What next for our industry?

Now the dust has settled a little bit, I wanted to share some thoughts on our industry. 3 of the country’s top 5 construction firms have been in the news for the wrong reasons. Meanwhile, we’re still in something of a ‘building boom’—but on the construction side it seems almost impossible to make a buck. Why?

Many commentators have pointed to a lack of efficiency from our contractors—an over reliance on labour and an under reliance on systems. But we’ve got smart forward-thinking contractors who have been trying to address this with investment in good processes and I’m not willing to say they are all getting it wrong. Efficiency or productivity isn’t the root of the problem here. In my opinion the procurement models and contracts adopted are at fault, or rather their failure to define and quantify the project risks, and how these should be shared by all parties involved.

Projects are complex beasts with a lot of uncertainty. Through the procurement models and contracts used, in many cases the Contractors end up wearing all the risk and getting squeezed the most—and as a consequence the rest of us feel the compression both upstream and downstream. And now as a result the worst impacted are leaving the market. The worry is that the gap at the top will be filled by construction firms looking to expand, and 5 years down the line we’ll be facing the same headlines. History repeats …

I sincerely hope that doesn’t happen for all our sakes. We need to radically rethink the model, and change needs to start with a new procurement approach with true collaboration from all involved to confront project risks head on, and agree a way forward which is best for the project and enables all parties to succeed. I am convinced that this is possible with transparency and honesty between the Client, Consultants, and Constructors to collectively identify what success can look like for all parties. The model has to ensure a fair, mature, sensible tendering process, so the risks are well defined, costed accordingly, and then collective understanding is achieved on how risk is transferred throughout the projects life. In the long run, I think it’s better for all parties, including the people funding projects—because the industry will be more resilient, and suppliers across the chain will have the breathing space to deliver genuine quality and innovation. Then everyone really can win.

But how? Should MBIE step in and show some leadership? Could the Government role model what ‘good’ procurement looks like? How can we use our powerful industry voices like the PCNZ to speak up on our behalf? Could the industry band together as one, get honest and open, and look at how to effectively apply procurement models they use elsewhere in the world in NZ? We need to do something …