Unlocking better construction outcomes

Leadership Group launched to focus on critical issues in the sector

Leaders from New Zealand’s prominent construction companies have come together to form the Vertical Construction Leadership Group (VCLG).

The group has been established with the aim of providing a coordinated focus on crucial issues impacting productivity and the construction sector’s ability to deliver critical infrastructure, including our schools, hospitals, and workplaces.

Vertical Construction Leadership Group lead and Master Builders CEO, David Kelly, says the group was founded to achieve a united voice for the vertical construction sector. “Our aim is to take action to deliver a better performing, stronger, and more sustainable sector that meets the current and future needs of New Zealand.”

The Group, chaired by leader in commercial construction, Peter Neven, has prioritised six key focus areas across the supply chain, labour market, sector sustainability, procurement, contracting, and addressing risk allocation.

A recent survey of leaders within the VCLG illustrated the scale of the issues facing the sector. The results revealed that while aligned with the issues facing residential housing, the challenges faced in vertical construction can be far more complex, particularly given the growing complexities of projects, the magnitude of cost escalation and delays, procurement, and sector productivity.

While highlighting the full scale and complexity of the sector, the survey showed larger projects made up the biggest proportion, with 42 percent of commercial builders managing projects costing over $100 million, over at least a 24-month period.

Most of these projects require complex teams, including more than 30 subtrades.

More than three quarter of respondents are managing more than 10 projects at any one time, adding to the complexity facing the sector.

David notes the significance this project scale has on the industry, saying, “The risk involved in delivering a project like this is already significant – but when we add to it the current skills and product shortages – the complexity becomes acute.

“As a group we intend to establish an environment where we work more effectively with government at the outset of projects, so that the procurement process allows higher quality assessments of risk to produce better outcomes for taxpayers.”

A key focus for the VCLG is on the government procurement system.

Progress has already been made here with the Construction Sector Accord, but the current environment is still putting pressure on productivity at the outset.

While some (35 percent) have reported that procurement practices have been moderately better over the last 12 months, 57 percent claimed it has been moderately worse or there has been no change.

Similar results were reported for the impact of the risk and liability provision changes in contracts. The paperwork involved continues to increase with procurement processes currently on average consuming 26 percent of the VCLG’s workforce in administration time.

“Procurement for this sector is very specialised and requires expertise which is currently hard to find across local and central Government, and across the private sector. An added challenge for many Government agencies is that construction is not their core area of focus, and nor should it be.

“The VCLG is committed to working across the sector and with Government to find ways we can grow the talent pool in this critical area.

“We know how important this stage is to the overall project – it sets the success parameters and tone of the process ahead,” David says.

Cost escalation is also an increasing concern impacting the sector’s ability to deliver. One hundred percent of those surveyed are experiencing cost increases for both labour and products.

“While this is not a new issue for the sector, the chronic skills shortage continues and with it does the cost of labour.

“While apprentice numbers are up, it is the more experienced workers that are currently lacking and companies are finding it more difficult to bring in skills from overseas. As a result, professional management costs continue to rise.”

The VCLG is looking forward to working collaboratively with The Construction Sector Accord, The Infrastructure Commission, The Property Council, The Institute of Architects, and the Association of Consulting Engineers to take on the very real issues facing the sector.

“As a sector we have recognised that we cannot wait for others to find solutions.

“Stronger leadership has been identified as a necessary condition to meet sector and Government’s construction goals and the group has come together as a result of this.

“We want to make it easier for all parts of the sector to work together – with better access and a united voice.”

About the VCLG

The Vertical Construction Leadership Group (VCLG) consists of 72 leaders from New Zealand’s leading construction companies to give greater focus to the issues facing the sector.

A recent survey reveals the complex and varied issues facing the vertical construction sector across procurement, supply chain, labour market, and productivity:

• 100 percent of those surveyed are experiencing cost increases for both labour and products

• 53 percent of commercial builders say it is more difficult to get staff than what it was 12 months ago

• Nearly all commercial builders are seeing on-site delays, with 37% experiencing delays of over 6 weeks

• Nearly half of respondents reported procurement has become more complicated in the last 12 months, with on average 26 percent of a company’s workforce being involved in administration and procurement.