Building Value - Productivity Partnership Newsletter May 2012

FEATURE

FUTURESCAPE FLASHBACK

Our 22 March Futurescape event gave the Productivity Partnership the opportunity to talk to senior representatives of the building and construction sector in Christchurch, along with training providers, research organisations, CERA and local government.

Guest speaker, Minister of Labour Kate Wilkinson, highlighted that health and safety at work is a key element in enhancing productivity, drawing attention to the fact that, if you're not safe at work, you can't be more productive. This ties in with one of the key messages of the Partnership's Skill Strategy, which was launched at the event. The Strategy promotes improved education and training for the sector including better health and safety education, in particular, changing the "she'll be right" culture to a "safety first" culture.

Carrying forward the momentum of the launch, consultancy Third Bearing has been contracted to work with the Skills Workstream, BCITO and the many organisations who contributed to the Strategy to develop a Skills Strategy Implementation Plan.

"The launch of this Strategy is when the real work begins," says Skills Workstream Leader Ruma Karaitiana.

The Futurescape event was also the platform for the release of the Partnership's fine-tuned Research Action Plan. The Evidence Workstream is positioning itself to implement the RAP by restructuring into a steering group, responsible for strategic oversight of the Partnership's research programme, and a technical group, responsible for evaluating and progressing research proposals.

"Successful implementation of the RAP demands a combination of a lead agency, good governance and effective management," says Evidence Workstream Leader Helen Anderson.

Press coverage of the Partnership's work focused on the opportunity the Christchurch rebuild presents to test new ways of working to increase sector productivity.

Related links
See the Skills Strategy
See the Research Action Plan
View the Futurescape media release

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FEATURE

MAPPING VALUE

How do you pinpoint the steps in the construction process where you can add the greatest value? That's the question being answered by the value stream mapping project being undertaken by the Partnership's Construction Systems Workstream.

With BRANZ's assistance we have identified the seven highest value segments in New Zealand's building and construction sector. These are:

1. New homes - group builders
2. New homes - small builders
3. Central government and education
4. Private retail buildings
5. Private office buildings
6. Private industrial buildings
7. Prefabricated/modular buildings.

"This list factors in whole-of-life costs, not just construction costs, as we know that the design of buildings affects their cost of use," says Construction Systems Workstream Leader Andrew Reding. "These seven segments represent 60 percent of the forecast life cycle cost of construction in New Zealand."

To start with, the Partnership will pick one segment - new homes, small builders - and map its critical value points with the input of people involved in it. This will give us a better understanding of where we can improve the construction process and remove barriers to productivity.

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FEATURE

INAUGURAL RESEARCH ACTION WORKSHOP

The Partnership's Evidence Workstream hosted our first Research Action Workshop on 1 May at Auckland University.
Following on from the March launch of our Research Action Plan (RAP) the workshop profiled all of the leading projects currently being funded by the Partnership to put the RAP in the context of the Partnership's wider work programme for research partners and others with a direct interest in the RAP.

"By profiling these projects we were able to draw out other work relevant to the RAP that is already underway in the research community," says Evidence Workstream Leader Dr Helen Anderson.
There was excellent discussion around each of the projects, according to Evidence Workstream member Kevin Golding. "The workshop enabled researchers to leverage their connection with the various projects and the overall Productivity Partnership. We look forward to taking that learning out to others in the industry."

The Partnership plans to hold a Research Action Workshop at least every six months

Related links
See the Research Action Plan

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GUEST COMMENTARY

VALUE BUILDER – MIKE FOX

FOUNDING DIRECTOR OF PRIMESITE HOMES AND CHAIRMAN OF THE REGISTERED MASTER BUILDERS FEDERATION

As an industry participant I am pleased to be able to comment on what the Productivity Partnership means for those at the coal face. Anecdotally, they say the construction industry is slipping behind - not only against other industries in New Zealand - but with comparable countries as well.

So are we a lazy lot that need to work longer and harder on site to produce more? I think not, but we
could do things smarter. The investigatory work being carried out by the Productivity Partnership will supply some answers that, hopefully, will streamline the way buildings are designed, monitored and constructed in New Zealand.

Deserved recognition

The true size and impact that the construction industry has on the overall economy has slipped under the radar for too long and its importance is only now becoming apparent.
Deserved recognition has been helped along by the recent PWC report to the Construction Strategy Group titled "Valuing the role of Construction in the New Zealand economy". Let me share a small excerpt from the PWC report:

"The construction sector plays a large role in the New Zealand economy. It is New Zealand's fifth largest sector employing over 157,000 full-time equivalents (FTEs) or 8% of the total economy. Construction related services employ a further 42,000 FTEs. In the last 10 years, 14% of all new employment has been in the construction sector.

"The sector is characterised by small businesses, and low labour productivity. The 8% of national employment generates only 4% of national GDP, but accounts for 10% of all businesses.
"Output from the sector dominates New Zealand's investment, contributing 44% of all Gross Fixed Capital Formation. The sector plays by far the largest role in building New Zealand's infrastructure stock, which is the foundation of productivity and economic growth."

The jewel in the crown and the overriding fact from the PWC report is that every dollar invested in the construction sector generates a total of three dollars in economic activity.

