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CONTRACTOR PERSPECTIVES 2017

NEW ZEALAND CIVIL CONTRACTING

PERSPECTIVES 2017

JANUARY


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PERSPECTIVES 2017 FOREWORD

05 Capital intentions

Bill English, Prime Minister – written as Minister of Finance

06 The view from the top

Simon Bridges, Minister of Transport

GOVERNMENT AGENCIES + ASSOCIATIONS

12 On the cusp of a transport revolution

Fergus Gammie, chief executive, New Zealand Transport Agency

14 Building resilience in 2017

Peter Silcock, CEO, Civil Contractors NZ

16 Strong client supplier relationship

Malcolm Abernethy, executive officer, Civil Contractors NZ

18 Sharpening the H&S focus

Vadim Spice, sector leader Construction, Worksafe New Zealand

22 Rocks roll in the rock star economy

Roger Parton, chief executive, Aggregate & Quarry Association of New Zealand

24 A robust landscape

Rob Gaimster, Cement & Concrete Assoc of NZ, NZ Ready Mixed Concrete Assoc.

26 Keeping the wheels turning

Rod Auton, executive officer, Crane Association of New Zealand

28 Moving forward in heavy haulage

Jonathan Bhana-Thomson, chief executive, NZ Heavy Haulage Association

30 The critical place of water

John Pfahlert, CEO, Water New Zealand

32 On board with Civil Trades

David Worsnop, interim chief executive, Connexis

RESOURCES

34 Legal report card

Sam McCutcheon and Arie Moore, Kensington Swan’s Construction Law Team

36 Tackling future challenges

Robert Jones, chief executive, Fulton Hogan NZ

38 Savvy technology

Jim French, heavy construction specialist, Teletrac Navman

40 Skilled professionals in short supply

Jason Walker, managing director, Hays NZ

42 Exciting advancements and opportunities

Alan Sharp, business area director Strategic Software Solutions, Trimble

44 Infrastructure contracts debate

Alan Titchall, Contrafed

46 Last word

Kevin Lawrence, Contractor editor

46 Advertisers’ index

CONTRACTOR PERSPECTIVES 2017

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The discussion for 2017 Welcome to the 2017 edition of Contractor Perspectives, our annual publication made up of commentary written by industry peers from government level to associations representing every sector involved in making civil contracting in this country a success. Our contributors have provided a rich commentary with great insight into their respective industry sectors and we thank them very much for their wise words. As the new PM Bill English says in his introduction: “The latest estimates suggest that around $125 billion will be spent on infrastructure between 2012 and 2025. That is the equivalent of 42 Auckland City Rail Links, our largest single infrastructure project for the past 30 years.” The cleanup in north Canterbury has added an extra perspective on this year and it didn’t take long before an alliance was formed that is similar to SCIRT, which rebuilt Christchurch, and is headed by the same leader – Duncan Gibb. It anticipates a new resilient highway between Christchurch and Kaikoura (with viewing features and passing lanes) finished by 2018. As CCNZ chief Peter Silcock has said, our civil contracting sector has already learnt many lessons from Canterbury, although the bulk of the quake damage requires large- scale earthmoving, slope stabilisation and road and rail reinstatement. Peter also notes in his perspective that the NZTA continues to lead our industry in terms of both the amount of work contracted and the quality of its procurement. “The continued roll out of the Network Outcomes Contracts (NOCs), a significant programme of safety improvement work and a range of capital projects (many of them smaller projects), has offered opportunities to a wider range of contractors,” he says. “On the other hand, the introduction of ISNet as the NZTA prequalification system has meant that a number of contractors have chosen to relinquish their prequalification status, despite the support offered to smaller contractors by NZTA. “The costs, staff time and relevance of the system are still being debated a year after its introduction. More work needs to be done in 2017 around the costs and benefits of this system.” The NZTA, under its new chief Fergus Gammie, took a different approach to its perspective this year. Instead of discussing such issues, it provided a picture of a pending revolution in our transport system with the sort of fancy technology you watch on BBC Knowledge. A lot of us don’t see this vision happening any time soon. We are not Norway and the nation tolerates one of the oldest (and dirtiest) vehicle fleets in the western world, and most of our public transport operations are privately-owned and based on cost/profit, not subsidised ‘common good’. On the local council front the Local Government NZ association didn’t submit a perspective this year, for reasons it hasn’t shared, but authorities in many regions are challenged trying to pay for infrastructure with a diminishing (ratepayer) funding base. And they are big providers of civil contracting work. As roading and water infrastructure costs makes up about half of council spend, it makes sense to improve the cost of projects, and CCNZ executive Malcolm Abernethy calls for councils to simplify the procurement process and reduce both time and costs for all parties. “It is CCNZ’s view that a far more effective means of optimising procurement will be to start with more effective procurement planning.” On the regulatory front Kensington Swan points out that last year was particularly notable for the amount of law and legislation that came into force. As in previous years, this law specialist provides a valuable ‘report card’ of the various legislation that now affects your business sector. Sector associations representing civil contractors, cranes, heavy haulage, concrete, water and training also provide reports cards on 2016 and a wish list for this year. Hays Recruitment warns that the scarcity of engineers here with experience may force employers to increase salaries for local talent in 2017, while contributors from Trimble and Navman focus on exciting advancements and opportunities on the technical front that provide productivity gains for savvy contractors. As always in this industry sector – interesting times, so please read on. Alan Titchall Editorial manager, Contrafed Publishing.

