By Jeremy Sole
CEO, NZ Contractors’ Federation
I recently spoke at the Transport New Zealand summit in Auckland and my presentation touched upon the contentious issue of NZS3910 conditions of contract for building and civil engineering construction.
The issue I raised was that the whole point of 3910 was that it should be easily understood by everyone – but in some areas now, with councils significantly modifying the standard, you need a lawyer and a Rubik’s Cube to figure it out.
I noticed a lot of people in the audience nodding their agreement at that point. Many came over to discuss the subject afterwards and, naturally, the conversation progressed to the overall relationship between contractors and local councils.
There is certainly widespread recognition that there is an urgent need for change and a significant improvement in these relationships, in fact it’s essential for the economic future of this country.
A healthy construction industry is essential if we are to achieve the massive infrastructure development requirements to support economic growth in the coming decades.
Modifications of 3910 is one of the problems, and contributes to the current environment which ranges from uneasy to hostile.
Risk management is another difficult area. While risk should be borne by the party best placed to manage it, that is really hard when parties modify the contract, through ignorance, to mislead or to deliberately obfuscate.
This behaviour prevents tendering parties from understanding the allocation of risk and responsibilities embedded in the project, causes market distortions and litigation and destroys what could otherwise be productive relationships.
Overall, however, the biggest problem is the increasing trend for many councils to bundle together a number of smaller contracts into one package.
As I have said many times, a healthy industry includes a mixture of contracting businesses of all sizes. But this bundling approach favours only the bigger operators, stifles growth and skill development among smaller local contractors and could, ultimately, drive them out of business.
It really doesn’t have to be like this. We only need to look at the positive trail that the New Zealand Transport Agency’s major projects team is blazing in its relationships with contractors and approach to procurement to see there is a better way.
If local authorities and other infrastructure clients, such as the power industry and rail, can take a similar approach to the NZTA major projects team, then we can ensure a healthy civil construction industry where skilled and qualified clients, consultants and contractors collaboratively produce innovation and whole of life value for money at mutually acceptable prices.
One of the major advantages of the approach NZTA’s team is taking is that it helps give contracting firms, of all sizes, long term confidence so they can invest in training their staff.
But the industry also needs to take a closer look at the type of training we are delivering.
Having skilled and focused equipment operators is a prerequisite for productivity in any industry, and particularly in civil construction. This is primarily because productivity, while it takes into account the direct cost of errors in the project, doesn’t allow for subsequent productivity losses in other sectors as a result of inexperienced or inattentive operators damaging infrastructure such as fibre optic and power cables.
Currently, most civil construction industry training is focused on getting people qualified to operate various types of plant and mitigating threats of productivity [profitability] losses, such as health and safety or working on and around utilities, and in trenches.
It is important to note, that while skilled and qualified staff are key drivers of productivity at the worksite; skill and qualifications are not the same thing. For instance, some excavator drivers may possess exceptional skills which are among the primary drivers of on-site profitability but not have any formal qualifications.
Yes, practical training will contribute directly to productivity and profitability but the industry cannot afford to ignore the less tangible but equally productive skills provided by formal training. Without formal qualifications even an exceptional operator is only good at part of the job they are required to do and may pose a supervisory burden in other areas.
A motivated and qualified workforce is another of the key legs of a profitable and productive industry. People who have had the advantage of the intensive and engaged study that goes into achieving a qualification generally perform better than those who have not had that opportunity.
They bring the depth and breadth of the knowledge their qualification has provided for them into their work – from pure technical knowledge to a broader understanding of supervision and management levels of the project and the business and what needs to be achieved. There is a real internal productivity advantage to this.
Productivity is measured as the ratio of labour input to the overall project output costs. Given that higher levels of skills and qualifications result in higher quality work, shorter delivery times and lower project delivery costs; it will, in a market economy, inevitably result in lower prices.
Contractor Vol.34 No.6 July 2010
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