Building-trade warm words solve nothing

Five Cabinet ministers, no less, gave up some time on Sunday to meet leaders of the construction industry on a South Auckland building site and announced an “accord” on the industry’s problems. But it is not at all clear what the accord will do.

The Prime Minister said, “The wellbeing of New Zealanders is intrinsically linked to safe, durable and affordable homes, buildings and infrastructure. To meet the future needs of New Zealand, both Government and industry recognise that we need to work differently.”

Fletcher Construction chief executive Peter Reidy, formerly head of KiwiRail, said, “The accord recognises that the way the construction industry, its clients and the Government have behaved in the past has created systemic problems . . . It commits those working in, and with, the industry to start treating each other differently, so we can replace the current adversarial culture with one based on respect, trust and shared responsibility.”

These sentiments are a response to several recent construction company collapses and heavy losses made by the likes of Fletcher Building on major projects such as Auckland’s international convention centre. The reason for these difficulties is not hard to understand. The firms are competing hard for contracts and putting in bids with little margin for escalating costs. And costs have risen, especially in Auckland, because the city is having a construction boom and, as every householder knows, a tradesman or woman is hard to get.

At heart, the problem is skills shortages. Building costs are exceeding estimates because subcontractors are in position to demand higher rates. They will be doing very well — until a contractor collapses owing them money. All sides are taking normal business risks and it is not clear what the Government can, or should, do about this.

Certainly it should be doing what it can to boost trades apprenticeships in the construction sector but the minister responsible for industry training, Chris Hipkins, was not one of the five at Manurewa on Sunday. Hipkins has announced an overhaul of training that would give tertiary institutes control of on-the-job training programmes. Industry organisations are protesting loudly but they must bear some blame for today’s shortages.

Until a practical solution to that problem is proposed, it is hard to get excited about announcements that “we need to work differently” and a resolve to “replace the current adversarial culture with one based on respect, trust and shared responsibility”. Rather, there is reason for concern that those statements could imply construction companies will be relieved of some of their bidding risk and will have less need to estimate projects accurately and control costs as they proceed.

That would not be healthy for building development of any kind, including housing, and it would reduce the incentive for construction companies to do what they could to improve the supply of skilled subcontractors. An accord of warm words about wellbeing, respect, trust and shared responsibility solves nothing and sounds ominous.

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