Risk management – the most critical issue for the construction industry

A survey conducted by the Registered Master Builders of the industry’s leading figures has revealed over half believe the sector is not performing to its potential, due to risk allocation in contracts and a lack of skills.

The survey went out to over 50 select CEOs and senior managers from the leading commercial and residential building companies, property developers and designers, as well as other prominent figures in procurement, dispute settlement and construction law.

It was conducted in the lead up to the third annual “all-of-sector” Constructive Forum, which took place in Wellington during August.

Registered Master Builders chief executive David Kelly says “More equitable risk allocation in contracts is viewed as the most critical issue for industry transformation.

“Constructive focuses on bringing industry together to solve these issues, and while considerable progress has been made, our survey shows there is still more to do.

“This is not something the industry can solve alone.

“Improved collaboration was also ranked as a critical issue to transform the industry, and this is what Constructive is all about – bringing together the entire supply chain, with Government, to tackle the issues as a whole.

“It is also unsurprising that a lack of skills was ranked the most critical issue affecting the sector right now. This has been a focus since the first Constructive in 2016, and we will highlight some of the initiatives that are underway.

“The sector is working hard to raise the profile and lift the attractiveness of building and construction to more diverse groups, and this continues to be a key focus.”

Improved collaboration, through adopting technology and innovation in the way we work, is also important for the sector.

RMBA, NZSTCF and CCNZ come together to offer practice advice to builders and sub-contractors

The Contractors Federation (NZSTCF), and Civil Contractors New Zealand (CCNZ) aligned at the Constructive Forum to offer practical advice to builders and sub-contractors, to help transform the building and construction sector.

David Kelly says they are working closely with NZSTCF and CCNZ, who share similar concerns about the state of the sector, and believe the key to resolution is for the industry to work better together.

“No one is winning in the current environment. There is not enough cash in the system, contractors have no certainty, margins are too low, they are taking on too much risk, and there is a lack of schedule of quantities – this affects not just our Master Builders, but the sub-contractors and other industry professionals as well,” he says.

“It is up to the industry to step up. We cannot expect the change to only come from the clients. We can do more to educate them and put an end to the race to the bottom. The cheapest price will very rarely result in the best value outcome,” he says.

President of NZSTCF, Graham Burke agrees, saying members of all organisations need to be mindful of the types of projects they are taking on.

“The industry knows only too well that there is a lot at stake here. We are calling on all contractors, whether they are the lead on the project or the sub-contractors, to make sure they fully understand the contracts they are taking on.”

Chief executive of CCNZ Peter Silcock says there is some very good practice out there.

“The best results are achieved when everyone involved works together – property owners, designers, engineers, contractors and subcontractors. There are opportunities for everyone to add value over the course of a project. With this as the focus rather than lowest cost, we can achieve great results.”

David Kelly says the collaboration with NZSTCF and CCNZ is only one part of puzzle, and more is needed across the industry.

“Our current issues are complex and multifaceted. They require the industry to work together, and with Government, to navigate the changes required.

“This is too important an issue to get wrong. We are talking about more than just buildings, these are the homes, workplaces and communities our society is based on. We are pleased to see the industry come together at Constructive and look forward to the practice solutions discussed.”