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CONTRACTOR PERSPECTIVES 2017

PUBLISHER Contrafed Publishing Co Ltd Suite 2.1, 93 Dominion Road, Mt Eden, Auckland PO Box 112357, Penrose, Auckland 1642 Phone: +64 9 636 5715 Fax: +64 9 636 5716 www.contrafed.co.nz GENERAL MANAGER Kevin Lawrence DDI: 09 636 5710 Mobile: 021 512 800 Email: kevin@contrafed.co.nz EDITORIAL MANAGER Alan Titchall DDI: 09 636 5712 Mobile: 027 405 0338 Email: alan@contrafed.co.nz ADVERTISING / SALES Charles Fairbairn DDI: 09 636 5724 Mobile: 021 411 890 Email: charles@contrafed.co.nz ADMIN / SUBSCRIPTIONS DDI: 09 636 5715 Email: admin@contrafed.co.nz PRODUCTION Design: TMA Design, 09 636 5713 Printing: PMP MAXUM Articles in Contractor Perspectives are copyright and may not be reproduced in whole or in part without the permission of the publisher. Opinions expressed in this magazine are not necessarily those of the shareholding organisations.

www.linkedin.com/contrafedpublishing @NZContractormag

The official magazine of Civil Contractors NZ www.civilcontractors.co.nz The Aggregate & Quarry Association www.aqa.org.nz The New Zealand Heavy Haulage Association www.hha.org.nz The Crane Association of New Zealand www.cranes.org.nz Rural Contractors New Zealand www.ruralcontractors.org.nz The Ready Mixed Concrete Association www.nzrmca.org.nz Connexis www.connexis.org.nz

ISSN 0110-1382


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Capital intentions HON BILL ENGLISH, PRIME MINISTER – WRITTEN AS MINISTER OF FINANCE

GOOD INFRASTRUCTURE is critical to New Zealand’s future.

Ensuring that we have the right frameworks in place to support wise infrastructure investment decisions that meet the needs of a changing New Zealand is an important focus for this government. In 2015 i released the 30 Year New Zealand Infrastructure Plan which states that, overall, New Zealand has a broadly good infrastructure base, bolstered by investment in recent years. However, the transport, telecommunications, energy, three waters, productive water and social sectors need to be better prepared for the challenges of the next 30 years. They are also aging and our growing population is creating pinch-points. Major investments are required. The latest estimates suggest that around $125 billion will be spent on infrastructure in New Zealand between 2012 and 2025. That is the equivalent of 42 Auckland City Rail Links, our largest single infrastructure project for the past 30 years. One hundred and twenty-five billion dollars is a lot of money so it is essential that we invest it responsibly. To do so, we need a better understanding of the levels of service we want to deliver, more mature asset management practices and use of data, and more effective decision-making that considers non-asset solutions. To assist with that, the National Infrastructure Unit, which sits within the Treasury, publishes an annual Capital Intentions Plan. The plan lists upcoming infrastructure projects across central government, local government and the private sector and provides the market with greater visibility of upcoming investment commitments and opportunities. It recognises that a key focus of 2015’s 30 Year Infrastructure Plan, which is also released by the National Infrastructure Unit, is to provide businesses with greater certainty and confidence about current and future infrastructure provision. This is important because an efficient and reliable infrastructure network underlies our economy and is the basis for our social, economic, environmental and cultural wellbeing. The Capital Intentions Plan for 2016 gives a year-by-year breakdown of actuals and intentions. It shows that the total actual and estimated spend between 2012 and 2025 has increased by nearly $15 billion since 2015.

