Productivity Partnership Newsletter July 2013 Building Value New Zealand - Building and Construction Productivity Partnership

30th July 2013

Read the latest news from the Partnership

SPECIAL ISSUE

PULLING TOGETHER THE EVIDENCE

Bill Smith

This issue of the Building Value newsletter is a special issue presenting an overview of Stage 1 of the Productivity Partnership's Research Action Plan (RAP), including top level findings.

Our case studies on what drives productivity in New Zealand's building and construction sector show some remarkable consistency in messages about how to lift sector productivity.

One of the key findings to emerge is how different the residential and non-residential parts of the sector are in the challenges they face and the way they operate. In residential building, in particular, there are opportunities for small to medium enterprises (SMEs) to significantly reduce time and waste in the construction process. On the non-residential side, a common theme is the need for better predictability of future workload for major construction projects. The Productivity Partnership is already addressing this through the industry procurement fora it has established in Auckland and Canterbury, led by Richard May, and its upcoming National Pipeline.

The RAP has also highlighted the potential of Building Information Modelling (I prefer to say Management) or BIM to transform how the commercial sector operates. There are clearly challenges to achieving this but the Partnership's BIM project, led by Andrew Reding, is looking at these.

In both residential and non-residential construction there's an excellent opportunity to capture efficiency gains through greater use of prefabrication and offsite assembly of construction components. With the industry now facing a significant increase in workload, the time is right to move on this.

The coming wave of work is likely to mean increased profits for firms, but the big risk is that it won't be accompanied by more productive work practices and that sector productivity will not rise. The focus on improving productivity must remain front and centre of what the sector does.

Completion of Stage 1 of the RAP represents a significant milestone in the Partnership's work programme and is a major achievement for the Evidence Workstream, in particular, wrapping up nearly two years of work. Many people have contributed to it, including my Evidence Workstream colleagues and our research partners. I'd also like to acknowledge the guidance of the Partnership's Governance Group and its other workstream leaders – Andrew Reding, Ian Elliot, Ruma Karaitiana and Richard May. Thank you all for your efforts.

Dr Helen Anderson
Evidence Workstream Leader
Productivity Partnership

	IN THIS ISSUE


	Key RAP projects Brief descriptions of ten priority projects Looking at the big picture stats What the macro data on our industry tells us RAP key findings Some summary observations RAP suggested actions What we can do to improve sector productivity Productivity Hub Conference Overview and papers Partnership moves Our new address

RESEARCH ACTION PLAN STAGE 1 COMPLETE

It's a wRAP! Completion of Stage 1 of the Productivity Partnership's Research Action Plan (RAP) marks the achievement of a significant part of our work programme. This has gone some way to answering the key research questions identified in the RAP released by the Evidence Workstream in March 2012. These were agreed with industry, government and researchers. The RAP projects completed to date specifically relate to three of the eight key research areas and reflect immediate priorities:

1.	Productivity measures
2.	Industry process
3.	Canterbury rebuild.

Information on each research project, including the full research reports, are provided on our website buildingvalue.co.nz/evidence

This is real "mud on boots" research. The RAP has delivered findings that can be applied in practical ways to improve sector productivity and help achieve our goal of a 20% increase in productivity by 2020. They provide a firm base of evidence on which to build value.

For a start, we've found that:

Very different construction processes in residential and commercial building and the high number of small firms make it difficult to transfer learning and best practice across the sector.

In residential construction, productivity can be improved in the early stages of the construction process by better informed clients, streamlined consenting and tendering processes, better project management and project planning skills and increasing offsite prefabrication.

In commercial construction, productivity can be improved by companies having access to better information on forecast demand and using more sophisticated procurement practices.

In Canterbury, the rebuild is hampered by insurance issues and intense competition for resources but provides the opportunity to fast-track innovation for the benefit of the industry as a whole.

For benefits to be fully realised, these opportunities to enhance productivity need to be partnered by sufficient intervention and investment to create a significant culture change in the industry.

Where we have got to so far is an important first step in understanding what drives productivity. However, it's important that we don't wait to understand more before we take action. We need to start addressing the issues while progressing in-depth research in key areas. Our key findings and suggested actions point the way towards a more productive future.



