot of people out of sectors that are struggling or closing down like meat works and those guys are still with us 14 years later. We’re also finding that guys get a ticket, we give him experience and we tell them we’ll pay this and after six or 12 months but they don’t work out and move on. There’s then a battle with the union, who say ‘They had a ticket and you should have been paying them as a qualified operator from day one’.
We need something in place to cover that. If a trainee is signed up to a platform of monetary value there’s no wages claim. Over the past 12 months, I’ve been in conversations with other crane companies who want to see our own internal industry training. We need to offer traineeships at a fixed rate, so there isn’t a wages claim if they don’t work out. All the pre-warning notifications work the same way as other industries, and you can move them on. As an industry we need to do this properly; we’ve got two young guys one has completed his training and has a trade certificate. I keep telling the young guys if you come out with a trade certificate you’re a trades person. You don’t have a work cover ticket; you’ve got a trade certificate, which is a big selling point for you or the employer to push.
DA: We’ve actually got a traineeship written into our agreement and the rates are locked in which negates the problem if they don’t work out or don’t like the job. It costs us money, but it’s a win-win. We send them out to train them, record their hours, and get feedback from more experienced guys they work with. We send them out quite regularly as a second dogman, but don’t charge them out; that way they get experience on the cranes and we make sure they are competent. We’ve got two guys on the traineeship and it’s working really well.
Is there more that the government authorities can do? Yes. If we can put these people through official traineeships and they come out the other end with a certificate, you know they are competent and that’s what the industry needs. Operators want, professionally trained people working with them, not someone who’s done a course for a week.
NM: Malcolm, you’ve spoken about WA projects being heavily regulated and this question is about manufacturing. We’ve seen some countries drive tariffs and regulations to keep fabricating within its borders. Australia doesn’t have quite the same restrictions. Ultimately, do you think we could do more if tariffs existed and there were incentives for the OEMs to develop their cranes or equipment here? Do we have the ability to develop leading designs locally, or is our market too small to drive competitive design? What improvements can we make and outside of that we are designing locally and building for the Australia market, what differences would we see in this equipment?
MS: I’ve been in the industry for some time now, since the P&H days when P&H were manufactured in Australia, but they struggled to get the cranes registered on the road. The KATOs came in and had to have all the axles changed, same with TADANO. Really, Australia is just a drop in the ocean for the manufacturers.
DA: There is equipment manufactured in Australia and they do a fair job. We can manufacture, we’ve got some very clever people in this country, but we’ve got to readjust our labour style and identify those people that want to work in manufacturing.
NM: Next topic is fuel consumption on all terrain cranes. Australia has long distances and travel times to site. Is the current product coming in designed for the distances you travel in your markets? Are we getting the right equipment for the job?
DA: The roads in the countries of the manufacturers are different to our roads. It’s drier and temperatures are hotter, so we are going to burn more fuel. We have to pay more for the new generation cranes because they are Tier 4 final or Tier 5. There are plenty of tears when it’s coming out of your hip pocket.
At the end of the day when you’ve got a 72t piece of machinery dragging some piece of metal behind it, you’ll be lucky to get 700 meters per litre. It’s a major cost we incur in Australia. Today’s equipment features automatic transmissions which means it doesn’t rev up and it doesn’t do this and that. Nearly every brand of crane you can drive manually will provide better fuel consumption. If you’ve got an old school operator who knows how to drive a piece of machinery, knock it back half a gear etc, his fuel consumption will be 20 per cent better. You can’t put that with an engine that is electronically programmed. We all have to look at fuel consumption, including the manufacturers, as it’s a huge cost.
MR: We’re a small operation and do a lot of local work so fuel consumption analysis is not a huge priority, but I can see what impact this would have on a company travelling long distances to get to site.
We run a heavy haul business and we’re pulling 2000t to 3000t down a road, not always a public road, and we’re getting one km to one litre. I guess the other thing we don’t consider for our business is that the crawler cranes can need six, ten or event 20 truckloads of gear, so the cost of logistics can be heavy. It doesn’t help that Australia has different road rules in each State, which is another issue we have to deal with.