“...we need a better understanding of the levels of service we want to deliver, more mature asset management practices and use of data, and more effective decision-making that considers non-asset solutions.”

Overall, the latest data shows a total of 4504 infrastructurerelated projects across central and local government and the private sector, an increase of 1351 projects since the first Capital Intentions Plan was released two and a half years ago.

Central government spending for the same period has increased by $5 billion to $54.1 billion, local government by $7.6 billion to $54.7 billion and the private sector by $2.1 billion to $16.7 billion. Overall, the latest data shows a total of 4504 infrastructurerelated projects across central and local government and the private sector, an increase of 1351 projects since the first Capital Intentions Plan was released two and a half years ago. For these projects to come to fruition, infrastructure providers will need to be able to utilise new types of financing and delivery models that promote innovation and responsible use of taxpayers’ money. With that in mind, the government is taking steps to more closely align the Australian and New Zealand infrastructure markets so they are more appealing to offshore infrastructure investors. The recently-released Australia New Zealand Infrastructure Pipeline is an online portal that provides a clearer picture of high-value infrastructure investments opportunities throughout Australasia. Twenty four New Zealand-based projects and 97 Australianbased projects are listed – from government agencies and local authorities. All projects listed are valued at more than $100 million and most have either recently started or are yet to get underway. As well as improving transparency and forward projections, the government is also exploring new types of financing and delivery models that promote innovation and responsible use of taxpayers’ money. The PPPs that we are starting to see across the country are a good first step. By increasing procurement capability we will reduce risk, enable scale and lower transaction costs. I look forward to seeing the market solutions that this competitive environment will deliver to address our future challenges. CP

CONTRACTOR PERSPECTIVES 2017

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The view from the top SIMON BRIDGES, MINISTER OF TRANSPORT

THE GOVERNMENT continues to deliver record levels of

investment in our transport infrastructure, while making sure we are ready to adopt the radical technologies that are emerging in almost every aspect of transport. During 2016 we retained our focus on developing our infrastructure network, while strongly addressing the transport challenges facing Auckland, and looking to the future.

Zealand has more than doubled. The government has a goal of continuing this growth rate over the years ahead, and we are actively encouraging people to make the switch to EVs. Already the programme is supporting a nationwide public charging network, creating an exemption from Road User Charges for electric heavy vehicles, and creating a contestable fund to encourage and support innovative low emission vehicle projects.

Investing in infrastructure Excellent progress is being made on the Roads of National Significance, which improve connections between centres of production, processing and export. In November 2016, construction began on Stage 2 of the Christchurch Southern Motorway and the Christchurch Northern Corridor. Construction will soon get underway on the Puhoi to Warkworth motorway north of Auckland, the second land transport project to be delivered by Public-Private Partnership. Of the 54 projects in the Urban Cycleways Programme, 10 have been completed, and as at 30 September, 15 were underway. Cycling is an increasingly popular way to get around – and this record investment in cycling infrastructure demonstrates our commitment to making cycling a more attractive and safer transport choice. Safety accounts for a large proportion of our transport investment. We spend hundreds of millions of dollars each year on physically making roads safer – with median barriers, rumble strips and wide shoulders – and on advertising and education campaigns to encourage the sort of behaviour we need to keep the road toll down. Earlier in 2016 the government announced the Safer Roads and Roadsides programme, which is allocating $600 million for safety improvements. More than 90 high-risk sites on rural State Highways across 14 regions will undergo safety improvements, and this package includes nearly all high-risk roads where there have been five or more fatalities in the past five years.

