For the past 18 months or so, the civil construction sector (like other parts of the New Zealand construction industry) has experienced a sharp decline in projects coming to market, says CCNZ CEO, Alan Pollard.
This is not a function of a normal, economically driven, boom-bust cycle. Much of the root cause of this downturn can be associated with political uncertainty, as an incoming Coalition Government set about halting initiatives and untangling reforms started by the previous Labour Government (Three Waters for example), with little timely market guidance about what they would be replaced with, or when.
Ongoing volatility continues to challenge long-term investment, workforce stability, and delivery capability. This downturn has placed firms under significant pressure, and we have lost a number of members to business closures and liquidations. We continue to lose skilled workers.
It is all very well having a published infrastructure pipeline, a Government Policy Statement on Land Transport, or ambitious long-term council plans, but what matters to contractors is what actually hits the market as fully funded projects.
Without a predictable flow of work, contractors will not invest in people, equipment and new or emerging technologies, and we risk losing further critical skills just as they will be most needed when activity returns.
Many councils have paused major water works while they consider the arrangements required for new water entities under Local Water Done Well. But construction cannot stop while organisational structures are considered; councils need to continue to bring water work to market through the transition.
At times like this, procurement comes under the spotlight. As does delivery against projected plans. Incredibly, there appears to be no mechanism for reporting actual projects delivered against council plans. This is something the Government is looking to introduce.
It’s clear to see from the Office of the Auditor-General’s reporting that councils generally under-deliver, some substantially. And the National Infrastructure Commission reports indicate that many central government agencies have little idea of the assets they own, let alone plans to maintain or replace these assets.
We have recommended a number of actions to address these issues:
• To help bridge the project gap, bring forward maintenance and renewals. This is ‘bread and butter’ work for contractors and is essential to get the best out of council assets. Money spent on maintenance and renewals is usually money well spent.
• We have asked the Government for funding assistance to support training programmes to help businesses retain staff during the downturn. It takes time to rebuild skills and capability, and the civil construction industry can’t afford to continue to haemorrhage people.
• Ensure procurement processes are fit for purpose, and that those officers responsible for procurement are properly trained and held accountable for their decisions.
• Engage contractors early. Too much time and money is spent on project design, when ‘catalogue designs’ may provide better value. Contractors are experts in what they build, so early engagement is likely to result in better suited and more cost-effective solutions.
• Communicate regularly and transparently. Several local authorities do a great job of showcasing forward work to contractors in their regions, which in turn enables these contractors to understand the coming work programme.
• Ongoing dialogue through contractor briefings and forward works forums in these regions enables the positive partnerships we should be seeking, where contractors can offer practical advice to their local authorities, who can in turn support the excellence in project delivery we should all be reaching for.
There’s no doubt there is a lot of project work coming – it’s a conclusion we can reach with reference to pipelines or planned programmes or budgets. Although the civil construction industry has been through several rounds of restructuring over the past 18 months, when the projects finally come to market, they are likely to do so at pace and at scale.
The infrastructure deficit, calculated by the Infrastructure Commission, sets out the investment needed to ensure our communities have access to first world infrastructure. So, as we head into the local government electoral cycle, and the general election next year, it’s time to turn projects into realities and look to the better outcomes we desire from our infrastructure networks. Our communities depend on it and deserve it.
Parting words from Jeremy Sole- a final column