By Alan Pollard, CCNZ chief executive
Civil Contractors NZ released the annual Construction Industry Survey in August. This annual research is a partnership with Teletrac Navman. It shows us the mood of the industry and the challenges and opportunities our members see ahead.
This year’s results show that despite over half of industry respondents expecting to increase turnover in the next 12 months, there are major challenges ahead. Turnover does not mean profitability, and the challenges we face include accessing a skilled and reliable workforce, cost escalation and supply chain issues, confidence in a continuous pipeline of work, and increasingly complex contract terms and project negotiations.
Generating a skilled workforce remains the number one issue businesses face, with a massive 84 percent listing this in their top three challenges, and more than 50 percent citing it as their primary challenge.
This has been the case since this research began in 2017 (even during the uncertainty caused by the pandemic). So, as an industry, our first priority must be to create opportunities for New Zealanders to enter the industry with the prospect of a long term and rewarding career pathway.
It is also incumbent on us to ensure these opportunities are easily accessible to those in our communities who, for whatever reason, have not been engaged in meaningful work or who have not experienced the support needed to break the cycle of unemployment or to get ahead.
Pre-employment programmes result in pools of work-ready people with the promise of a permanent job when they “graduate”.
I find it incredible that, at a time when the government is placing more and more responsibilities on businesses to step in where social policy and education has failed to prepare people for the work they will perform, funding for successful pre-employment skills programmes is inaccessible, static or falling.
Given the low rate of unemployment, the flow on effect of prolonged border closures, and the intense competition across all sectors of the economy for talent, it’s inevitable the balance of workers needed must come from a migrant labour force. But here is another policy failure.
Very few jobs on the “green list”, which offer a pathway to residency, are associated with the civil construction industry. The new employer assisted visas are cumbersome and expensive (very few have been processed to date).
A new category providing for employers to bring in unskilled workers at 90 per cent of the living wage ($23.65 per hour) fails to recognise that unskilled workers need a significant investment in pastoral care and training and development before they are able to productively contribute. Add to that costly and unnecessary job checks and candidate checks, and significantly increased visa costs, and these barriers become prohibitive.
Times of crisis require a different approach. The Government expects employers to be innovative and creative in addressing its labour challenges, and yet Immigration NZ continues to take the same bureaucratic line it has held for many years – “if you always do what you’ve always done, you’ll always get what you always got”.
The survey highlights the need for a clearer and more certain pipeline of local and central government work. Businesses cannot invest in equipment, technology, and people if they do not have confidence those assets will be effectively deployed.
Without confidence, capacity is at risk. An example of this is the Three Waters Reform. The survey showed only 25 per cent of respondents thought the reforms would have a positive impact on their business; 28 percent felt there would be no significant impact; while 47 percent felt the impact would be negative or highly negative.
This is not surprising. Prolonged debate around asset ownership and governance has created uncertainty, with local government entities losing highly skilled and capable people. We are also now seeing councils review water asset investment, capital and maintenance programmes while the debate rages on. It is critical work continues during the transition. If it does not, critical equipment and workers will no longer be available at the time they are needed, and we will begin the boom-bust-reform cycle all over again.
Cost escalation and supply chain issues feature prominently in the survey, with 90 percent of respondents saying they have been significantly impacted over the past 12 months.
A consequence of this is the effect these cost and supply pressures have had on project delivery, with 59 percent of respondents having to source alternate equipment or materials; 57 percent experiencing cost overruns; 56 per cent needing to renegotiate contracts; and 20 per cent having penalties imposed or having to make a claim on the contract. All of these are time consuming and add tension to the client-contractor relationship.
While contractors were mostly confident that their businesses can withstand the challenges ahead, confidence in the ability of technology to improve business efficiency, in the government’s commitment to infrastructure, and in the ability of New Zealand’s infrastructure to cope with climate change, have all declined. Overall, confidence in the civil construction industry outlook has decreased from 50 percent last year to 41 per cent this year.
So, we are entering a crisis of confidence, worker shortage and cost escalation. The critical role our civil construction industry plays in the health, wealth and well-being of our communities is at risk; it is inconceivable that these challenges and barriers should be allowed to continue unchecked.
Contractors are resilient, tenacious, responsive and adaptable. And there remains an opportunity to address these challenges to the benefit of government, industry, and the broader community. But the window of opportunity is closing. It won’t be addressed by “more of the same”.
CCNZ conducts the annual survey to have real data on the mood of the civil construction industry, and I encourage members and supporters to work together and use this knowledge to create positive solutions. I know industry is working hard to address these issues because I have seen solutions like new training academies and partnerships.
I believe the phrase ‘industry-led and government-enabled’ should ring true. Complete answers to the challenges we face can only be addressed by industry and government working together, being bold in our approach, and recognising the strengths each party brings to the table. Individual solutions are out there.
But they will only work at scale when government can trust industry to get on with the job, and work to help businesses scale up the answers when they get things right.