Technology in the fast lane Changing technologies offer huge potential for both safety and efficiency, allowing fewer vehicles to transport more people and freight, while reducing or removing the potential for human error. I am convinced that new technologies – including ones that haven’t even been imagined yet – will change the way we think about, need and use our transport system. Electric vehicles (or EVs) are one example of how oncefuturistic technologies can rapidly become popular. In 2016, the Prime Minister and I launched the government’s Electric Vehicles programme, and the number of EVs registered in New

Alignment in Auckland Technology has strong potential to address Auckland’s unique transport challenges, but other improvements can also ease the pressure on the city’s transport network. September brought the end of the 12-month Auckland Transport Alignment Project (ATAP), with a recommended strategic direction that emphasises an integrated approach, including a better balance between transport demand and the capacity of our infrastructure and services. For the first time, ATAP has seen central and local government agree on the major transport challenges facing Auckland, and the priorities for addressing them. ATAP also identified a number of additional investments over the next decade that focus on addressing Auckland’s most significant transport challenges. Some of the greatest projected improvements are in West and South Auckland, which are projected to grow rapidly as up to 700,000 people move into the region over the next 30 years. One of the flagship transport projects that will help address this future demand is the City Rail Link. A Heads of Agreement signed between the government and Auckland Council in September reflects our commitment to CRL, and the Crown will provide up to 50 percent of funding once a Sponsors’ Agreement is signed.

The year ahead Looking forward, the government will continue to deliver infrastructure that meets New Zealand’s current and future transport needs. In 2017, a new Government Policy Statement will set out our land transport investment priorities from 2018-2021. In addition to being a strategic document, the GPS sets out the spending envelopes for different types of activity, guiding the NZ Transport Agency in preparing the next National Land Transport Programme. The projects scheduled for delivery over the next few years will bring significant benefits for passenger and freight transport, better connecting us with each other, and with the world. CP

CONTRACTOR PERSPECTIVES 2017

FOREWORD

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GOVERNMENT AGENCIES + ASSOCIATIONS

CONTRACTOR PERSPECTIVES 2017

GOVERNMENT AGENCIES + ASSOCIATIONS

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On the cusp of a transport revolution FERGUS GAMMIE, CHIEF EXECUTIVE, NEW ZEALAND TRANSPORT AGENCY

A a transport revolution is coming and it will change the way industry partners will need to think and work together.

I HAVE BEEN in my role as head of the Transport Agency since March 2016, but I’ve been working in the transport industry an awful lot longer. So I’ve seen a lot of shifts and changes in my time – but nothing comes close to the scale of change that we’re seeing now. I believe New Zealand is on the cusp of the biggest transport revolution in decades. The vehicles we use to get places are changing, and our expectations of what we get from transport and how we use it are also changing. The change is underpinned by innovation, particularly in technology, and innovation requires us to think differently. As technology continues to evolve, so will all aspects of our lives. Smartphones, online television and live streaming have already changed our lives. We now buy services rather than products – and the same thing is happening in the transport space. In the not too distant future, we can expect to be able to pay a monthly fee to have access to a range of services, and that is already happening in places overseas, such as Helsinki where you can pay a monthly fee for transport. Transport will become a subscription service, ridesharing will increase and private car ownership is expected to fall. Autonomous vehicles are already being successfully trialled and their introduction will dramatically change the landscape. Along with technology will come changes in regulation, and we need to think about how we integrate all the levers that will improve productivity and safety, and make it easier and more efficient for everyone. New direction for the Transport Agency While we all need to be prepared for the revolution that is coming, from the Transport Agency’s perspective, we know there are three key pivot points we need to make to be ready for the future: 1.We need to shift our focus from process to people by making everything we deliver people-centred to meet customer needs. 2. We need to shift from transport networks to one transport system – this is about having a holistic approach to an integrated transport system that will provide the foundation for this next generation of transport services. 3.  We need to shift from transport outcomes to community outcomes – to provide a system that keeps our communities connected, safe and meets their needs.

