Accord tackles hard-nosed practices
If there was ever a sign that the Government is returning to business as usual after the most demanding of months since the mosque attacks, it was the phalanx of senior ministers in hard-hats on a building site in Auckland last Sunday.
Prime Minister Jacinda Ardern was on hand to press home the significance of a new Construction Sector Accord between the Government and construction industry players.
This is the latest in the sprawling web of efforts to fix systemic construction industry weaknesses that mean building firms are apparently more likely to go bust during the current boom than if the sector was in the doldrums.
The Government commits to ‘‘better procurement practices and improved pipeline management’’, along with improving building regulation and consenting processes.
Building and Construction Minister Jenny Salesa delivered on the latter on Tuesday, with feedback sought on what are claimed to be the most comprehensive reforms to the Building Act since it passed into law in 2004.
But the issue of excessively hard-nosed procurement practices is cultural and ingrained, not just in the public sector procurement chain, but throughout the construction sector.
In dealing with this, the accord reads very much like a commitment to be better behaved. Can that possibly be enough?
The need for more mutually enlightened commercial behaviour in the construction sector is clearly needed but the commercial incentives to commit to work on sharper terms than a competitor are not easily erased.
A combination of perennially squeezed margins, skills shortages, rising input prices and a relatively uncompetitive market for building materials has created a low-trust commercial environment in which, too often, everyone is trying to chisel everyone else on price while taking on as little project risk as possible.
Some will argue that those dynamics are the essence of all commercial negotiations. However, it is a matter of degree.
The best negotiations bind parties together in a collaborative partnership with all the give-andtake that implies. These tend to spend more time on how the project will be achieved in practice than in wondering how it might go wrong in theory.
Unfortunately, this sort of negotiation tends to be too rare.
Many negotiations leave all parties looking over their shoulders, ready to blame and seek retribution for any failure, little recognising that creating a toxic, legally contested environment before even turning the first sod of earth is itself a major source of project risk.
As one of the largest procurers of big construction projects, the Government has the ability to lead this change. But it will require commissioning officials, who have been rewarded for making an art form of driving ruinously hard bargains with private suppliers, to approach their task differently.
For its part, the construction industry commits in the accord to: enhanced industry leadership, collaboration and organisation; better business performance; and improved culture and perception.
Both the Government and industry agree to grow workforce capability, do a better job of managing and sharing project risk, improve health and safety performance, and to build more houses with better durability.
The key to the accord’s success may yet be in those few words about better industry leadership and collaboration.
Leading the accord process for the sector is Peter Reidy, who stepped away from the success story he’d created at KiwiRail to take over the troubled construction arm of Fletcher Building. A proponent of the highperformance, high-engagement style of management that has helped workforces and management to pursue business goals with more common purpose, Reidy appears to be bringing some of the same concepts to the accord.
The more the construction industry pushes back against the contractual terms that have made big projects into cauldrons of lossmaking risk, the less such contracts will be written – at least until the first big player breaks ranks.