Productivity Partnership Newsletter October 2014

Welcome to the final issue of the Building Value newsletter.  We look back on the achievements of the Productivity Partnership during its four years “in office” and look forward to a new future.

From 1 November the Productivity Partnership will cease to exist as a standalone team. Our business will be integrated with MBIE’s wider business, providing a bigger canvas on which to work to improve the performance of the building and construction sector. I will take up the position of Sector Trends and Innovation Manager in the Sector Trends and Innovation team, and will still be the first point of contact for Partnership-related inquiries. You can continue to reach me at .

Much of the work the Partnership instigated and led has been picked up in MBIE’s thinking about construction and housing, so really we’ve done a little of what a lot of industry folks thought couldn’t be done and “steered the supertanker”. That feels good!

It’s great to be going out on a high, with the release of our second National Construction Pipeline Report  and two enlightening pieces of research by NZIER commissioned by the Partnership.  One looks at the impact of bespoke housing demand and small firms on productivity. The other throws light on the difference between the cost of building a house in New Zealand and Australia – which turns out to be not that much. Earlier this month we published the 5th Auckland Pipeline Report and we are in the process of posting a series of BIM in Action case studies on our popular BIM in NZ page on our website, which will continue online.

There’s no doubt that the Partnership’s original goal of increasing productivity by 20% by 2020 is ambitious. As our research highlights, many factors contribute to productivity and our Research Action Plan has put in place a number of more robust measures to track progress.

The industry is heading in the right direction towards greater collaboration, assisted by BIM and other smart technology, greater use of industrialised construction and innovative building techniques and simpler consenting processes.  Any advances must not compromise quality.

As our record of achievement shows the Productivity Partnership has been a catalyst for positive change. With a lean team, we have achieved much by leveraging the extensive talent within the industry, and plenty of goodwill and generosity.  A strong bridge has been built between government and the industry and this is the Partnership’s greatest legacy.

There are too many people to pay tribute to here. However, I would like to acknowledge those who started the Partnership to action the recommendations of the 2008 Sector Productivity Taskforce – the late Bill Smith, Katrina Bach and the Hon Maurice Williamson.  I would also like to acknowledge the tremendous investment made by our workstream leaders past and present: Helen Anderson, Andrew Reding, Richard May, Ian Elliott and Ruma Karaitiana. The Partnership People collage shows other contributors. Our network of value builders reaches from every part of the industry to local government to the Beehive. Thank you all.

The good work of the Partnership will continue with MBIE’s focus on greater sector engagement and commitment to involving people in creating a vision for the industry’s future. MBIE has strong functions to progress the Partnership’s four workstreams – skills, procurement, construction systems and evidence-based research. Under the Partnership brand, it will carry on co-ordination of national activity on BIM, the procurement forums and National Construction Pipeline – projects where the industry is actively contributing.

Any solution to addressing the barriers to sector productivity will be a shared one, achieved in partnership.

Chris Kane

Many people have played an important role in the Productivity Partnership over the last four years including our former Governance Group, workstream leaders and staff past and present. Here’s a snapshot of some of the key contributors.

Top Row (L-R): Andrew Crisp, Trevor Kempton, Katrina Bach, the late Bill Smith, Andrew Reding

Second Row: Brent Mettrick, Chris Kane, Gordon Moller,  Peter Cunningham, Helen Anderson

Third Row: Richard May, Heather Staley, Peter Neven, Peter Gomm, Ruma Karaitiana

Bottom Row: Ann Kennedy-Perkins, Philippa Ward, Pieter Burghout, Rebecca Kearns, Ian Elliott

Not pictured: Alison Geddes, Dave Kelly, Poh Boey, Cass Worman, Michelle Veisaku, Bianca Stedman, Hon Maurice Williamson, Helen Pickering, Nigel Bickle, Gael and Uzi Keren

Thanks to the design team at Vertigo for making the Productivity Partnership look good.

"New Zealand is a challenging place for building things. We have a demanding topography, complex geology, sparse population and it’s a long way from large manufacturing centres. These things contribute to poor productivity in our construction sector which is very labour-intensive and typified by low standardisation and high cost. We can improve this situation by building smarter and the Productivity Partnership has done great work to help us understand the issues and drive more efficiency into construction and design."

Graham Darlow

Chief Executive, Construction Group

Fletcher Building

The Productivity Partnership has been a catalyst for positive action to address barriers to productivity in New Zealand’s building and construction sector. Key achievements include:

• Productivity Partnership Roadmap
• Built Environment Skills Strategy and industry Skills Summits
• Auckland Construction Pipeline
• Canterbury Construction Pipeline
• National Construction Pipeline
• Auckland Infrastructure and Procurement Forum
• Canterbury Procurement Forum (now CERA Commercial Steering Group)
• Research Action Plan
• It’s a WRAP (published research reports)
• BIM Acceleration Committee
• New Zealand BIM Handbook
• BIM in Action case studies
• National Technical Standards Committee

The Partnership has given visibility to key issues and brought together the people needed to resolve them - linking industry and government and working across sector boundaries.

"The Productivity Partnership’s real achievement was in focusing the construction industry and the Government on a common objective to lift productivity, this at a time of unprecedented construction activity, where the benefits would impact the whole of the New Zealand economy."