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GOVERNMENT AGENCIES + ASSOCIATIONS

An integrated transport system In terms of creating a fully integrated transport system – this is going to require us to think differently. Not only do we need to look at the network as a whole, but we have to look at every aspect it takes to make it work. In the past, we’ve been very good at understanding, building and delivering physical infrastructure networks. Now we’ve got to focus on creating a transport system where technology and infrastructure are completely connected and everything’s easy. If we are really thinking about an integrated system – we are thinking about connections and integration between physical and digital networks, vehicles, information and people – and the interactions between them. We need to be thinking about a system where our infrastructure can send us information about what people are doing, how they are using the system, and respond to their needs – fast. And so that means not just thinking about how our physical infrastructure is integrated with our digital systems – creating one integrated, connected system. We’ve got some great innovative engineering solutions – but we also need to be better at taking up the opportunities that the advances in technology offers the industry. Technology has always been a disrupter for industry. Transport has experienced this many times before and it is going to change dramatically over the next 10 to 20 years. Technology is going to give us the ability to have a much better understanding of what is happening on our network – and let us get to know our customer much better. We are going to have the ability to have a view of how our system is working though real time GPS data. Technology will also enable us to connect with our customers – and provide them with connected journeys. The more we understand about how our customers are using the system, the better we can predict their needs and provide integrated solutions that meet them. So there are opportunities to make some dramatic improvements to our transport system using advances in technology. But we can’t just sit by and passively watch it happen. We need to think differently, work together and be proactive in our approach. As management expert Peter Drucker said: “The best way to predict the future is to create it.” CP


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Building resilience in 2017 PETER SILCOCK, CHIEF EXECUTIVE, CIVIL CONTRACTORS NEW ZEALAND

The surge of infrastructure work in New Zealand has created opportunities for contracting companies to grow.

THE 2016 YEAR FLEW BY. It was a year full of challenges and new

opportunities for the contracting industry with most of our members reporting a good supply of work but tight margins. To be successful in today’s contracting world requires a high level of business agility. It is all about looking at new opportunities and how you can use the resources, expertise and experience you and your team have to partner with others and/or to win work and to produce outcomes that build your reputation. The surge of infrastructure work in New Zealand has created opportunities for contracting companies to grow and has also attracted the interest of some major international construction companies. At the same time home-grown contracting companies are increasingly delivering quality projects offshore, particularly in Australia and the Pacific. There is no doubt that we are part of a global construction industry in terms of technology, equipment, people, financial support and contracts. A few exceptions to the good availability of work have been in those areas reliant on the dairy industry and in Christchurch with the wind down of SCIRT and delays in getting council work to market. Overall the forward work plans for infrastructure work are still bulging with the Treasury Infrastructure Evidence Base 2016 update showing that the intentions for 2016 to 2025 are that $100 billion will be spent on over 3800 projects. Getting value from that spend through smart procurement came into focus in 2016. The simple fact is that we still have too many clients and procurement managers that have a narrow view around procurement. Many clients, such as central and local government agencies, are long-term owners and managers of assets, so they should be taking a long-term view of the contracting industry’s capability and capacity to build and maintain their infrastructure in the future. A healthy, vibrant and competitive contracting industry is good for clients and contractors. Let’s hope that in 2017 we see more clients taking a longer term view. Clients also need to ensure that they have the right people and skills to effectively manage their procurement processes and contracts. Real progress will only be made if organisations take a whole of life view of the costs. Earlier in 2016 health and safety took centre stage with the introduction of the new Act. We are fortunate that WorkSafe, under the very able leadership of Gordon McDonald, did a good

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CONTRACTOR PERSPECTIVES 2017

job of hosing down some of the consultant rhetoric around this. The clear message was and still is - if you have a good system small tweaks are required; if you don’t have a good system then the risk just got a lot bigger and it is time to make some changes in your business. The launch of the construction industry’s “ConstructSafe” health and safety competency testing regime has been well received with over 2500 people having taken the test over the past nine months. Contractors and clients have welcomed having the assurance that the people on their sites know how to protect their own and their workmates’ health and safety. Contractors have praised the scheme because the feedback provided has enabled them to better target their investment in staff training and development. We expect those numbers will continue to grow through 2017 as more people get familiar with the system and the benefits it provides.