	RAP RESEARCH PARTNERS The Productivity Partnership thanks all of the following research partners: Auckland University of Technology BRANZ Constructing Excellence New Zealand MBIE NZIER Scion University of Auckland Back to top




	KEY RESEARCH PROJECTS Stage 1 of the Research Action Plan has focused on ten research projects. These are: Systems Mapping Project This project identifies critical intervention points in the life cycle of buildings, and across the building and construction sector as a whole, that can be used to make productivity gains. It includes understanding the complex behaviour of the sector and the key interactions and influences that affect productivity. Read more Value Stream Mapping Project This project identifies where waste occurs in the construction of residential buildings. It maps the steps in the construction process and quantifies the importance of each in providing value (functionality and market value) to the end-user. Steps that can be improved or eliminated are identified. This knowledge can be used to reduce the time taken to build houses, thereby reducing costs and improving productivity. Read more Volume Builders Project This project looks at the business models used by New Zealand companies that build a large number of homes – group or "volume builders" – and whether these achieve productivity gains. It helps identify which measures of productivity should be focused on to achieve positive change at a company level. Read more Case Studies of Successful Projects This research examines successful civil construction projects to identify common themes, processes and approaches that deliver productivity improvements. From these, the most common and universally applicable productivity drivers are identified. Future steps based on this knowledge are recommended. Read more Macro Evidence Base A big picture view of New Zealand construction sector labour productivity, unpicking macroeconomic data to help us understand why productivity here is so low, compared with Australia. This project addresses a critical research gap to help make sure that we are asking the right questions to identify key problem areas. Read more Canterbury KPIs The Canterbury rebuild provides the opportunity to pilot performance measures for the wider building and construction sector. This project examines key performance indicators (KPIs) for construction organisations in Christchurch. Read more Construction Productivity in Canterbury This study examines changes to components and processes for residential projects during the Canterbury rebuild and the effect of these changes on construction productivity. It considers whether they have wider application for the industry across New Zealand. Read more Canterbury Procurement Project The post-earthquake reconstruction programme presents a unique opportunity for clients and the supply chain to work more collaboratively, drive out waste and get better value from improved construction procurement. This project investigates the impact the Canterbury rebuild has had on procurement models, approaches and practices, and associated supply chain relationships. Read more Canterbury Resourcing This longitudinal study evaluates the response of the construction sector to a large-scale natural disaster. It looks at how construction firms involved in post-earthquake reconstruction in Canterbury manage resourcing requirements, exploring their business dynamics and the outcomes of different resourcing strategies. It is intended to follow participants over the recovery period from November 2011 until December 2014. Read more Back to top

KEY FINDINGS

Collectively, the RAP projects point to the following findings.

Residential construction

•	There's lots of opportunity to reduce time and cost waste in SMEs.
•	Client skill levels need to be improved to enable them to contribute more effectively to the design and production planning of their properties.
•	Consenting and tendering processes have risen considerably since 2004 and add time and labour costs to construction projects.
•	Project management and other planning skills need improving in SMEs.
•	Offsite manufacturing can improve quality, health and safety outcomes and can significantly reduce build time.
•	Boom and bust cycle is a disincentive to investing in new technology.
•	Opportunities are limited for peer to peer learning of, and on the job training in, new technology and processes.

Non-residential construction

•	Predictability of forward workload for major projects allows for better cross industry planning and more efficient investment.
•	Current tendering processes are very costly.
•	More sophisticated "partnership" procurement processes, especially by government, can produce long-term benefits.
•	Better and more timely skills training is needed for project and HR management.
•	Key Performance Indicators (KPI) monitoring is sporadic and there's an opportunity to provide better benchmarking.
•	More companies are using offsite manufacturing but it is capital intensive.
•	The use of BIM is growing but there is opportunity for better training and use.

Canterbury rebuild

•	The rebuild process is following a pattern similar to other post-disaster rebuilds overseas.
•	There is some innovation in terms of procurement and relationship management.
•	There's an opportunity to fast track some innovative design, planning and construction techniques.
•	The contribution of management and project skills training needs to be emphasised.
•	Building in Auckland is much easier – it's more predictable and insurance issues aren't anything like of the same magnitude.

Key Findings

SUGGESTED ACTIONS

Our research highlighted the following opportunities to improve productivity.

Residential construction

•	Develop innovative projects in Auckland and Christchurch to demonstrate quality, higher density housing using modern construction methods.
•	Develop business cases (and, if feasible, demonstration facilities) for trialling in Auckland and Christchurch the productivity benefits and construction advantages of offsite manufacturing.
•	Publish housing market assessments and plans to show how Building Consent Authorities (BCAs) will develop their capacity and their processes to match these.
•	Explore with BCAs how the time and cost of consenting and inspection can be lowered, and set and publish targets for achieving significant efficiencies in BCA processes.
•	Target and communicate consumer advice and advocacy through appropriate media – using real life case studies.
•	Work with builder training bodies to improve project management tools and training specifically for SMEs (including KPIs to improve understanding of firm level productivity).

Non-residential construction

•	Work with government agencies to ensure that government projects demonstrate best practice procurement.
•	Develop business cases (and, if feasible, demonstration facilities) for trialling offsite manufacturing in Auckland and Christchurch, focusing particularly on the standardisation of materials and processes.
•	Support publication and collection of KPIs at firm and major project level and develop training packages to assist companies to use KPIs to aid productivity improvement.
•	Develop national BIM strategy, including public sector leadership on BIM (eg, required use on significant capital projects), and develop a programme to accelerate uptake across New Zealand.
•	Support the tertiary sector to encourage short, targeted courses for construction management skills.
•	Continue support for the Auckland and Christchurch procurement fora to provide forward workload information.

