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Has the creation of the MBIE delivered for the NZ construction industry?

Has the creation of the MBIE delivered for the NZ construction industry?

It’s been five years since the Department of Building and Housing was subsumed into the mega-ministry known as the Ministry of Business Innovation and Employment (MBIE).

So, is it time to take stock and see if the experiment has delivered benefits for the construction industry?

As a precursor, it might be helpful to map out some of the history. Originally, we had the Building Industry Authority (BIA) which was a separate small Crown entity, somewhat disconnected from Government and, unfortunately, found to be woefully lacking when the leaky building crisis unfolded.

In addition to this, other building regulations were scattered across other departments, including the Department of Internal Affairs and the then Ministry of Economic Development and Ministry of Housing.

Partly as a result of the Hunn report on leaky buildings, the Department of Building and Housing (DBH) was created around 2004 to give coherency, leadership and a much needed overview of construction, housing and tenancy matters.

For the first time, it brought together policy, regulatory and technical knowledge from various departments into one identifiable and accountable ministry.

It enabled working relationships to be formed, knowledge transfer, and for a clear focus on the industry to be developed.

The lesson from the leaky building crisis was that when something goes wrong within the building industry it can have high consumer impact and political fallout — not something that any politician looks forward to.

Over its seven years of existence, the DBH had a huge reform programme to implement, including matters such as builder licensing and the productivity partnership.

The DBH raised the profile of construction and enabled the Government to start to understand the size and complexities of what is a unique and hugely important sector to the economy. 

It had its own chief executive and divisional managers so it was clear to see who was responsible for what, and the work streams being worked on.

It may not have always been perfect, but there was always dialogue with industry and a willingness to try and achieve a common goal — which was always a better performing industry.

Come 2012, and with as little as three weeks’ notice, it was announced that a new mega-ministry called the Ministry of Business, Innovation and Employment was to be created, and that the DBH was to fold and be absorbed into the new entity.

The reason given was “bigger is better”, and that the industry would be better served by a multi-faceted ministry that was business focused.

 

Zero consultation

There was zero consultation with industry as to what they thought of the new Ministry, or any disclosure of what the problem was that they were trying to fix in the old structure.

It brought together the following ministries under one organisation — the Ministry of Economic Development, the Ministry of Science and Innovation, the Department of Labour, and the Department of Building and Housing.

DBH staff ended up being scattered across various disconnected silos within the MBIE. For our industry, we immediately lost transparency as to who was responsible for what, and the valued working relationships slowly unravelled along with a perceived loss of focus and direction.

It appears that the MBIE has steadily turned into an inward-focused organisation when it really needs to be outward looking and industry-engaged. How can you make the industry better if you don’t understand it or engage with it at a meaningful level?

Unfortunately, most of the sector knowledge that was built up within the DBH has now been lost through disenchanted staff attrition. It would be fair to ask what the MBIE has achieved for the industry over the past five years, as it appears to have been drifting somewhat.

The MBIE has also had to react to the Minister’s follies whilst seemingly ignoring big issues such as land affordability, supply and sector capability.

 

Flawed and massively unwieldy structure

I am certainly not knocking the individuals within the MBIE as there are some real stars amongst them, but the structure they have been forced to work within appears flawed and massively unwieldy.

Add to this a non-engaging, confrontational minister, and what is a vital industry looks decidedly orphan-like.

The MBIE has one chief executive covering many industries and sectors, and he/she reports to something like 16 ministers — surely an impossible task in anyone’s book?

An industry such as ours — which is collectively one of the largest employers and economic drivers in the country — deserves a level of service, representation and focus which is currently not deliverable through the current Minister or MBIE structure.

Our industry gets managed within the MBIE by third-tier managers who are certainly capable bureaucrats. However, they often have little understanding of our industry and, by position, lack the cut through and influence needed to make change.

When you look at the fee of $2 on every $1000 of every building consent that is skimmed off for the MBIE to do its job, there should be funds available to provide a more focused and construction-centric service.

On a $6 billion industry, that is $12 million dollars of fees that go directly from our industry into the coffers of the MBIE annually.

It’s only fair that this money is for the benefit of the industry and consumers as a whole, and should be reinvested back into the system to deliver better results, more investment in training, better information, and a regulatory system that is appropriate for today’s challenges.

 

So, what should happen from here?

The prosperity of our nation is hugely impacted by the construction sector. Arguably, there has never been a time when a strong productive construction sector was needed.

With unprecedented workloads contrasted with shortages of skilled labour and declining productivity, we face a massive task. A 1% lift in productivity within our sector would lift our nation’s GDP by $4 billion — a massive return that is certainly achievable.

However, the opposite is currently happening. The momentum of Building Act reforms has stalled. We need to finish the job and move to the next level to deliver a more streamlined system focused on delivering quality buildings at reasonable cost.

Not all buildings are high risk, and one size does not fit all. Quality controls are important, and so is consistency across the country.

Regulatory and process over-design doesn’t equal better outcomes — it just adds cost and delays. New building methods also need to be factored in, and the industry encouraged to explore new and better building systems.

It is well documented that the Building Act, the Local Government Act, the Resource Management Act and the regulations governing land subdivision are flawed when it comes to building, and are a barrier to delivering the outcomes needed to house people in an affordable, efficient manner. There must be progress on this.

 

Social and financial benefits

The new government must first acknowledge the huge importance of our industry, along with the social and financial benefits that come from a well-functioning industry and well-housed people.

They should appoint a new senior minister of both construction and infrastructure. That minister needs to be prepared to engage and champion the necessary change.

This minister should be given the mandate to fix the problem and work closely with industry to come up with a truly workable system.

They will need to be supported by an identifiable and dedicated ministry focused solely on our industry. It is questionable that the current MBIE structure can deliver that support.

The industry is ready to step up and contribute to make those changes. However, without strong, engaging leadership and a regulatory system that is fit for purpose, and focused on delivering quality buildings and developments at reasonable cost, we will continue to slide backwards.

There is no such thing as standing still — the world moves on regardless.

 

• This article contains the author’s opinion only, and is not necessarily the opinion of the Registered Master Builders Association, its chief executive or staff.

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