Report of the Building and Construction Sector Productivity Taskforce – Executive Summary
The Building and Construction Sector Productivity Taskforce was established in 2008 to develop practical proposals on how to improve sector productivity and skill levels. The Taskforce was made up of industry and central government leaders.
The performance of New Zealand’s building and construction sector – comprising residential building,
non-residential building and civil construction – matters to the health of the economy, and to the social fabric of New Zealand.
The sector contributes 5 percent of New Zealand’s Gross Domestic Product (GDP). Every dollar spent in the sector has a multiplier effect between 2.1 and 2.8 through the rest of the economy. A report produced by BERL in 2003 highlighted that a 10 percent improvement in productivity in the construction industry will improve GDP by 1 percent1. The sector builds the critical infrastructure that underpins New Zealand’s economic growth. It builds the physical infrastructure for New Zealand’s health, education,
housing and social services sector.
The performance of the sector needs to improve. Over the past ten years labour productivity in the sector has trended downwards, whereas for the rest of the economy it has improved. There are a number of underlying drivers for the sector’s productivity performance, such as the level of innovation, or the impact of regulation on the sector. The impact of these factors on sector performance needs further examination.
Taskforce recommendation
The industry and the Department of Building and Housing work together to develop a fuller statistical analysis of the performance of the sector and a three year work programme to address other factors influencing the sector’s productivity performance.
However, a key driver is the skill and expertise levels amongst the sector’s workforce, including management skill and capability. The way that work is commissioned and procured also has a major impact on productivity levels – because this determines the way buildings are built, how skills are used in the process and how the industry shapes itself to respond to demand.
The Productivity Taskforce has looked at skills and procurement issues as a starting point for improving
the productivity of the sector. It has developed strategic recommendations for improving performance, summarised below. The Taskforce also recognises that, while the Government can better support the sector – for example, through the way it manages its own procurement and engagement with the sector, and by communicating why procurement affects value for money – the construction sector itself needs to take greater ownership and leadership of the skills and procurement issues.
An overview of the Taskforce’s key recommendations is included in this Executive Summary. More detailed analysis and recommendations are provided in the full Taskforce report.
Creating improved sector performance and value-for-money through better procurement
The various parts of the building and construction sector are substantially different in their procurement, risk management, and delivery models.
The non-residential building sector is, in the current climate, increasingly dependent on government and local government demand, which:
- is not communicated to constructors or the supply
chain on a long-term basis
- often focuses on the lowest construction price,
rather than value for money over the whole of
a building’s life
- often uses individualised, bespoke designs for
reasonably standard buildings such as schools,
prisons, and hospitals.
Parts of the non-residential civil sector have embraced international good procurement practice. Within the Government sector, the New Zealand Transport Agency (NZTA) is leading the way.
How work is procured has a fundamental impact on productivity, and skill and training levels. Changing
procurement practices will be vital in improving the productivity and performance of the sector.
The Taskforce proposes that the good practice procurement models used in parts of the civil construction sector be applied to the non-residential building sector. The Government can play a leadership role which reflects its importance in civil and non-residential construction. Good practice examples, such as NZTA’s practices, could be applied to major construction procurement across the
rest of the state sector. A dedicated strategy to improve the capacity and capability of procurers in the state sector is also needed.
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Taskforce recommendations
The Government, through its forthcoming National Infrastructure Plan, provides a rolling 10 year forward capital investment plan, with more detail for the first three to five years. The Plan would:
- include information on the Government’s planned
construction investments, to help the sector better
plan its skill and capital equipment needs
- as far as practical, smooth construction demand
across the business cycle, to minimise the economic
and social costs of the sector continually gearing
up or down.
The Government forms, with industry and local government, a Government Construction Client Forum
to develop and apply best practice procurement models to state sector construction projects, as well as improve the state sector’s capacity and capability to deliver them.
Through the Government Construction Client Forum, the Government:
- reviews its procurement policy for non-residential construction, building on the approaches used
by NZTA
- introduces skill and training requirements for Government procurement contracts, for contractors and sub-contractors. The skill and training requirements should be for all levels, from trainee through to management levels
- changes its emphasis from minimising the build cost of a construction project, to value over the whole-of-life of the project.
