NorthChamber IA5 Construction and Infrastructure sector event
Date:- Wed 24th June 2020
Venue:- Mitre 10 MEGA, Whangarei
Overview of Speaker presentations.
Facilitator Sue Walters, current Vice President and Admin Manager Northland Scaffolding.
AIM create an understanding of construction landscape for Northland in the belief that the more we know, the more we can collaborate and plan for.
• Hon Shane Jones NZ First Minister for Regional Economic Development,
• Keith Cocking, from Fulton Hogan, and Chair, Civil Contractors NZ Northland
• Simon Weston from Whangarei District Council, General Manager Infrastructure
• Trevor Griffiths founding director Griffiths Project Management and President, NZ Institute of Building, Northland Branch
• Simon Crawford, owner Bella Homes and President, Master Builders Northland
• Herman Potgieter, director of Lumus NZ, an economic development organisation specialising in supply chain alignment,
Local and Central Government feedback
A key aspect of recovery for the construction and infrastructure sector, and the wider regional economy is the collation and submission of ‘shovel ready’ projects to submit to central government for funding.
Key points from Whangarei District Council
• WDC is making the most of Government funding schemes and applying for funding wherever possible.
• The Northland Region has secured $9.3m from the Worker Redeployment Program. $2.8m of this is in the Whangarei District. Work commences in July 2020.
• WDC has submitted $730m worth of applications to the Crown Infrastructure Partners ‘shovel ready’ program. This is in the form of ten applications covering Whangarei district revitalizing projects; airports; water supply resilience; wastewater treatment upgrades; urban shared paths; high risk rural roads safety; enhanced network improvements; Twin Coast Discovery cycleways; enhanced road maintenance and transport strategy improvements. Currently we are waiting for announcements on the successful projects.
• WDC has regular industry meetings with CCNZ to provide updates on health and safety, tendering program and upcoming projects.
• If a contractor wishes to start tendering for WDC work, please contact the infrastructure projects team and we can talk you through the tender process, and help you become WDC Health and Safety approved.
Minister Shane Jones said the value of submissions from around the country was in the region of $180 billion dollars, just over half of the value of the New Zealand economy before Covid 19 struck. He assured the room that Northland would not miss out, and that an announcement around. Indicating he was unable to say at that moment what percentage would come Northlands way, but reassuring that Tai Tokerau was definitely in line for some money. Government update as of 1 July – https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12344464
Residential Building Sector
• Residential construction is the largest part of the sector at 60% with revenue of 24 billion in 2019 with over 150,000 working in the wider residential construction. In a post COVID-19 environment, there is a substantial risk of an economic shock of a similar to prior crashes.
• Our May 2020 post-lockdown membership survey showed 67% of members were already experiencing a decline in the number of projects, 28% of members believed their region would experience a substantial loss of projects , 95% of members used the wage subsidy to help offset the cost of their employees
• If economic forecasts are correct, there could be a drop of up to 20,000 new homes built in the next year. This has many negative implications including substantial number of residential construction businesses failing, a rise in unemployment, increased migration and associated skill shortages, a drop in school leavers taking up apprenticeships and increased pressure on government social services
• The lockdown period provided opportunities for small business owners to work on their businesses, refocusing strategies and policies around productivity and managing trades without the day to day interruption of construction, putting them in good shape to deal with the changes brought on by the COVID-19 lockdown. Focus on health and safety, hygiene and site protocols have been at the top of list.
• The government has identified the construction sector as critical in the recovery from the COVID-19 pandemic. They have recently announced in the 2020 including 2 critical items to assist recovery of the residential sector – 8000 new state homes to be built in the next 4 years and 1.6 billion towards trades training.
• There has never been a better time to build. Money is at its cheapest in history to borrow.
• Master Builders is currently working with Government on a range of initiatives to potentially including cash grants, streamlining consents, tidying the LBP scheme and a temporary raise in house price caps
• Mental health is a huge issue withing the industry and effects of lockdown have had further negative impacts. Fortunately, there is good access to a number of fantastic resources including a pocket guide from Site Safe, the ‘Mates in Construction’ initiative and Lifeline.
• Now more than ever we need to look out for each other, we will get through these crazy/unusual times and come out stronger and more resilient than ever.
Civil Construction Sector
Pre-Covid the civil contracting industry outlook was the most optimistic we have seen in Northland, ever! That is a big statement, but on the back of residential & commercial growth, forward work programs and central government commitment through PGF and NZ Upgrade Programs our members were very optimistic
• The immediate impacts of COVID-19 on Northlands Civil Construction sector are becoming significant. The winter months are traditionally tougher for some members, add to this a disrupted end to the season with the nationwide lockdown across March & April and the sector ground to a halt.
