Housing New Zealand’s (HNZ) innovative new billion dollar agreement with the contractors who maintain its 69,000 properties took effect on July 1.
Housing New Zealand contractors engage more than 4500 tradespeople who spend two million hours annually performing some 390,000 maintenance jobs on Housing New Zealand homes.
The numbers are big, and over the next five years Housing New Zealand will invest $200 million a year via its new Next Generation Performance Based Maintenance Contract (PBMC).
Housing New Zealand Property Services general manager Marcus Bosch says the contract pushes customer service and performance to the forefront.
“We want our tenants to have a good experience and to see professional, high quality tradesmanship in action,” Mr Bosch says.
“At the end of the day, our contractors, their subcontractors and trade staff represent us out in the community. It’s vital we work in partnership with them to achieve great customer service, industry best practice and value for taxpayer money.”
The Next Generation PBMC includes five score cards and 10 key performance indicators against which contractor performance will be evaluated. The score cards include Response Time, Quality, and Health and Safety.
“We’ll be rewarding great performance against these criteria,” Mr Bosch says. “But the agreement also includes clear remedies for when performance may not be up to scratch.”
Commercial property lawyer David Chisnall, who was involved in the contract’s development, says it replaces a predecessor that was rooted in a traditional, construction industry approach.
“It was probably right for its time, but there was a strong commitment from Housing New Zealand’s senior executives to move to a contract based on good service and performance,” Mr Chisnall says.
“Tenants should be proud of living in Housing New Zealand properties, and trade staff should be proud of the work they do to service and repair those properties. The contract is designed to achieve those outcomes.”
Mr Chisnall says the contract could be applied to good effect elsewhere in New Zealand. “With a core value of around a billion dollars, it’s one of the biggest procurement contracts, if not the biggest, in New Zealand’s performance contracting history.
“It’s innovative, and I believe it could be adopted nationally by other organisations, like councils, who also have a strong procurement and service focus.”
Other benefits of the agreement, which also allows for greater commercial agility, include the flexibility it gives Housing New Zealand to rapidly mobilise contractors during force majeure events, such as the Canterbury earthquakes.
And it incentivises contractors to take on apprentices — a crucial factor with New Zealand’s construction industry already under pressure and set to reach unprecedented levels of demand by 2021.
There will be seven companies supplying maintenance services to Housing New Zealand under the Next Generation PBMC. The contract will last for an initial term of five years, with a right of renewal for a further year.
Unlike the old agreement, which was a standard form of construction contract, the new PBMC is designed specifically to meet Housing New Zealand’s maintenance requirements. It formalises Housing New Zealand’s expectations of its contractors, and puts greater emphasis on customer service, safety, quality, efficiency and value for money.
Housing New Zealand’s previous, two-year (with a right of renewal for a further two years) agreement with its maintenance contractors expired on June 30, 2014. This presented an opportunity to develop an improved agreement for the way HNZ manages commercial relationships with its maintenance contractors.