“In 2017... CCNZ will be continuing to push the message that quality infrastructure that is well planned, constructed and maintained is the foundation of well-functioning and productive communities.”

Despite local body elections, 2016 has not seen any resolution to the challenges around local government funding of the upgrading/replacement of our three waters assets. The investment required is a massive challenge for councils, especially when many are committing to zero or very low rates increases or where population growth has slowed. The need for that further investment has been highlighted by the water quality issues in Havelock North and I am sure that councils across the country will be closely examining the results of the inquiry. It shows how vulnerable some of our water infrastructure is and that we need to rethink our council


priorities and approach to funding. Also, in Hawke’s Bay, further delays on the Ruataniwha Water Storage System are a graphic demonstration that while we have made changes to our resource management planning systems there is still some way to go. Road blocking tactics by special interest groups and the review initiated by the new council have created further delays and uncertainty for this major civil contracting project. Work did however get started in 2016 on one of New Zealand’s largest construction projects, the City Rail Link in Auckland. The project is a part of the planned solution for Auckland’s transport gridlock. The housing market and transport issues in our major city took centre stage in 2016. The Auckland Unitary Plan and the ATAP process have shown some good progress. However with everyone admitting we can’t build our way out of Auckland’s transport gridlock it is beyond time to look at vehicle use charging as a means of demand management. NZTA continues to lead the pack both in terms of the amount of work contracted and the quality of its procurement. The continued roll out of the Network Outcomes Contracts (NOCs), a significant programme of safety improvement work and a range of capital projects (many of them smaller projects), have offered opportunities to a wider range of contractors. On the other hand, the introduction of ISNet as the NZTA prequalification system has meant that a number of contractors have chosen to relinquish their prequalification status despite

the support offered to smaller contractors by NZTA. The costs, staff time and relevance of the system are still being debated a year after its introduction. More work needs to be done in 2017 around the costs and benefits of this system. The Kaikoura earthquake has created massive damage to our road, rail and communications networks. We are very fortunate that the quake did not occur when more vehicles were on the road or the death toll would have been much higher. The earthquake has shown how vulnerable some of our infrastructure is and I am sure that NZTA will look to incorporate more resilience into the rebuild of the coastal road, rail and communications corridor. We know that other parts of our infrastructure network are just as vulnerable so why wait until we have the next disaster? Over the next few years it would be great to see central and local government programmes focused on building infrastructure network resilience. The 2017 year will see us push headlong into central government elections. Infrastructure and the cost and availability of housing will be major talking points. CCNZ will be continuing to push the message that quality infrastructure that is well planned, constructed and maintained is the foundation of wellfunctioning and productive communities. Last year taught us all to expect the unexpected, to build resilience and flexibility into our teams and to embrace change. Success will be all about the attitude that you bring to 2017’s challenges and opportunities. CP

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Strong client supplier relationship MALCOLM ABERNETHY, EXECUTIVE OFFICER, CIVIL CONTRACTORS NEW ZEALAND

A review of the relationship between councils and CCNZ members over the past year and a wish list for 2017. COUNCILS REMAIN a valuable client to Civil Contractors New