It is clear that the industry is a big player but, by nature, is fragmented and misunderstood not only by those operating within it but also by those who could utilise its unique set of drivers to assist the overall growth of the economy and the built environment.

It is also an industry that is ravaged by the prevailing economic climate.

The severity of yoyo economic cycles needs to be moderated if we are to have a well-trained and sustainable workforce. The valuable work being done by the Productivity Partnership includes initiatives to help smooth these cycles.

Pan-industry approach

I am also excited about the research being undertaken by the Productivity Partnership as it is imperative that a pan-industry approach is taken to understanding and gathering evidence to lift productivity.

Matters like how the industry really works, benchmarking the industry accurately against others both here and internationally, the resources the industry needs to create "Built New Zealand", quantifying the negative impact of joint and several liability and the real costs and effects of regulation are all issues that need to be impartially researched before a real difference can be made.

The industry needs to lift its game but meaningful productivity gain is not just about getting people to work smarter and harder on site.

Significant gains could be easily made through the following:

• Better planning
• Less rework
• Forward ordering
• Use of smart technology
• Collaboration of those both on and off site
• A whole-of-life value approach to projects, rather than today's cheapest price
• Standardisation of design and construction.

Furthermore, it requires a fundamental study on what does and doesn't work in relation to design, regulation, procurement type and timing to even out demand, economy of scale, standardisation, best processes, suitable skill sets and whole-of-life value.

This study needs the collaboration of industry best practice and intelligence, backed up with the intellectual grunt and resources of the respective research organisations. No one party will have the answers.

If we really want change to be adopted then it also needs to be relative and packaged along with the tangible benefits that make a difference on site.

The results of this study may mean long-held and entrenched practices may be ditched as the industry and its service providers reinvent themselves into an efficient force to meet the demands of the modern era.

This will require strong industry leadership and a move away from fragmentation and patch protection.

For our industry to prosper I see its future representation becoming more unified and stepping away from operating inisolated silos.

Low-hanging fruit

I feel there is some low-hanging fruit identified in the Productivity Partnership's Research Action Plan and above. It would seem a shame not to be bold and get some early gains.

Two examples of this as a building practitioner are as follows:

I have noticed a corresponding drop in productivity since the implementation of the Building Act 2004 and the Weathertight Homes Resolution Services Act 2006.

Although well-meaning, they have resulted in the industry becoming so risk averse that the words "discretion, pragmatic, constructive advice and innovation" have been removed from its vocabulary. The last man standing regime is decimating our industry and placing control and significant income into the hands of lawyers and insurers. Words that have now become commonplace are: "I know it is not the best solution or the most productive or economical one for the client, but do it this way because we can't accept any liability".

I am not singling out any party, however, our regulatory control systems have developed significant processes that add little value and knock productivity for six, all in the name of risk protection.

Do you think we can turn the ship back on course?

I believe we can, but it will need some fundamental changes and actually proportioning responsibility to the degree of involvement. This will move us away from the last man standing taking the hit for everyone.

A country with a population no larger than a medium-size international city should easily be able to deliver an efficient, sustainable industry that produces excellent building solutions.

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PARTNERSHIP PEOPLE

BILL SMITH
PRODUCTIVITY PARTNERSHIP CHAIRMAN

Having worked in general management roles in the building and construction sector for more than 30 years, Bill Smith brings a valuable industry perspective to his role as Chairman of the Productivity Partnership. He served as General Manager of subsidiaries of both Fletcher Building and Carter Holt Harvey with a special interest in building products manufacture.

Bill became involved in the Productivity Partnership late in 2009 in his capacity as Chairman of the Building Industry Federation of NZ. He took up the challenge of being Founding Chairman of the Partnership because he passionately believes that fundamental change is needed if the sector is to thrive in a more open and demanding environment and ride out successive boom and bust cycles.

"I have enormous respect for what is happening in the sector," says Bill. "From what I've observed, the New Zealand building industry has extremely competent management but it is enterprise-centric. Over 80 percent of businesses are SMEs. I don't think the sector is unproductive, it's that some high-impact things need to be done by whole-of-sector, not by individual enterprises.

"Where the Productivity Partnership can make a big difference is finding ways to bring learnings and new processes to small and medium-sized businesses. Our goal of a measured 20 percent increase in productivity will only be achieved if those out in the sector see value in something and adopt it. It's a case of finding the right fit," says Bill.

"The work the Productivity Partnership has done so far shows there is enormous potential to lift sector performance. The bottom line is that it is an equal government and private sector partnership and change is needed in both the public sector and in the industry if we are to increase sector productivity. For example, initiatives like greater IT enablement that impact on many sector participants require the government and sector to take a joint leadership role."

It's satisfying to Bill that "in retirement" he can contribute to the industry in which he built his career. In addition to his work for the Partnership, he chairs the Advisory Panel to the Chief Executive of the Department of Building and Housing, serves as Executive Director of the Construction Strategy Group and is a member of the Licensed Building Practitioners Board and the Asthma Foundation Board. Two grandchildren and Rotary also keep him busy. It looks as if it will be some time before Bill can spend more time "chilling out" in his favourite spot - the Mackenzie Country.

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