Richard Aitken

Chairman, Construction Strategy Group

Value of all building and construction by region (by quarter)

The second National Construction Pipeline Report confirms the findings of the Productivity Partnership’s first National Construction Pipeline Report released last December, pointing to continued unprecedented growth in building and construction in New Zealand.

It draws on updated data from Statistics NZ, projections by Pacifecon NZ Ltd based on their comprehensive database of non-residential building projects, and forecasts by BRANZ covering both residential and non-residential building.

Key findings are:

• construction activity is forecast to grow across New Zealand
• a minimum 10% increase is expected every year to 2017
• construction activity peaks in 2016 (2015 in Canterbury)
• the value of construction work undertaken in June 2014 was just below the previous peak in 2007
• growth continues to be driven by Auckland residential housing demand and the Canterbury rebuild
• growth in Canterbury construction activity is lower than previously forecast.

The report identifies a small number of very large projects each valued at more than $100 million (see Appendix D). Central government projects don’t feature largely in the forward work programme outside of Canterbury where nearly $1 billion of public works are scheduled to start before April 2015.

“The level and rate of construction activity we’ve seen over the last year suggests that our first forecasts were pretty much spot on,” says Productivity Partnership Manager Chris Kane. “This forward view of the construction pipeline means the industry can invest more confidently in new plant and equipment, staff training and innovative construction techniques. It gives the market reliable information for planning and timing projects.”

Read the full report

• New Zealand construction firms are larger than statistics suggest.
• It costs about the same to build a house in New Zealand as Australia.
• It costs less to build apartments in Auckland than in Sydney.

These are just a few of the surprise findings of two pieces of research by NZIER, jointly commissioned by BRANZ and the Productivity Partnership.  We asked NZIER to study two key areas:

1. the impact of bespoke housing and
2. the predominance of small construction firms (five or fewer employees) on innovation in residential construction.

NZIER also prepared a separate report with more detail on benchmarking residential building costs between Australia and New Zealand for the Partnership.

The two resulting reports identified:

• Construction firms have a larger “shadow size” because they have a high number of contract staff over long periods.
• Builders are open to innovation but say regulation and avoidance of liability are barriers – they don’t want to be “the last man standing” if something goes wrong.
• There is little difference (0.4%) in the average cost of building a typical medium or high quality home in Sydney and Auckland, based on cost per square metre.
• The cost of building apartments in Auckland is approx. 15% lower than in Sydney.
• Innovation in residential construction here is focused on the use of new products that enhance building design but don’t necessarily improve sector productivity.
• Poor project management is a real issue – better industry training and increased consumer demand and willingness to pay for it should help improve it.
• The report also recommends publishing build time statistics, as happens in Australia, so consumers are aware of how long it should take to build a house and factor this into contracts.

“These reports contain some really useful information that can help the industry serve residential customers better,” says Productivity Partnership Manager Chris Kane. “As expected, they reinforce that the drivers of demand for bespoke housing and barriers to innovation are complex. They’ve come up with some helpful recommendations, including the need to promote good consumer information – a lot of excellent websites exist that the public don’t know about. This research suggests that the greatest opportunity to improve productivity in residential construction is by improving project management and regulatory practice. Both industry and government have a part to play in achieving that.”

See the NZIER reports:

• Bespoke residential housing demand and construction innovation
• Residential construction benchmarking costs

New Zealand is up with the play compared with other countries interested in increasing the use of Building Information Modelling (BIM).  The difference is that, here, BIM uptake is being pulled by the industry rather than being pushed by the government. That’s the key observation made by Productivity Partnership Manager Chris Kane at the 2nd Annual Singapore Building and Construction Authority Government BIM Symposium he attended on 13 October.

Chris was one of five guest presenters giving an overview of “what’s happening with BIM” in their respective countries. He was joined by speakers from India, Japan, Singapore and Hong Kong.

Chris explained the nature of the New Zealand market and how the high volume of planned construction work is requiring that we use new delivery methods.

“The time is right to accelerate the use of BIM in New Zealand – we’re at a tipping point. The government is in a good position to engage with a willing and able building and construction sector to jointly develop standards and rules for BIM use.”

According to Chris, the things that will make the biggest difference to BIM uptake are client education, followed by creation and adoption of agreed standards for exchanging information between BIM tools and standard forms of contract for engaging BIM providers.

A keynote speaker at the Symposium was New Zealander Rob Steele, former CEO of Standards NZ who is Secretary-General of the International Organisation for Standardisation. He emphasised the need for common standards to support BIM use around the world. ISO has a suite of standards relating to BIM and has been actively providing support for BIM the last six years.

Chris highlighted the opportunity to encourage use of BIM via government procurement guidelines so it becomes “the way we do things around here”. MBIE is working with the sector in New Zealand to produce new procurement guidelines for construction.

“The UK is way ahead in terms of embedding the underpinning infrastructure that’s needed to support wider use of BIM, including government policy and guidelines,” says Chris. “On the other hand, our industry is better placed to power up with BIM. A priority in New Zealand has to be the development of a BIM roadmap or action plan to co-ordinate this.”

In association with the BIM Acceleration Committee, the Productivity Partnership has produced a series of case studies demonstrating “BIM in action”.  These feature a range of New Zealand projects and showcase the many uses of BIM throughout a building’s life cycle – from planning and design to operation and renovation. See the first of the series on our BIM in NZ webpage.