Challenges ahead for the Construction Sector Transformation Plan

29 January 2020

​​​​​This week, the Construction Sector Accord Steering Group launched its Transformation Plan after extensive consultation with industry and government. The Plan aims to give practical effect to the principles of the Construction Sector Accord, which were released in April 2019.

The Plan is an important step towards realising the Accord's primary objective of transforming the New Zealand construction industry into a high performance sector, commensurate with its status as a key contributor to the domestic economy.

Bell Gully reviewed the Accord as part of our publication, 'A critical review of risk in the New Zealand construction industry'. We concluded that the effectiveness of the Accord in reforming the construction industry would turn on the practical approach to implementation of the Accord's four broad guiding principles: build trusting relationships, be bold, value our people and act with collective responsibility. Given the ambit of the Accord and its focus on cultural change, we noted that “whether or not the Accord achieves its goals will be dependent on the Accord receiving maximum industry buy-in." Absent consensus, the Accord and the Plan run the risk of being regarded simply as a lot of talk and not much action.

We consider that the Plan has the potential to shift much of the ongoing dialogue and rhetoric and to effect real cultural transformation if it is successfully implemented. It is a comprehensive, ambitious and considered strategy which, as outlined below, covers the major troubled areas in the industry. In particular, the focus on better understanding and allocation of risk has the potential to result in more effective procurement practices, more appropriate risk allocation between contractors and principals and therefore a more resilient industry as a whole, with parties that are better equipped to deal with risk outcomes. At its core, the Plan is about pulling in the same direction and we welcome that as an initiative. The industry, and the Steering Group in particular, can take heart from the fact that this is already starting to take hold in the selection of contractual models for major projects.

The Plan sets out a “Transformation Action Timeline" to be implemented over three one-year “time horizons" beginning in June 2020. There is a lot to be done in each of those periods and across the timeline period as a whole. To take the Plan forward, later this year the Steering Group will be replaced with a new Leadership Group responsible for implementing and monitoring the Plan. It is expected that, as with the Steering Group, the Leadership Group will be comprised from a cross-section of the NZ construction industry across both the private and public sectors.

The enormity of the task facing the Leadership Group cannot be underestimated – its charge is to challenge the status quo in an industry that is known for being etched in its ways. It will do this through implementing initiatives which, on the face of the Plan, are currently only at a preliminary stage of development. To succeed, the Leadership Group must have the right blend of skills, experience and industry cache, appropriate levels of funding and resourcing and adequate support from other key agencies, such as the New Zealand Infrastructure Commission – Te Waihanga. It must have continuity of political will beyond the election in September 2020. Most importantly, it must have the cooperation of the industry as a whole; and that, in and of itself, is the ultimate challenge – and may potentially be the ultimate achievement – of the Plan.

The Plan

The Plan focuses on enacting change in six areas with 21 programmes over three years:

  1. Leadership: creating a connected, collaborative construction sector with strong leadership through the Leadership Group, implementing and monitoring the Plan to create a single vision for the sector. Programmes in this area include the identification of 'Beacon Projects' which can be used to identify and share innovation and good practice across the sector.
  2. Business performance: enacting transformative programmes to create a more visible and better planned pipeline of work to support industry. This includes the continued development of the national infrastructure pipeline by the New Zealand Infrastructure Commission – Te Waihanga, with a view to the programme including non-government projects. The Leadership Group will also develop and roll-out an education programme focussed on identifying and managing commercial risks in construction.
  3. People development: fostering a qualified, competent and skilled workforce which can satisfy industry demand and keep pace with technological and policy changes. As is to be expected, the Ministry of Business, Innovation and Employment, the Tertiary Education Commission and the Ministry of Education will all lead programmes in this space, together with the Leadership Group who will lead a programme focussed on the development of a long-term workforce plan to ensure better synergy between the supply of people and the demands of the construction pipeline.
  4. Health, safety and wellbeing: making improvements to health and safety practices through cultural change and ease of compliance. Construction Health and Safety New Zealand (CHASNZ) is already taking a leading role in this space, with the result that the Plan is largely focussed on supporting CHASNZ with the implementation of existing initiatives.
  5. Regulatory environment: improving the sector's regulatory system to enhance its protective ability while not stifling innovation and delivery. The review of the existing model for building consenting is already underway and the Leadership Group will work with MBIE and local government in facilitating this. The Leadership Group will also act as a unified point of response to the government's Building System Legislative Reform programme.
  6. Procurement and risk: understanding risk and risk allocation, to ensure resilient industry participants and fair procurement practices and promoting procurement skills in order to improve transparency within the sector and reduce disputes. The programmes in this space are what many would have expected, with a focus on improving procurement practices, transparency of risk allocation and contractual terms and providing better protection to subcontractors. The common theme is better education and understanding across industry.

If you would like to discuss any of the matters raised in this article please get in touch with the contacts listed or your usual Bell Gully adviser.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.