Alan Pollard, CEO, CCNZ
As I write this column for the June issue of Contractor magazine, we are yet again engaged in dialogue with the Government, this time with Local Government Minister, Simon Watts.
CCNZ President David Howard, Communications and Advocacy Manager Fraser May, and I met with the Minister last month. This followed meetings with Minister Simeon Brown last year (before he changed portfolios), Minister Stanford, Minister Simmonds and Minister Bishop earlier this year (for that meeting, alongside Engineering NZ and Consulting Engineers).
The meeting with Minister Bishop resulted in several actions which we are working through. In particular, the NZTA was tasked with identifying opportunities to bring work forward, be that maintenance, smaller capital works, or preliminary work for the larger roading projects included in the Roads of National Significance.
I want to acknowledge the Transport Agency’s recognition of the lack of work available, and its efforts to find some immediate relief for the industry. Your association has arranged roadshows with the Agency to present its work programme and how contractors can participate in the forward work. I encourage members to attend, ask questions, and gauge what opportunities this may bring for them.
Our message to Minister Watts was clear: the continued slowdown of local government work, including water, is being severely felt by the civil construction sector, and consequently by all other sectors that we partner with – equipment and machinery, hire companies, goods and services for example. They are all hurting.
We discussed a number of issues.
First, despite assurances from the Minister of Finance that councils have all the funds they need to continue to invest in maintenance and capital, and despite advice to the contrary from councils, the reduction in work from local government continues to gather momentum.
Some councils have advised that they have little in their forward works programme. And several contractors have advised they have no work whatsoever beyond June. This is not sustainable. A healthy and sustainable civil sector is critical for maintaining and upgrading infrastructure assets. Ensuring a healthy and sustainable industry is the responsibility of both industry and clients.
Second, without confidence in a forward programme of work, businesses will rightly do what they need to do to survive. That is, restructure, downsize, manage cash and risk. I told the Minister that, given the lack of work over the past year or so, and the restructuring that has resulted, it is unlikely that the industry has the capacity to deliver what central and local government expect from their respective asset plans. With the further decline in local government work, the situation has deteriorated. The government’s plans will now be severely compromised.
Third, we discussed with the Minister the poor procurement practices that we are now seeing across local government.
Under the guise of “value for money”, we see clients deliberately forcing down prices in the knowledge that contractors are short of work. We hear about contractors pricing jobs below cost to win work just to keep their teams intact and occupied. We hear of contractors being asked for advice and an indicative price for work, only to then have that job awarded to someone else without a competitive process.
Behaviour like this is not acceptable and is nothing but a race to the bottom.
Fourth, we discussed the conversion of planned or budgeted projects to actual projects. Incredibly, there appears to be little data captured on this, so I wonder where accountability sits for delivering and maintaining the infrastructure that our communities rely on. I’m firmly of the view that our country risks becoming a third world country if we do not tackle the issues impacting infrastructure investment.
And there may be things that can be done, now. If there is no project pipeline, why not get water metering over the line, now that councils have the additional debt cap? This will solve the immediate lack of work in the market for water contractors and also help resolve long-term issues around local authorities’ lack of funding for the water networks.
But at present, it seems funding is spent on organisational restructuring, ideas that may never come to market and ‘shuffling deck chairs’, not on physical works. We have sought more data from the industry to support our advocacy.
Members often tell us that we are “banging our collective heads against a brick wall”. I understand that frustration, and I understand that the wheels of central and local government turn incredibly slowly. But the consequences of doing nothing would be catastrophic. Who ensures contractor voices are heard?
CCNZ can say and do things that contractors can’t, given the need for contractors to maintain a relationship with clients. We are not afraid to challenge where appropriate and to call out bad behaviour. Our advocacy has never been more important than it is today.
The industry is on a precipice; our communities need the work the industry delivers. The consequences of a struggling construction sector, not just civil, and the flow-on risks to the broader economy cannot be understated.
It is time for the Government, central and local, to step up. To work with us to bring forward work sufficient to keep our existing contractor businesses occupied until the government infrastructure programme gets underway. To support the industry with funded training to help retain our existing staff and ensure that we will have the skills and capacity needed to deliver the government’s programme.
To make sure that procurement happens professionally and ethically, with integrity, honesty and respect. And to remove existing regulatory barriers so that work can proceed unimpeded by bureaucracy.
Time is of the essence. Action is needed now. The future of our industry and the country’s ability to deliver much-needed infrastructure depends on it.
Parting words from Jeremy Sole- a final column