Business

New accord seeks behaviour change in fragile construction sector

 Government and industry leaders have unveiled a new Construction Industry Accord that seeks to change the destructive commercial behaviours that have seen major firms struggle and collapse in the middle of a building boom.

From under-bidding to win contracts to government agencies forcing firms to wear disproportionate project risk, the accord seeks to "replace the current adversarial culture based on respect, trust and shared responsibility", said Peter Reidy, chief executive of Fletcher Construction and chair of the Accord Development Group.

"The Accord recognises that the way the construction industry, its clients and government have behaved in the past has created systemic problems that are having an impact on the New Zealand economy and the well-being of New Zealanders," said the former chief executive of government-owned KiwiRail in a statement for this morning's formal launch at a building site in Auckland.

The accord's intended significance was reflected in attendance at the launch by Prime Minister Jacinda Ardern, Finance Minister Grant Robertson and Building and Construction Minister Jenny Salesa and the signatures of another six senior ministers: for housing and urban development, Phil Twyford;  infrastructure, Shane Jones; economic development, David Parker; Workplace Health and Safety, Iain Lees-Galloway; education and state services, Chris Hipkins; and health David Clark.

Initial industry signatories reflect a range of heavyweight players and industry bodies, including Fletcher Building's residential unit, infrastructure and construction contractor Downer NZ, Auckland's public infrastructure utility Watercare, the Ministry of Business, Innovation and Employment, trade union E tū, the Registered Master Builders Association, Fonterra, and law firm MinterEllison.

Other industry participants will now be invited to join the accord, which Reidy says will identify "priority areas for government and industry to work on, including the way government agencies ‘buy’ construction work, the need to invest in upskilling the workforce and the need for the industry to improve its financial resilience".   

Under a previous ceo, Fletcher Construction racked up major losses on several large construction projects, including the government-backed Auckland International Convention Centre.

In the past year, two major firms - Ebert Construction and Arrow International - have failed and there has been growing focus on the extent to which common commercial practices, particularly seeking to shed risk, have been to blame for a sector that both struggles for profitability and to build scale at a time when the sector is also unable to meet strong, sustainable demand for both residential and commercial buildings.

The approach taken by the industry, its clients and government "led to systemic problems like a focus on lowest cost over quality, uncertainty about the pipeline of upcoming work, and a culture of shifting risk rather than managing it," said Reidy. "These and other problems had played out in things like construction company collapses, problems with building quality and skills shortages."

That had also "left individuals within the industry struggling to cope with the pressure, and likely contributed to the relatively high rates of suicide and injury in construction", said Reidy, who acknowledged these were "big issues in the construction industry globally".

At this stage, the accord is a statement of principle and does not have binding elements.

It was "a vehicle for us to start" focusing the industry on creating "a high-performing construction sector capable of delivering great homes, buildings, infrastructure and jobs for New Zealanders".

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