By Jeremy Sole
CEO, NZ Contractors' Federation
As I write this I’m into my second month in the role of CEO of the New Zealand Contractors’ Federation and the lie of the land is starting to become much clearer.
The industry has certainly been encouraged by the knowledge that there are a number of significant infrastructure projects either under way, or coming up; many as a result of the Government’s acceleration of projects as part of its economic stimulus measures.
However, in many cases it is the larger players that are positioning to pick up these contracts and, despite the best efforts to spread the work made available throughout the country and in different sized parcels, there is still a hiatus for many of the small to medium-sized contracting businesses. As a result, there are a number of different conversations going around regarding the current and forward workloads of these SME businesses.
There are certainly geographic fluctuations. While a significant number report they are currently working at capacity, there are many others who are struggling to get enough work to keep their heads above water.
We are reliably informed that many of the larger property developers have earmarked their next projects and are waiting for the optimal balance between property prices and interest rates as a trigger to press the go button on their developments.
Hopefully, as some commentators have been predicting, they will find this nexus point over the next three or four months. Certainly evidence points to the fact that New Zealand still has a property shortage and, when the upswing comes, demand is likely to accelerate rapidly.
Commercial development also appears to be holding up reasonably well with a number of major projects in the offing.
However, local council work is an area which appears to have slowed considerably. Some councils are progressing with their works programmes but others are pulling back due to blowouts in other expenditure areas such as increased operating costs arising from recent development of facilities.
While the desire to keep rate rises to a minimum is understandable, continuing to invest in works programmes provides vital support for the local economy and it is to be hoped councils take this into account when planning for the coming year.
The Government’s decision to update the Government Policy Statement (GPS) on Transport, increasing upper ranges on proposed spending, has sparked some controversy.
This move reflects the Government’s commitment to invest in transport infrastructure to achieve economic growth. However, while the latest update is positive for the industry, it seems likely this will be subject to the availability of funding.
The lowering of the bottom end of the predicted spend ranges in some areas probably reflects this uncertainty although another reason could be that it is a pragmatic response to many councils not committing their own funds to transport related projects and therefore not drawing down the NZTA portion and reducing the overall national spend.
To ensure NZ Inc gets maximum value from allocated transport funding, we need an annual deadline date for applications to the local roading fund and also an expiry date if the central government share is not drawn down for approved projects.
Together these two control mechanisms would go a long way towards getting more of the funds working harder and faster in the areas targeted – and promote efficiencies from reallocation of the funds to get other projects underway if they are not drawn down.
With the announcement of the Government’s preferred governance structure for the Auckland region we are seeing some swift action toward resolving the growth inhibiting multi-council, multi-agenda structure.
Standardisation of rules, philosophies and processes should bring an operating environment more conducive to ensuring that local and region wide infrastructure initiatives get planned, integrated, gain consent and are built more economically and efficiently and within reasonable timeframes.
The potential risk for civil contractors here is in the transition period. A big question mark still hangs over which currently anticipated projects will get the green light, what councils will be willing to commit to in the period leading into the governance changes, and how long it will take the new Auckland Council to decide a new works programme, allocate priorities and get consents.
The Government has set aside $13 million to set up an establishment board and it is to be hoped that the process of change can proceed as smoothly as possible with the various bodies involved co-operating for the benefit of both ratepayers and the regional economy.
I would also like to take this opportunity to pay tribute to Derek Wigzell, the Federation’s Auckland Branch Secretary, who passed away in April.
Derek, with the support of his wife Jean, provided outstanding service in the role for 10 years and was made a National Life Member, the Federation’s highest honour, at our last annual conference.
His long time contributions to the industry will be greatly missed, along with his quick wit and sense of humour that regularly extended to the pages of this magazine.
Contractor Vol.33 No.4 May 2009
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