The construction industry faces big hurdles to lift its game

Friday, 26 October 2018

The 57-level Pacifica apartment and hotel tower in central Auckland is one of the city's largest construction projects.

The fragmentation of the New Zealand construction industry and the shortage of skills across the board from builders to designers to engineers are key challenges with no short term solutions.

They were critical issues for discussion at The Great Construction Debate organised by the Property Council and held in Auckland recently.

Attended by 250 industry members, the debate aimed to air the challenges, particularly in Auckland where there is a huge pipeline of construction work in the next few years.

The intensity of debate follows the collapse of large construction company Ebert Construction owing subcontractors $33.84 million.

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One of the participants in the panel debate Chris Haines from quantity surveyors Rider Levett Bucknall said fragmentation of the industry made up of many small operators lead to inefficiencies and high costs.

The public perception was that projects were carried out by big construction companies like Fletchers Construction and Hawkins with lots of their tradesmen and they were investing in apprenticeships.

The $1 billion Commercial Bay building project near the Auckland waterfront is about a year from completion.

'It's not the reality. The reality is something almost completely the opposite.'

Big companies like Fletchers and Hawkins managed the projects where there could be 45 sub trades who had to co-ordinated like a well-oiled machine.

The meeting heard that the skills shortage was being solved on building sites by hiring lots of subcontractors who might be hiring other subcontractors and crews of builders, individual builders and teams of overseas workers.

These were short term solutions plugging a gap.

With the fragmentation of the industry 'the training and the apprenticeships are coming from the bottom up rather than from the top down,' the meeting heard.

The New Zealand International Convention Centre is more than a year away from completion.

Haines said there needed to be a catalyst to get some of the big contractors who were often overseas-owned and well-funded to invest more in the physical side of construction and apprenticeships and forge more relationships with sub-trades.

Because the industry was made up of so many small players it was difficult to get substantial training and investment. And the industry acknowledged it was hard for subcontractors to employ a large staff because their workloads were so variable.

Haines said there was discussion about clients bundling commercial projects into packages that would give big contractors more security for forward work planning and which might encourage the big tier one and tier two contractors to invest more in training.

The skills deficit was not just in the physical part of the construction industry but also in design, architecture and engineering and other disciplines, the meeting heard.

The meeting agreed there needed to be sharing of knowledge but that was not usual as knowledge was regarded as intellectual property and was what companies traded with, Haines said.

'The big question that was hard to answer was how can there be greater trust - the whole client versus contractor. And how can you improve value. Those questions were quite hard to answer.'

It did not mean less cost versus more cost, but how could better results be achieved whether that was in timeframes, quality or budgets.

'The takeouts were there does have to be trust and trust is earned and the way you earn trust is going through projects together and doing the whole lessons learned.'

Phil Eaton, managing director of project management company Greenstone Group, said a key issue for all parties was that the construction market in Auckland was already at its peak capacity.

Resources were stretched and many businesses only had time to focus on delivering projects rather than also investing in training and the business.

For developers construction costs were a major issue. Because of the way buildings were constructed with most parts of a project bespoke it was hard to get efficiencies. Off-site manufactured products were used in parts of the commercial building market but much more could be done.

'Training and innovation are less likely to be carried out as the small businesses cannot afford it or do not have the confidence in forward work to do so,' Eaton said.

People talked about the poor set up of projects at the outset due to inexperienced teams or undercapitalised projects, which lead to a lot of inefficiencies and false starts.

'Trust in the construction sector is a big issue. Everyone has had their fingers burnt and are a bit more than weary,' Eaton said.

The Property Council said it would be using the content from the debate to inform its advocacy strategy.

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