Building industry supports government’s new construction procurement guidelines

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Registered Master Builders Association chief executive David Kelly

The construction sector has welcomed the announcement by Ministers Phil Twyford and Jenny Salesa of the recently revised Construction Procurement Guidelines.

The Guidelines acknowledge and address critical issues that the construction sector has been calling for regarding fairer contract terms and better allocation of risk.

“For a number of years, construction contractors have been asking for change in how some government agencies procure,” Registered Master Builders chief executive David Kelly says.

“We strongly support the release of the Guidelines, which have the potential to significantly improve the quality and consistency of how government construction projects are delivered.

“It’s unsustainable for government agencies to drive contract prices down and pass an unfair amount of risk onto the contractor. All this does is create an adversarial relationship and a culture of mistrust between parties, as well as leaving contractors potentially financially vulnerable.

Opportunity to reset culture

“These Guidelines provide an opportunity to reset this culture by having agencies and contractors working more collaboratively to achieve fairer contract and risk allocations when delivering projects,” Mr Kelly says.

“We are pleased to see the Government take another important step towards improving the health and vitality of the sector. This is a good initiative, showing the Government is committed to change as part of the Construction Sector Accord.

“This isn’t just about improving the sector’s health. A vibrant construction sector is the infrastructure that underpins the New Zealand economy.”

Civil Contractors New Zealand chief executive Peter Silcock says if the Guidelines are properly implemented with agencies held accountable, it could signal a new era.

“For a long time now the focus has been on lowest cost. Agencies will now be required to change their procurement to focus on outcomes rather than cost, placing more emphasis on fair allocation of project risk to those best-placed to manage it,” Mr Silcock says.

Complex legal interpretation

He says the new Guidelines required agencies to limit or justify any use of special conditions — a move away from lengthy additions to “standard” construction contracts which sometimes added hundreds of pages of special terms, requiring complex legal interpretation.

“Clients think they are managing risk by deviating from standard contracts. In some cases, they create it.

“Moving away from this should bring the costs down as clients, contractors and lawyers won’t have to spend time poring over hundreds of pages of special conditions,” he says.