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Productivity Partnership Newsletter December 2013

18th December 2013

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Building Value - Productivity Partnership newsletter March 2013

 

VALUE BUILDER – MARTIN STEPHENS

Martin Stephens

MARTIN STEPHENS IS GENERAL MANAGER AND A DIRECTOR OF CLELANDS CONSTRUCTION LTD, WHICH IS CLOSE TO CELEBRATING A CENTURY IN BUSINESS IN NEW PLYMOUTH. MARTIN HAS OVER 35 YEARS EXPERIENCE IN THE CONSTRUCTION INDUSTRY. PRIOR TO JOINING CLELANDS HE HELD SENIOR POSITIONS WITH TWO INTERNATIONAL CONSTRUCTION COMPANIES, WORKING EXTENSIVELY OFFSHORE ON LARGE CONSTRUCTION PROJECTS, AND MANAGED A NATIONAL CONTRACTING BUSINESS.

Clelands is the largest construction company in Taranaki and has played a key role in transforming the region's built environment, constructing iconic buildings such as Puke Ariki library,information centre and museum, the $17 million "two in one" New Plymouth Police Station and Remand Centre opened on 1 October – the first of its kind in the country – and the new Len Lye Museum. However, Clelands' footprint extends well beyond Taranaki – its business covers commercial, industrial and bespoke residential construction projects across New Zealand and overseas. Here Martin Stephens shares why he believes the inefficiency of the construction industry's traditional tender system is a burning issue.

One of the biggest issues for construction companies is being able to predict forward workload. Having the ability to plan ahead, invest in and allocate resources with some level of certainty leads to better productivity and quality outcomes.

The time consuming and inefficient nature of the traditional tender system in New Zealand is a huge cost iceberg for the construction market for the following reasons:

The cost of multiple companies (normally three to six tenderers) expending valuable overheads preparing tenders. This is significant duplication of effort.
The lost opportunity in not involving the builder in finding efficiencies with the design at an early stage of the project.
The current tender process does not allow proper lead time for planning, allocation of resources and investigation of more cost effective alternatives which could be proposed.
The tender process by its very nature can set in place an adversarial relationship between key parties involved in the execution of the project.
Clelands' experience is that tendered projects often come in over the client's budget at tender closing time. Normally, in this situation, a builder is selected and then the time consuming and expensive process of value engineering to modify the design and bring costs into line with the budget occurs. More often than not, this involves significant amendments to the project documentation, resulting in time delays.

We are finding that the traditional design and procurement process is often longer than the actual construction time. The time required for design and documentation is often extended, compressing the tender time and putting undue pressure on subcontracting trades. This results in inconsistent and inaccurate subcontractor pricing; or failure to submit a bid at all. This cannot be good for the project or the construction industry.

Puke In tendering their projects clients are often led to believe they are achieving the most cost effective, timely and transparent result. In our experience strong partnering arrangements between clients, consultants and construction companies at the earliest stage of projects provide a greater degree of integrity and transparency. The selection of a team entrusted with the design and construction of a negotiated project on a truly "open book" basis brings certainty to all parties. This collaborative and transparent approach means all of the pricing information – including bids from subcontractors – is available for scrutiny and verification, leading to greater efficiency. To that end, I have no doubt that much of Christchurch's commercial and industrial rebuild will be fulfilled by partnering agreements to enable such a large volume of work to deliver the best value.

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  IN THIS ISSUE  
Arrow

Value Builder
Martin Stephens, GM of Clelands Construction Ltd, calls for a better tender system

National Construction Pipeline
Major construction boom forecast

In Partnership
Roving reporter Chris Kane, reports on his German prefabricated construction tour

Auckland Procurement Forum
Find out the outcomes

NZ National BIM Survey
Masterspec releases the results

 
     
 

CONTACT US

Building and Construction Sector Productivity Partnership

The Secretariat
Level 10
33 Bowen St
PO Box 10-729
Wellington 6143

Phone

Email buildingvalue.co.nz

 
     
 

FEATURE

 
 

ON SITE

Currently, the Productivity Partnership is working with industry on:

preparing a draft Building Information Modelling (BIM) handbook for industry consideration
producing the Auckland Pipeline Report No. 4 and Forward Work Plan for release in Q1 2014
developing the next iteration of the Canterbury Pipeline.

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FEATURE

 
 

NATIONAL CONSTRUCTION PIPELINE

REPORT RELEASED

New Zealand is on the brink of the biggest construction boom in 40 years.

