The New Zealand Institute of Building has welcomed the announcement of the second edition of the Government Construction Procurement Guidelines released earlier today by the Minister for Building and Construction, Hon Jenny Salesa, and the Minister for Economic Development, Hon Phil Twyford.
The NZIOB says the new Construction Procurement Guidelines mark a very positive shift in the way government agencies evaluate design consultants and contractors, who are bidding for government building work.
Malcolm Fleming, NZIOB Chief Executive, says “We appear to have moved away from the ‘lowest price is best’ model that has become an embedded practice, one which has led to poor outcomes for the construction sector and the built environment alike.”
For some time, the NZIOB has been drawing attention to the strong link between the current low margin/high-risk environment, and the sector’s lamentable low productivity rates. In the NZIOB’s view, the twin issues of poor productivity and low profitability feed one another i.e., companies that have poor productivity will naturally struggle to be profitable; while those who are not profitable, will find it difficult to invest in innovative processes and technologies that will raise productivity.
“To break the cycle, we need to shift our procurement practices to those that: promote innovation adoption, encourage the consideration of Early Contractor Involvement, be transparent and fair about risk transfer with the construction supply chain, and encourage procurers to evaluate construction projects through both capital expenditure and operating expenditure lenses i.e. adopt ‘whole of life’ evaluation models. The new Government Construction Procurement Guidelines do this, reflecting the shift in approach that the construction sector has been asking for.
“That the bulk of government agencies are either: mandated to use, expected to use, or encouraged to use the new Government Procurement Guidelines, sends a strong message from government that they have taken up the construction sector’s challenge: that government undertakes quality engagement with the sector, and resets its procurement practices to establish itself as a procurer of choice.
“As evidenced by the high-profile main contractor failures and difficulties of the past few years, the construction sector has been found wanting in its ability to deal with the emergence of risk transfer and unfair contractual practices such as ‘risk by stealth’, a great deal of which has been evident in government procurement contacts. A positive outcome has been the establishment of the Construction Sector Accord, the central premise of which is to improve the government - construction sector relationship.
“The development of a more enlightened, transparent, and fair approach to construction procurement is an excellent first step and one that is welcomed by the broader building industry,” says Malcolm Fleming.