Guidelines signal new hope for construction industry

30 September 2019

The contracting relationship between government and the construction industry is set to be redefined, with new construction-specific guidelines created to accompany new government procurement rules coming into force tomorrow.

Civil Contractors New Zealand Chief Executive Peter Silcock said if the new Construction Procurement Guidelines and the new Government Procurement Rules 4th Edition were properly implemented with agencies held accountable, it could signal a new era.

“For a long time now, the focus has been on lowest cost. Agencies will now be required to change their procurement to focus on outcomes rather than cost, placing more emphasis on fair allocation of project risk to those best-placed to manage it.”

Mr Silcock said the new Guidelines required agencies to limit or justify any use of special conditions, a move away from lengthy additions to ‘standard’ construction contracts, which sometimes added hundreds of pages of special terms, requiring complex legal interpretation.

“Clients think they are managing risk by deviating from standard contracts. In some cases, they create it. Moving away from this should bring the costs down as clients, contractors and lawyers won’t have to spend time poring over hundreds of pages of special conditions.”

He said the new Guidelines aligned with principles of the Construction Sector Accord – a commitment between industry and Government to improve productivity and address challenges faced by the construction sector by building capability and resilience.

Because of this, interpretation was also important. The Guidelines provide agencies with practical interpretation for different business models, from strategy and market engagement to risk management and improved skills and training to ensure a skilled future workforce.

Mr Silcock said while the threshold requiring a specific skills and training development plan was too high at $50 million dollars, its inclusion placed greater emphasis on skills and could be adopted in smaller projects too. Factors such as involving contractors early in project planning to ensure a sound business case would also make a positive difference.

He said shifting the focus from cost-cutting would provide more value for money in the long run. For instance, greater emphasis on skills development planning, would improve project quality, potentially also reducing cost by making it easier to find skilled people.

Mr Silcock said many of the new rules were optional for local government, but he would like to see increasing uptake amongst councils. An increasing focus on partnership and a sustainable construction industry were in the interests of all parties involved and were likely to lead to better results for projects, companies and communities.

Some councils were already looking to implement the rules in their procurement policies, such as Auckland Council’s Healthy Waters department, which had used social procurement strategy to underpin its procurement approach and Sustainability Toolkit, he said.

ABOUT CIVIL CONTRACTORS NEW ZEALAND

Civil Contractors New Zealand is an incorporated society that represents the interests and aspirations of more than 600 organisations – including large, medium-sized and small businesses in civil engineering, construction and general contracting. It also has associate members who provide valuable products, support and services to contractor members.

• The Construction Procurement Guidelines are available here:

https://www.procurement.govt.nz/procurement/specialised-procurement/construction-procurement/

• The Construction Procurement Guidelines are one of many initiatives currently underway to address some of the major challenges facing the construction sector. These include: the Construction Sector Accord, a commitment between government and industry to transform the sector by driving the right behaviours through a sector-wide mandate; and the Construction Skills Action Plan, which specifically addresses issues around skills and workforce, and aims to deliver the right people, at the right time, with the right skills, to meet New Zealand’s current and future construction needs.

• The construction sector is New Zealand’s fourth largest employer, providing work for nearly 250,000 people. However, the industry is characterised by multiple long term issues such as skills and labour shortages, poor risk management, unclear regulations and pipeline and a lack of coordinated leadership, which have never previously been cohesively addressed.

• The Construction Procurement Guidelines were originally released in 2015 and have been updated. The update includes providing guidance related to the broader outcomes work programme, which prioritises use of the Government’s annual procurement spend to achieve better public value for money, by targeting ways to promote better cultural, social, economic and environmental outcomes.

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