NM: Equipment life cycle. Each of you run equipment fleets; how do you plan the life cycle of your fleet and the make up and mix of old and new technology versus traditional equipment.
MR: You’ve got a lot of specialised glazing and rigging in your fleet as well.
I think we apply the same principles in the business when it comes to mobile crane fleet. When you look at some of this gear it’s very high risk and we had to put a model together in order to risk-assess that equipment and to work out what to do with it through its life cycle. By putting a risk assessment around it, we implemented systems to measure the hours; systems in terms of preventative maintenance and non-destructive testing. We put that into a model and it spat out a number at the bottom. We put this in a risk scale and decided it was time to upgrade.
NM: Malcolm has a significant crawler fleet. Does the technology affect the crawler fleet like the all terrain fleet? How do you manage old versus new and manage your renewals program?
MS: Everyone has a different business model. There’s certainly a market for second hand cranes and that’s one part of the equipment lifecycle. You need to look at what your running costs are on a day-to-day basis and what is the return on investment. How you want to attack the appreciation and the interest expense. Whether you want to go that hard early, or go for a five or 20-year life cycle. They’re obviously issues to look at. And then the biggest issue in the room, as we all know, the industry is getting busier and I don’t think the world is going to have a recession as we saw when Australia last had a boom. The rest of the world is going to demand equipment at the same time as us. It’s going to be equipment availability that’s probably going to drive life cycles and how you assess that. Then there’s changing from a 10-year inspection to an eight-year inspection and how this will affect your business. I think it’s a big positive that we can now look at that from a point of view of not adding ten years onto them but to have third parties come in and conduct engineering and cyclic loading that will bring it more in line with the OEMs. This will give you the ability to assess whether your equipment can be used for the next ten, 15, 20 years. These are decisions you need to make throughout the cycle of your business.
PR: We’ve changed our business model a little bit as well. Over the last 18 months we’ve implemented a maintenance program and we’ve really been trying to keep on top of everything. We’ve got a bit of older gear that needs updating, but the maintenance program is a big thing for us – focusing on preventative maintenance to avoid having a major breakdown. We all know how much these cost when they are off the road. Obviously, the main inspection will change things as will keeping records and making sure the equipment passes.
NM: Time to replace/upgrade; what are the critical decisions for you as owners? What goes into your decision process? Brand loyalty? What do you look for when renewing your fleet? How important is after sales support?
MR: Brand loyalty is a personal thing I suppose, and there are varying opinions on this. I’m always interested in technology advancements, how and where technology is moving in the industry. As we move forward I can see that there is going to be quite a jump in our industry as a result of technology. Service and support is critical; my business demands it and when I’m getting support I’m leaning that way.
GL: My business is a bit more remote than others and product support has always been a deciding factor for me. We’ve had to work closely with the manufacturers, we have a highly skilled maintenance team that works really. We’re not strictly one brand, I usually buy three or four of one unit so it cuts the training costs. Parts have always been our biggest problem. If a part has to be ordered from Europe, it has to be shipped and you can lose a lot of down time, that’s always been our biggest killer. But I’d say all the manufacturers we have here provide pretty good service.
MS: With a big crawler fleet, product support is important. Obviously, if a machine is down, you’re not generating any revenue. I’m not sure how many have had contractor fights over terms and conditions. We have a paralegal firm working on them these days, we certainly do damages, consequential loss; all those great things that go with the risks of this business. Some are on major projects but it is filtering down into the smaller projects. The industry is certainly a difficult beast at times! From a loyalty point of view we certainly look at product support but probably from a different angle. We want our guys trained to same the level as the factory technicians. We have the premise that we can get out of the seat and start repairing the crane there and then. In remote WA we can’t wait for the OEM to tell you it will be three days before he can get a technician to you, so there’s nothing better than an operator being able to get out of the crane and start working on the problem.