Despite the high level of contracting work available in many parts of the country, as we play catch up on past under investment in infrastructure, civil contractors are facing some big challenges with low margins, uncertain forward work programmes, ongoing industry restructuring and a shortage of skilled people.
I have been on a steep learning curve since starting my role as CEO of the industry body representing civil and general contractors in July last year. It has been a great time to join the industry because our members have massive opportunities and at the same time big challenges. There are huge changes going on and it is a very dynamic and stimulating environment.
Civil Contractors New Zealand (CCNZ), was formerly the New Zealand Contractors’ Federation and Roading New Zealand until the two associations merged in September 2014.
There are great opportunities in the industry and it is our job to help our members make the most of these opportunities. CCNZ has three primary roles: we represent and advocate for the civil construction industry and our members; we provide information and advice to members and; we run programmes that support the development of the industry and our people.
By working together through Civil Contractors New Zealand contractors have a stronger voice to influence the business environment they work in, have the ability to develop resources and programmes that meet their needs and can create networks which are vital for their business success.
One of our main objectives is to ensure we have a healthy and competitive industry which provides opportunities for all sizes of contractors and an even playing field. We work at both a national and regional level with clients providing contractor input into their procurement policies and processes. Over the past few years we are seeing more bundling of contracts and this concerns us. If we go too far down that track the opportunities for small and medium sized contractors will not be there (except as subbies) and that is not a good thing. Clients need to take a longer term view. They need a healthy and competitive contracting market because it is the basis for them getting value for money and innovation.
A good example of our work around advocacy is the work we did on Voidable Transactions. Our advocacy and the support provided by contractors on this issue dates back to mid-2013 and took the issue right to the Supreme Court. We hailed the final decision on a liquidator’s powers to claw back payments made by an insolvent company to a contractor, as a victory for common sense. The Supreme Court overturned an earlier Court of Appeal ruling allowing liquidators to claim back payments made by a company up to two years before its collapse. The decision was a very important one and gives contractors the confidence to invest in new equipment, training staff and expanding their businesses to meet the growing demand.
The civil contracting industry is looking forward to a busy period of high demand over the next few years. New infrastructure developments are taking centre stage and urban growth is fuelling the need to renew and upgrade our roading, energy, communications and water assets. We have, the 30 Year National Infrastructure Plan released in August last year which identifies the need for a $110 billion investment in infrastructure over the next 10 years; NZTA’s investment planned for New Zealand’s land transport system over the next three years (a 15% increase over the last three years) and; national and local governments starting to step up to the challenges of affordable housing and the infrastructure services they will require.
Nationally the work is there, however we are also seeing the wind-down of the bulk of the civil infrastructure work required for the Canterbury rebuild and the energy and dairy sector downturns have impacted on contractors servicing those sectors.
The work programme varies a lot between regions and increasingly the success of contractors will be based on their specific areas of expertise and their ability to work in partnership with other contractors, clients, engineers and designers. These partnerships work at all sorts of levels not just through subcontracts but alliances, partnerships and joint ventures.
There are some big picture challenges looming. While we are starting to meet the need for new infrastructure development, we seem to be standing still or losing ground on the maintenance of some of our existing assets. NZTA’s investment on road maintenance has significantly reduced over the past few years and there has been plenty of talk about “sweating” the asset. Many contractors I have spoken to say they are already seeing the impacts on our roads.
The continued roll-out of NZTA’s Network Outcomes Contracts has reshuffled the deck and there has certainly been some winners and losers. Those results are having flow-on effects in terms of competition for other work, which impacts on all contractors.
The fact that there has not been any real progress in finding a way for Local Authorities to sustainably fund the massive investment required to upgrade, maintain and renew our aging Three Waters (water, waste water and storm water) Infrastructure is a very big concern. In a number of areas where the population is forecast to stall or decline and the proportion of retirees is growing, the challenges are simply getting bigger.
Another major challenge is ensuring we have enough people with the right skills to construct and maintain the $11 billion per year programme in front of us. The launch of the new Civil Trades regime by the Hon Steven Joyce and Hon Louise Upston in December is a game-changer for the civil construction industry and this will help attract more people into the industry. For the first time people working in civil construction can obtain a formal certification recognising their skill, expertise and experience. This puts our people up there with other well established trade qualifications. Seeing the first 14 Certified Civil Tradespeople receive their certificates from the Minister was a real thrill for the many people who have supported them and for CCNZ, which has worked to establish the new regime in partnership with our ITO Connexis.
We are also placing greater emphasis on recruiting more women into the industry. We need to ensure that women see construction as a viable and rewarding career opportunity. We have always had quite a few women involved in administration and business management roles but what we are seeing and encouraging now is women to take on roles out on the sites. It is changing the industry for the better and is part of the change the industry needs to make. We simply can’t afford to ignore half of the workforce and the skills that they can bring to our businesses.
Some of the ongoing work we are doing at present includes preparing submissions on behalf of the industry on proposed laws and regulations including driver licensing, worker health and the new retentions regime under the Construction Contracts Act. We are also involved with the development of central government procurement policies and local government guidance around procurement, plus are in discussions with NZTA regarding members’ concern about the new prequalification system NZTA has introduced.
Over the past 10 years we have encouraged and helped our members develop good health and safety systems. For contractors that have good systems, the new Health and Safety at Work Act will not have had too much impact, apart from stepping up staff engagement. Earlier this year CCNZ, in partnership with our Core Associate lawyers Kensington Swan, ran a national roadshow visiting 14 locations around NZ, with the primary focus being education on health and safety reforms and the Construction Contract Act Amendments.
I represent CCNZ on the Construction Safety Council and a great initiative we are presently working on is the new “ConstructSafe” competency framework and assessment tool. This is not another training programme, the framework sets the level of competency that people need to have to safely enter a construction site (whether you are a carpenter, civil contractor or a timber salesperson). The system has been developed by the whole construction industry and is supported by an online tool that quickly assesses people’s competency. “ConstructSafe” has been comprehensively tested in a variety of construction sites, large and small, horizontal and vertical. It creates a single competency standard and ensures that everyone on site has the knowledge to protect their own safety and the safety of their workmates.
We are in a position to add value to our members and the wider industry. It has certainly been a time of challenges and learning for me over the last year and I am looking forward to what will be an interesting and exciting time for our members as they continue to build new and replace old infrastructure in New Zealand.