The CCNZ team, supported by our Executive Council, continues to monitor civil construction work, or lack of it, across the country. By Alan Pollard, CEO, CCNZ.
We know it’s been a tough year and would like nothing more than to be able to magic up project work to support contractors during this economic downturn.
That is out of our control, however we continue to advocate for local and central government clients to spend their budgets on physical works to be brought forward wherever possible, whether this be maintenance or capital project pre-work. Unfortunately, advocacy is a long game. But we are starting to see results.
I recently met with the Minister of Infrastructure and Transport, Chris Bishop, along with my colleagues from Consulting Engineers and Engineering NZ. The Minister has indicated the Government plans to invest $68 billion in infrastructure in the next five years, compared to the period 2019 to 2023 when $51 billion was spent. But the most notable part of the meeting for me was recognition from the Minister that we have a serious short-term (six to 12 months) workflow problem.
It has been a massive challenge to have this recognised by central and local government. A lot of government construction data only goes up until the first quarter of 2024, which is when the problem began (after that, numbers are mostly forecasts and projections). But it seems the government’s numbers are finally starting to show the hole we have been in for the past year.
At our meeting, we explored how the NZTA might be able to bring certain packages of projects to the market quicker; how councils could be encouraged to use their budgets to accelerate spending on maintenance and renewals; and how to track projects that actually come to market against what is included in pipelines or budget forecasts. We encouraged the Minister to raise our concerns with other relevant ministers, for example the Local Government Minister, Simon Watts.
I have personally followed up with the NZTA following the ministerial meeting and have been assured it is fully focused on getting work to market as quickly as possible. They understand the impact the lack of work has on contractor market health, and how important this is to the contractor community. The Agency is looking to accelerate replacement bridge works coming to market, including bundling projects to reduce procurement lead times and using standard designs. They have awarded $78 million of delivery contracts since January 2025 and are in the process of tendering their new maintenance contracts.
We are also using whatever avenues we can to access local government decision makers. I had the opportunity to present to a local government forum recently. I covered two key themes in my presentation: the drivers of cost escalation and what local government could do to make projects more efficient (given a recent focus on construction cost increases), and how to get the best out of the relationship with your contractors.
On cost escalation, my observations included the following:
• An increasing emphasis on the concept of ‘value’, but this principle has been interpreted (or misinterpreted) to the extreme, with an ill-informed focus on lowest cost tenders.
• Procurement processes often don’t follow MBIE guidelines or best practice. We need consistency across councils, but the range of skills and the differences in application of procurement practices is very broad. Poor procurement can produce unintended consequences, such as exposing councils to higher costs for similar project outcomes.
• In some regions (Wellington and Canterbury for example), there are not enough sites available to dispose of clean or contaminated construction waste. Our preference is to recycle as much of this waste as we can, but often local authority interpretation of what constitutes contaminated waste leads to perfectly acceptable soil and rock being shipped to landfills great distances away, at significant cost and with a higher project carbon footprint.
• Labour rates, which increased dramatically post-Covid, remain stubbornly high.
• The construction sector input costs have risen across the supply chain, and while inflation is now tracking downwards, this relief is not yet evident across the industry.
• Our country faces a massive infrastructure deficit. But our critical infrastructure is aging, suffering from decades of underinvestment.
• Addressing the central and local government preference for bespoke designs on every project. The design process is costly and time-consuming, and often the concepts behind bespoke designs have not been tested, causing risk and uncertainty.
• Contractors are often excluded from the design process, removing a test for practical reality, and often contractors have built the infrastructure previously so can flag practical construction challenges for clients and designers.
• There are disparities between how clients treat projects. For example, the approach to traffic management may depend on the willingness of a client to consider alternative project delivery options. For instance, it may be more efficient and cost-effective for a road to be closed to enable works to proceed, but whether this happens often depends on the risk appetite of a client.
Having identified some of the drivers of cost escalation, I then discussed some of the things that clients can do to make better procurement decisions working with their contractor community. These included the following:
• Have a clear, transparent, committed, funded pipeline of work.
• Connecting with their contractor communities. Some of the best client-contractor relationships are where the client hosts an annual contractor forum to present the forward works programme, discuss contractor participation, and identify potential risks.
• With CCNZ, advocating for a bipartisan approach to infrastructure planning and investment. Infrastructure must be seen as an intergenerational investment that spans governments, not a short-term lolly scramble.
• With CCNZ, advocate for alternative methods of infrastructure financing. We cannot continue to rely on taxes and rates to fund this investment, yet we have a $200B infrastructure deficit to resolve. Private investment, public private partnerships, user pays (such as road tolls or water meters) must all come into play.
• Engaging contractors early. Contractors know the latest technologies, materials, and innovations, and the most efficient ways to get things done.
• Consider the cost and sustainability benefit of reusing construction materials.
• Give procurement the attention it deserves. Whoever oversees procurement must be suitably qualified and experienced to understand the commercial drivers for decision making, and the consequences of that decision making.
• Use CCNZ members. They must meet our onerous ethical requirements and commit to abiding by our code of ethics, setting out our expectations for contractor behaviour which include integrity, honesty and adherence to the law. CCNZ’s best practice technical guidelines ensure contractors are consistent in their approach to project delivery.
• Honouring the new NZS3910:2023 Standard Form of Contract, which should eliminate the need for multiple variations.
The more we can do to engage with clients and educate them about the factors that drive costs and improve efficiency, the better the outcomes for everyone.
Parting words from Jeremy Sole- a final column