Connecting clients and contractors

We are all well aware of just how challenging the economic climate has been over the past 18 months or so. One of the antidotes to the downturn that my team and I have been supporting is more regional forward works briefings. By Alan Pollard, CEO, CCNZ

We have had positive support in this from the Transport Agency, which has joined us for
CCNZ-led regional contractor briefings across multiple regions. And where these events have been proposed, councils and other clients have seen the value in meeting with the industry to discuss how to deliver on their forward works programmes. So, we’re increasingly looking to deliver these roadshows and forums across a wider cross section of clients.

Early last month, I had the pleasure of attending the Wellington Wairarapa Forward Infrastructure Works Briefing co-hosted by CCNZ and our partner organisation, ACE NZ at the NZTA offices in Wellington.

The event was attended by representatives from most of the major public sector clients, including all Wellington councils, KiwiRail, Minister of Transport Chris Bishop, and, of course, the NZTA. Those who attended were able to gain insight into what works were coming to market and when, as well as what would be expected of them in carrying out those works.

These events enable contractors to see what’s coming up and to hear what clients need as work hits the market. We have been encouraging clients to engage with their contractors – even if they don’t have a lot of work on – so that awareness of what’s coming up in the market, and knowledge of the skills, capability and equipment required are as good as possible.

Another important function of these events is as discussion forums, enabling clients to better understand the challenges contractors may have in delivering work when it does hit the market – and providing any solutions that may be within council or client control.

When councils attend contractor meetings, we see members able to raise issues such as fill disposal, hydrovac recycling and more, actually addressing the issues that are reducing project efficiency and causing cost escalation, that wouldn’t otherwise be common knowledge.

As a result, we have found from experience that the best client-contractor relationships are in regions that host regular contractor forums, and when there is an open, honest, transparent relationship between clients and contractors.

Many of these forums have been branch-led through the work of our members, including full region works briefings in Hawke’s Bay and Waikato, while others have addressed specific issues, such as a recent soil management forum in Canterbury. 

From these meetings, we have been able to share knowledge and conversations nationally, making a working template for what makes a good forum – one that has value for the contractors and clients in attendance. CCNZ provides a good platform for contractors to address issues in procurement, call out unreasonable practices, and improve understanding and relationships between clients and contractors.

But the central truth here is that it’s the collective responsibility of clients, consultants and contractors to ensure a healthy and sustainable infrastructure construction market, and the most important action that any client can take is to have a well-defined fully funded, committed ongoing programme of work. 

We see potential in continuing CCNZ-led client forums, and I encourage you to consider how we can take these to the next level in coming years. If you have any ideas on how we can get the most from these events, please don’t hesitate to raise this at your next branch meeting; let your clients know about the value these forums can add; or check in with your Regional Manager directly to discuss what’s in the works, or how we can help you make your good ideas a reality. 

The forums have confirmed that there is potentially a considerable amount of work coming in the next 12 to 18 months. We know that as work dried up during the past 18 months, contractors were often faced with difficult decisions about how to price what tenders were brought to market. We are aware that sometimes prices were set just to cover cost on the basis that keeping teams busy was preferred. This, of course, is not a sustainable business model.

Like all parts of the economy, contractors have faced increasing costs. As the market turns, contractors should be reflecting this cost escalation in their tender pricing. For months we have warned clients that the current pricing approach taken by many businesses does not cover project costs and may have to rise to more sustainable levels as the market returns to equilibrium. 

As further work comes to market this will expose the extent to which contractors have had to downsize to stay in business. Inevitably, labour costs will rise as demand for skilled workers increases, given the high levels of migration that have seen our workforce shrink.

It is not reasonable, realistic or sustainable to expect contractors to carry those increasing costs. Those clients that have taken a long-term view to supporting, developing and retaining a skilled workforce will see the best results.

Contractors are encouraged to price work commercially and sensibly. Margins are already slim, but it is entirely reasonable that contractors make a fair return for the plant, equipment and people they have employed.