The Government, where practicable, standardises building components and systems in its own sectors such as health, education and corrections.
The residential building sector, even at the peak of the cycle, operates in a completely different manner to the non-residential commercial sector. It has different drivers, procurement methods and skill requirements.
Taskforce recommendation
The industry works with the Government to facilitate an industry forum to improve residential procurement.
Key elements of a medium to long term skills strategy for the sector
The overarching objective is to ensure the sector has the skills and expertise to develop the economic and social infrastructure the country needs. This means being able to recruit and retain highly skilled employees to the sector by providing a rewarding career with multiple career paths at all levels, from trade/technical to management/ professional. A sector with these opportunities will attract talented employees, who then have the incentive to invest in skills and career development.
Achieving this requires the following:
- talented employees are attracted to the sector as a sector with fulfilling and rewarding careers, with known career pathways into a profession or into management, and with training opportunities to support this
- the entry level training system meets the needs of employees and firms
- there are opportunities and incentives for upskilling and continuous professional development in the sector for those who want to develop trade, technical, professional or management skills
- the sector provides better job security and a career, to retain the skills it will need in the future.
This is increasingly difficult in the current economic climate. The residential housing sector is currently in an acute downturn. The Taskforce believes that the Government is the only body able to provide short-term stimulus, to ensure the sector retains the capacity and capability to build new houses when the upswing materialises. Failure to do this risks an acute housing shortage and increased housing affordability problems within the next two to three years.
Taskforce recommendations
The Government develops, as a matter of urgency, further fiscal investment plans for the sector to keep skilled employees and to meet expected future residential housing needs.
The industry establishes unified strategies to develop, and promote to potential talented employees, the
career paths and opportunities to progress to all levels within the sector.
The industry develops unified strategies to provide information on the training opportunities available within the industry to meet employees’ career aspirations.
The industry promotes the benefits of a modern construction industry to attract and retain talent under a “Built Infrastructure Industry” brand.
The industry engages with the appropriate Government bodies to ensure the delivery of entry level training meets industry needs in such matters as meeting projected demand for skills and expertise,
the number and range of qualifications on offer, the funding mechanisms for entry level training, and the
consistency and standard of assessment.
Industry and Government work together to underpin continuous professional development within the sector using existing occupational licensing and registration schemes as key levers to do so, including the Licensed Building Practitioner Scheme.
Industry leadership of a medium term skills strategy for the sector
The construction industry must take responsibility for improving productivity and skill issues in the sector. Industry has the best understanding of what the issues are. Industry has the best appreciation of how to improve the performance of the sector. Industry has the most at stake – and the most to gain – in delivering better performance and productivity.
Presently, the New Zealand construction industry does not have a single strategic point of reference that could address skills and procurement issues on behalf of the sector. The sector lacks a single voice on these and other issues of common interest across the sector. Rather, the sector has nearly 40 industry and business associations to look after the business (and sometimes technical) interests of their members. While these bodies have an important role to play in representing the interests of their respective memberships, they cannot represent the collective interests of the sector as a whole.
Developing a small, high level, focussed and strategic sector leadership body is an important enabler to delivering a sector-led sector skills strategy and giving effect to the recommendations in this report.
The Taskforce recommends that the strategic leadership body would focus on skills and procurement issues in the first instance. However, there are a number of other industry-wide issues facing the sector, on which the sector should have a coordinated voice. The strategic leadership body can pick up these issues in the future as appropriate.
Taskforce recommendations
The industry forms a small, high level, focussed strategic industry leadership body to represent the Built Infrastructure Industry of New Zealand. The leadership body would provide a whole-of-sector leadership role on skills and procurement issues.
As part of its leadership role, the leadership body would also develop a coherent single voice for the sector on other issues of common strategic interest. The full report of the Building and Construction Sector Productivity Taskforce provides more details on the Taskforce’s key recommendations outlined above. The report is available from www.dbh.govt.nz/sector-productivity-taskforce.