The construction sector in New Zealand is facing several challenges. As an industry, we all need to work better together to ensure projects are delivered in a secure, capable and timely way, says Jon Williams, Group Delivery Manager.
If we look at the broader commercial property market, which covers all types of development including commercial offices, government and private institutional developments, retail and multi-unit residential properties, there are some clear issues affecting our ability to deliver construction projects in a productive way.
Although we can still deliver quality developments, as highlighted at the annual Property Council awards, major contractor issues, poor or incomplete designs, inconsistent consenting processes and a client-side approach to risk transfer have all been highlighted in the media and are widely discussed within the industry. These challenges are inhibiting the construction sector from raising its productivity from an already low base.
A recent Industry Transformation Agenda workshop in Auckland aimed to identify the root cause of these challenges. Whilst the results of the workshop are still to be published, much discussion is centred around the following topics:
- Inappropriate risk transfer: This topic is raised in most industry discussions. Many risks are poorly understood by the party seeking to transfer them, and the party taking on the risk often has limited information available to enable them to identify and price the risk appropriately. Commercial and time pressures generally encourage optimistic risk pricing and if those risks come to bear, there can be significant impacts.
- Time: Some challenges could be mitigated if more time was allowed for activities such as scope definition, design coordination, pricing, commissioning and handover. We are trying to deliver a higher volume of more complex projects in less time, with less people.
- Lack of trust through the supply chain: Most procurement methods centre around adversarial contracts and a view that each party is focussed on their own, rather than shared project objectives.
- Lack of capability throughout the supply chain: From client briefing, through to project management, design, consenting, construction and handover, the skills of the industry have not kept pace with increased project complexity.
The challenges of inappropriate risk transfer and time could be solved by changing procurement processes. However, it is the lack of trust and capability that are stopping the industry making the changes it needs.
The sector needs to look at an integrated approach to delivering projects, bringing together teams that work across the development and utilise the full skills of all parties.
The following table compares current practice to an idealised process of integrated project delivery (IPD). Both current and IPD processes have been simplified.
The IPD process requires a greater level of trust:
- Trust that designers are working as efficiently as possible in the client’s interest to develop a design that meets their objectives
- Trust that the contractor is providing true pricing and is actively managing risk
- Trust that all parties will identify and allocate risk transparently and intelligently, so it can be priced and controlled with intent.
The client should “get what they pay for and pay for what they get”. If designers and contractors perform and meet their obligations, they should make reasonable BAU margins. By having secure margins, the industry can invest in upskilling staff and developing new technology. Training and use of productivity improving technology can be part of the non-financial KPI’s set for the project.