The National Construction Pipeline report, released by the Productivity Partnership on 10 December, points to an unprecedented level of building and construction in New Zealand over the next five years.

The National Construction Pipeline report was commissioned by the Partnership. It was prepared by
Pacifecon (NZ) Limited in collaboration with BRANZ.

This report is consistent with The New Zealand Sectors Report 2013 on Construction published on 20 November, but provides new information on the future industry workload including the nature and timing of planned construction activity by type and region. It brings together economic forecasts and data from the public and private sectors on their forward construction workload from 2013 to 2018. These show at least 10% per annum growth for four years, peaking in 2016 when nearly $32 billion of construction activity is planned.

Our report forecasts an increase in construction right across the country in both residential and non-residential sectors. Construction hot spots are Auckland, followed by Canterbury and then Waikato/Bay of Plenty and Wellington. The main drivers of growth are Auckland's residential housing demand more than doubling (projected 150% increase) and the Canterbury rebuild.

"This is a heads-up to the sector," says the Partnership's Construction Systems Workstream leader Andrew Reding. "We want people to be aware that there is an ongoing pipeline of work so they can manage resources appropriately.

"The National Construction Pipeline report is validated by a database of client intentions – projects that we know are going ahead," says Andrew. "What's striking is not just the rate of construction growth, but the duration of that growth. We're looking at a sustained level of activity over many years. The question for the industry is how are we going to meet that demand without compromising quality?"

New Zealand is a small market and the Productivity Partnership is sharing this information to encourage the demand and supply sides of the industry to work collaboratively. Visibility of forward demand can assist planning, scheduling of investment in skills and plant, and co-ordination of the timing of projects, particularly public works.

The Partnership intends to release national construction forecasts on a regular basis.

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The National Construction Pipeline report predicts unprecedented growth in building and construction in New Zealand to the beginning of 2019.
It forecasts at least a 10% increase in construction activity every year for the next four years.
Growth is expected to peak in 2016.

The forecast 2016 peak in growth coincides with:
– extremely high levels of construction activity in Auckland
– the Canterbury rebuild
– the national peak in residential construction
– a peak in building and construction in Waikato/Bay of Plenty
– expected peak for building the roads of national significance.

In 2016 the estimated total value of construction activity is expected to be nearly $32 billion (23% higher than the previous peak in 2007).
The National Construction Pipeline report is based on data collected by Pacifecon (NZ) Ltd and forecasting by BRANZ.
It covers both residential and non-residential building projects planned by government, local government and the private sector.
Regions showing high growth in construction activity are Auckland, Canterbury, Waikato/Bay of Plenty and Wellington.
Growth in construction activity is also forecast across all of New Zealand.
Highest demand by value is in the Auckland region, driven by housing needs more than doubling, and the Government's intention to accelerate residential building there. Residential building in Auckland is forecast to increase by 150% between 2012 and 2016.
There is a noticeable increase in construction of higher density housing, especially in Auckland.
The Canterbury rebuild is another key driver of demand – between 2012 and 2016 the value of non-residential work is forecast to more than double in Canterbury.

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FEATURE

 
 

Gerry

IN PARTNERSHIP

Foreign correspondent and Productivity Partnership Manager Chris Kane filed this report "on the road" during his recent study tour of prefabricated building technology in Southern Germany and Austria. The tour was led by Johann Betz, a German engineer with considerable experience in factory-based "industrialised" construction who now lives in Christchurch.

The tour is fascinating, from the wider perspective of the New Zealand construction industry. Just after the Second World War, Germany was faced with unaffordable housing in short supply and of low quality. In response, part of the construction sector consciously chose to "rationalise" how they built; basically, to question each decision made and each step of the production process.

The result has been that about 15% of the 100,000 houses built each year in Germany are prefabricated to a very high degree.

The tour has had a strong (but not exclusive) timber focus, which is entirely appropriate as Central Europe has a long history of timber construction. We've visited a number of factories where walls, floors and ceilings – basically anything that can be made into panels – are made from timber elements.

The difference from New Zealand in construction techniques is very noticeable. In Germany massive use of timber is common. Walls around 300mm thick are the norm, primarily because of the need to insulate to a very high degree. Most of the buildings we have been in – show homes, shops, hotels, even factories – are triple-glazed (and with the temperature outside currently at about minus five degrees, they need to be).