Canterbury rebuild

•	Support a series of residential demonstration projects.
•	Fund a pilot plant to support offsite manufacturing and fast tracking of innovative construction processes.
•	Monitor industry KPIs and resource scarcity and plan appropriate interventions should these be necessary.
•	Expand the offerings of display homes and actively provide consumer purchasing advice, including accounting for whole of life costs when making purchasing decisions.
•	Improve skills and training modules for rebuild specific issues, such as new regulations and legislation.
•	Develop mechanisms and appropriate protocols that would support SMEs to share back office, admininstration and other facilities.



	EVIDENCE WORKSTREAM MEMBERS AND ASSOCIATES Helen Anderson (Chair) Derek Baxter (Certified Builders, now Standards NZ) Pam Bell (Prefab NZ) Adrian Bennett (MBIE) Ruth Berry (consultant) Shane Brealey (NZ Strong) Richard Capie (BRANZ) Peter Cunningham (Constructing Excellence, now MBIE) Kevin Golding (Winstone Wallboards) Chris Kane (Productivity Partnership) Brett Lineham (MBIE) Brendan Mai (Statistics NZ) Ian Page (BRANZ) Andrew Reding (Productivity Partnership) Grant Scobie (The Treasury) Jeff Seadon (Scion) Wayne Sharman (BRANZ) John Tookey (Auckland University of Technology) David Turner (formerly MBIE) Clare Ward (Statistics NZ, now Families Commission) Amanda Warren (Constructing Excellence) Suzanne Wilkinson (University of Auckland) Back to top


	INFORMATION

	PARTNERSHIP MOVES The Productivity Partnership has moved. We are now located at: MBIE, Level 10 33 Bowen Street Wellington Our postal address is now: PO Box 5488 Wellington 6011 Our telephone number remains as Back to top

PRODUCTIVITY HUB CONFERENCE

On 2 July Evidence Workstream Leader Helen Anderson presented the findings of the Productivity Partnership's Research Action Plan (RAP) at the Productivity Commission's Productivity Hub Conference in Wellington. Construction was very much the example sector being discussed as a productivity challenge so our contribution was welcome.

The conference was targeted at economists and was attended by people from the Treasury, MBIE and other government and overseas agencies, including the Deputy Chair of the Australian Productivity Commission.

"It was satisfying to be able to provide sound evidence on the state of productivity in the building and construction sector in New Zealand and flag concrete steps that can be taken to improve sector productivity," says Helen. "Except for one project that takes a macro-economic view of labour productivity, ours is "mud on boots" research grounded in case studies of what's actually happening on construction sites in New Zealand now. There was a lot of interest in the issues we raised and our presentation stimulated a lot of discussion."

See the conference papers:

•	Abstract – "Construction sector productivity – the devil's in the detail"
•	Conference presentation
•	Conference paper




	LOOKING AT THE "BIG PICTURE STATS" One of the gaps in information on the performance of New Zealand’s building and construction sector has been the difficulty in interpreting the macro or big picture statistics, especially data on construction labour productivity. To address this gap, the Productivity Partnership asked the New Zealand Institute of Economic Research (NZIER) to do some macroeconomic research on construction productivity to build an evidence base for research and policy issues. In particular, the study looked at why construction labour productivity is so much lower in New Zealand, than in Australia, where has it has grown at twice the rate over recent decades. The project was led by NZIER Principal Economist Shamubeel Eaqub. "NZIER was pleased to have this opportunity to take a top down view of the sector to match the bottoms-up research done by the Productivity Partnership," says Shamubeel. "The key question we set out to answer was, "Are we looking at the right issues, in terms of barriers to improving productivity?" The NZIER research found that we build differently from Australia, for example, we use a lot more aggregate, forest products and architectural services (reflecting the demand for customised homes). Some key findings are surprising, for instance, the lowest level of productivity is in the Construction Services and in Heavy & Civil parts of the industry. "The macro data indicates that some of the drivers of, and reasons for, low productivity are different from what we expect," says Shamubeel. "It suggests we need to look more closely at issues within the Construction Services and Heavy & Civil areas. "Something else that stood out was the practical barrier to using new technology on construction sites, which also affects the ability to share information." The NZIER report will be useful in helping identify what tools the industry should use and where to target spending to improve productivity. Back to top

CONTACT US

Building and Construction Sector Productivity Partnership
The Secretariat
MBIE, Level 10, 33 Bowen Street, Wellington
PO Box 5488, Wellington 6011

Phone

Email
buildingvalue.co.nz

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Productivity Partnership Newsletter July 2013

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