• There exists a growing gap between COVID-19 deferred and cancelled work, and the “Shovel Ready” construction stimulus packages, creating extreme uncertainty .CCNZ estimates that up to 10% of the infrastructure construction workforce (5000 people) could be made redundant over the next 3 months if action is not immediate.
• Looking ahead, professionals across New Zealand are reporting they expect construction costs to rise faster than tenders over the year, and we’ve already seen price increases on products which provides a grim outlook for profit margins. However the outlook into the medium term & 2021 looks promising, so it really does look like a steep 6-month challenge that we need to negotiate together.
• Residential and Commercial markets will not bounce back in the next 6 months, so our industry needs continued government support. Infrastructure investment via initiatives such as the PGF and the NZ Upgrade Program will play a pivotal role in Northland’s post-pandemic economic recovery.
• These include $ 200 PGF Funding for Kiwi Rail of over $200m, commencement of Waipapa & Loop Road Capital Projects, $50m for Whangarei Boys High construction, plus Northland has been the recipient of two of the first NZ Upgrade Program projects for transport infrastructure (Puketona and Kawakawa Roundabouts). $30m from PGF to investigate potential water storage sites in the regions and $70m for additional water storage
• I have heard from a reliable source that the 4-lane highway from Whangarei to Marsden has been committed. Please get these Shovel Ready Projects out. Our contractors are ready, and waiting, we need the work now to keep the industry sustainable.
General Sector Feedback.
• Pre Covid – things were going well, we were happy, busy, confident about the sector all sectors were firing domestic, commercial, horizontal, vertical etc.
• Once Covid hit, things did not feel so great, lots of dread, fear, cold sweats, and very busy with phone calls and planning, but it was key not to panic.
• Good news is the pipeline is filling up with work from numerous sectors – rail, roading, education, vertical, community and Maoridom.
• Of concern initially was pipeline capacity as pre Covid sub- contractors and builders were looking south for work. Post Covid, more are coming home and looking for local work.
• Currently we have good builder capacity in Northland and reasonable sub- contractor and suppliers availability.
Value of the pipeline
• Education – Approx $100million in New Builds, $10million in SIPS- School Improvement Programme. And $50million+/- 5-year agreement projects.
• Commercial Sector – we do not have a dollar value yet – but there are lots of enquiries coming through from new build, refurbs, Marae and Aged care, so that looks positive.
• Shovel Ready – 2000 projects submitted – we know that 450 have been accepted to review,
• How we are doing? (Update Government made announcement July 1st with no real specifics around funding approved other than $150 million regionally committed to Te Tai Tokerau.)
• Businesses have taken a hit, Griffiths Project Management took a 40% revenue hit. (We have bounced back ok.) Lots of lessons learned including how to ZOOM. We also learned to talk more, ask the questions of each other, ‘Are you Okay? Is there anything you need.” The work is out there, we need to keep talking and supporting each other to get through,
Collaboration as a way forward.
A bigger slice of the pie: ‘Maximising the participation of local companies in infrastructure programmes’ – Herman Potgieter, Lumus NZ
The primary aim of the Lumus programme is to maximise the economic impact that we can gain from infrastructure investment. How can we maximise the slice of the cake that we as local companies can get from infrastructure projects? As Lumus, we mainly play an initial coordination role and provide the underlying frameworks and systems to make this happen
Based on our experience internationally and especially the pilot operations the past three or four years in New Zealand with organisations like Fulton Hogan and a number of other organisations, here are some of the key lessons that we have learned.
There is a major international shift in local economic development where competitiveness is increasingly shifting away from companies competing individually, towards the ability of organisations to operate much more collaboratively. This means that we need to start to look at how we compete as an integrated supply chain from a council level down to 3rd and 4th-tier contractors. It spans various types of organisations, where the first-tier companies tend to be construction firms, then transport and engineering organisations, then professional services firms etc.
The Lumus programme is a highly collaborative initiative where we need to look and develop the underlying capability to operate as an integrated supply chain, starting with the council and all the way to third and fourth-tier contractors The real beauty of the programme is that we do not only collaborate on a supply chain basis, but also to rope in a whole network of local development support organisations that can help contractors and suppliers improve their performance. For instance, the Chamber of Commerce has a network of business mentors, plus there are local consulting firms and training organisations like NorthTec. It really means that we can drive the change process to gain a bigger slice of infrastructure projects, AND on a much larger scale across many organisations.
Internationally, as well as our experience from the pilot operations in New Zealand, we typically look at an output or productivity improvement in excess of 20%. It means more profit and can therefore pay better salaries as well as better shareholder dividends
We are currently in discussions with some of the key players including the council to see whether it makes sense to pilot this locally, meaning that we look at deployment across a small number of organisations in the supply chain. There is a very good chance that these training programs would also be co-sponsored by government incentive schemes.