 

Main findings

There have been two main findings from the trip:

1. Sustainability, energy and carbon footprints drive a lot of behaviour in Central Europe. The use of wood is seen as being sensitive to those issues. In fact, it appears that the more wood used, the better the house is perceived to be! This is an interesting contrast to our approach of engineering out every last unnecessary millimetre on cost grounds.
2. The prefabrication industry organised itself in the 1960s to document and achieve much higher construction and performance standards than the site-built competition. Over the years since, standards have increased in stringency, and new ones have been introduced, to the point where prefabricated houses now command a price premium over site-built houses.

 

Transferring learnings

The most obvious question is "could German prefabrication techniques be transplanted to New Zealand?" The answer is very probably no, primarily because the ecosystem that supports the delivery of prefabricated buildings in Germany is not present in New Zealand.

Could we develop our own systems (tailored to the New Zealand market and climate) and deliver them in a similar manner to those in Germany and Austria? Yes, undoubtedly, given enough time. Given the pressures of housing affordability and supply (see the Partnership's National Construction Pipeline report) it's obvious that New Zealanders wanting to take up prefabrication and industrialised construction won't have 60 years to grow the supporting ecosystem.

So the next question is: "what can we do in TEN years?"

The Partnership will be working with PrefabNZ to help create wider awareness of their work. We will also be working inside the Ministry of Business, Innovation and Employment to identify and remove unnecessary barriers to wider uptake of prefabrication and industrialised construction in New Zealand.

My final thoughts are that we have the insight to where the techniques seen in Germany could be applied and we know that there is considerable and enduring construction demand so there may never be a better time to adopt new ways of building.


Chris Kane

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FEATURE

 
 

AUCKLAND PROCUREMENT FORUM

The third annual Auckland Procurement Forum was held on 27 November. This Productivity Partnership initiative is now a highly anticipated event in Auckland's building and construction sector calendar – providing local access to high level decision-makers and vital information through a regional lens.

It was a full house with 80 industry representatives attending. The Forum, which is part of the Partnership's Auckland Procurement Programme was generously hosted by Auckland Council and organised by Constructing Excellence.

"The Forum is growing in popularity," says Tim Warren of Constructing Excellence. "This time it was especially pleasing to see representatives from the materials supply sector engaging in the debate."

Auckland-ProcurementHe says there was a lot of interest in new information on changes to infrastructure construction budgets for Vector and Watercare as they account for Special Housing Areas (SHAs). Likewise, the NZ Transport Agency, which is recasting figures on its works programme in consultation with the Government and Ministry of Transport. Headline figures for Auckland's three-year construction growth were also showcased. "The drive for more housing and roading in Auckland is having a major impact," says Tim.

There was wide support for Auckland Council's commitment to sign up to developing a procurement efficiency agenda, spearheaded by the Auckland Procurement Programme's Procurement Working Group.

Auckland Council's commitment to improved procurement process was also shared. Their focus for 2014 is on:

buyer days with a sector focus – to learn about the pipeline of opportunities and Council expectations
procurement policy workshops to assist in the market's understanding of Council policy and how it makes procurement decisions
implementation of the capital works Gateway process, designed to improve decision making, scoping and delivery of capital projects within the Council
continued development of common design and technical standards across the Council and its CCOs.

Watercare's Tim Munro announced another practical outcome – a new initiative to share geotechnical data between clients and their supply chain. In its early days at present, this will take out waste and duplication to speed up project delivery and reduce costs. There was also a lot of enthusiasm for wider industry use of Building Information Modelling (BIM) and connecting it with the online consenting process.

Tim Warren says the format of a snappy breakfast session crammed with useful information really appeals to the industry and there's a call to hold these events more frequently.

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FEATURE

 
 

MASTERSPEC NEW ZEALAND

NATIONAL BIM SURVEY 2013

Masterspec has released the results of its annual New Zealand National BIM Survey undertaken in August/September 2013, with the support of the Productivity Partnership and other industry organisations. It provides a picture of the progress being made towards the use and understanding of Building Information Modelling (BIM) technology by New Zealand's construction industry.

This second New Zealand National BIM Survey shows that BIM is gaining traction here with a steep increase from 38% (2011) to 57% (2013) of respondents aware of and using BIM. However, it highlights that there is more work to be done to ensure the real advantages of BIM are realised. It identifies barriers to wider uptake of BIM, including the need for agreed industry-wide protocols and tools.

There is confusion in the industry about what BIM is – the survey results show that BIM has a wide spectrum of different meanings (eg, 3D CAD), even among those who say they are already using the new technology.

The survey supports the view that an increase in the adoption of BIM will continue, with
80% of respondents agreeing that BIM is the future of project information.

Increasing the use of BIM is fundamental to achieving the Partnership's goal of
a 20% increase in industry productivity by 2020.

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