Recession survival

By Malcolm Abernethy

Executive officer

New Zealand Contractors' Federation

In these uncertain economic times may we all look forward to a busy year, albeit with major challenges in terms of managing and maintaining a viable contracting company.

We are regaled on a daily basis about our weak economy and the recession that we are weathering. Although we are nowhere as worse off as some economies around the world where news stories about businesses reducing staffing levels or taking extended holidays or shut down periods abound.

Recently, we read that Caterpillar is stopping production at its Leicestershire plant for four weeks, two weeks in February and two weeks in March, due to a large drop in orders. It is reported that staff will be retained on full pay over these shutdown periods and the company will provide training courses along with community and charitable activities. In June 2008 the firm laid off 320 temporary staff at its Building Construction Products (BCP) division at Desford.

Closer to home the Government has been considering ways in which to stimulate the economy or at least maintain it at a higher level than could be expected during the recession. I understand these discussions will include infrastructure development expenditure – both at a central and local government level. A projected infrastructure spend will, of course, reduce the impact on the civil construction industry, but the figures currently being talked about are more than $5.2 billion over five years, which is not a lot when New Zealand Transport Agency spends this sort of money on the roading network alone.

Unsettling signs

Before the end of 2008 we received reports of some contractors reducing staffing levels and struggling to find work for the work force and resources they retained. A lot of projects (small and large) are being priced but few were being awarded – it seems that many clients are fishing for low prices or simply determining the cost of doing the work.

From what I can tell, the work level reduction is not uniform across the country or in any one region or city. Some contractors remain busy with forward work while others are struggling to secure work, and large companies in some areas are actively pursuing small projects, taking work away from small companies that traditionally undertake this type of activity.

During these economic down turns the question always hangs over the industry – what is the correct approach to weathering out the storm?

I believe that retrenchment, reducing staffing levels and disposing of plant and equipment is not the way to handle things, and only results in lost ‘capability’ when the recession lifts.

This is the time to plan to position your company to take advantage of the opportunities that will come when the recession ends and, like all recessions, it will end – and hopefully sooner than later.

This is the time to strengthen those most vulnerable business areas:

• Chase up those bad debts,
• Consider specialisation of products and services,
• Improve the quality of all the work you do and perhaps add a bonus,
• Review your contract management procedures to ensure you satisfy all the requirements under the Construction Contracts Act,
• Maintain machinery resources and ensure they are ready to go,
• Train and mentor your staff to improve work outputs and quality,
• Review your management systems for health and safety, environment and quality.