Zealand members and in many areas there are groups of contractors that rely heavily on the work and tender opportunities provided. Relationships are the key and it is comforting to see relationships that thrive even when contracts enter into ‘healthy debates’ to reach a resolution. CCNZ has over the past year been working with councils and their Council Controlled Organisations to assist in the development of contractor management systems (frequently referred to as a prequalification system – they are not!) that demonstrate that the client body as a PCBU has taken due diligence over a contractor’s health and safety performance. We don’t always agree with contractors acknowledging that council requirements can be mandated in the RFT. CCNZ sees these systems as simply the invitation to be considered for a tender but suggests that given the amount of time and cost to meet these requirements they should indeed become a demonstrable part of the tender evaluation process. This is item one on our wish list for 2017. CCNZ and the numerous councils and clients need to develop a truly New Zealand prequalification system that satisfies the council and client requirements while ensuring the contractor is meeting all of their health and safety, quality and environmental obligations. Such a system would encompass the contractor management/ due diligence requirements of the Health and Safety at Work Act. This is item two on our wish list for 2017. On the procurement front CCNZ has been providing submissions to councils and their Council Controlled Organisations for the development of procurement strategies that reduce the time and costs involved in procurement. We contend that the overall aim of procurement reviews is to make procurement processes more streamlined, effective and efficient and this is wholeheartedly supported by the contracting industry. During the consultation process councils have acknowledged our request and are working toward the development of forward work programmes that provide some guidance as to what is coming up and we have been supportive of this work. Forward work programmes provide a measure of confidence to contractors that can be relied upon to develop staff, obtain resources and invest in their individual business to allow growth of both capability and capacity. CCNZ along with councils wants to simplify the procurement

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GOVERNMENT AGENCIES + ASSOCIATIONS

process to reduce time and costs for both contractors and council evaluation teams and through consultation we want this to happen over the next year while continuing to maintain a competitive and healthy market in every jurisdiction. It is CCNZ’s view that a far more effective means of optimising procurement will be to start with more effective procurement planning. Government’s First Principle of Procurement states that procurement agencies should: PLAN AND MANAGE FOR GREAT RESULTS: Identify what you need and then plan how to get it; Set up a team with the right mix of skills and experience; Involve suppliers early – let them know what you want and keep talking; Take the time to understand the market and your effect on it; Be open to new ideas and solutions; and, Choose the right process – proportional to the size, complexity and any risks involved.

It is CCNZ’s view that a far more effective means of optimising procurement will be to start with more effective procurement planning. The most immediate and effective improvements to efficiency and effectiveness accrue from procurement planning that develops targeted tools to select contractors, including projectspecific, designed to both eliminate unsuitable contractors from tendering (on a project-by-project basis) and differentiate between contractors of average and exceptional capability. CCNZ wants to continue to work with councils to achieve this! This is item three on our wish list for 2017. With infrastructure work virtually complete in Canterbury we need to ensure that we now have the capacity and capability for the clean-up and repair of infrastructure following the Kaikoura earthquakes in addition to the unprecedented spend on infrastructure in New Zealand for the foreseeable future. ‘Bring it on’ because as an industry we are working toward demonstrating our capability through initiatives such as Civil Trades, and assessing our worker competency through ConstructSafe tier 1, and the considerable work currently underway to develop competency assessment tools for the remaining three tiers of the Construction Safety Council competency framework. We believe that this work will be significantly progressed in 2017 and provide confidence to our clients and councils of the commitment to safe work practices within the industry. CP


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Sharpening the H&S focus VADIM SPICE, SECTOR LEADER CONSTRUCTION, WORKSAFE NEW ZEALAND

Health and safety should be a core part of any business and not something you do once and file away on a shelf – it needs to be part of a daily routine. AROUND ABOUT THE time the Health and Safety at Work Act came into force you might have thought that it would just about ban everything. Kids would have to stop climbing trees and even coat hooks would fall foul of the law. Guess what? It wasn’t true. The new law is not about banning everything and removing all risk at any cost. It’s about identifying risks and doing what is sensible to manage those risks. As you may well know, good health and safety should be a core part of any business. It’s not something you do once and file away on a shelf – it needs to be part of your daily routine. It’s about getting the basics right: showing leadership, talking and listening to workers, identifying risks, and ensuring effective and proportionate controls are in place and being used day-in, day-out. Any law change naturally creates some uncertainty, but health and safety doesn’t need to be complicated. For most businesses it’s pretty straightforward. The requirement to take practicable steps to manage workplace risks has been in place for 25 years. The Health and Safety at Work Act just sharpens the focus on ensuring that those who are in the best position to manage workplace risks are responsible for doing so. That means it’s not just up to managers and supervisors. Under the new law everyone from directors down to the casual labourer has a role to play in keeping our workplaces healthy and safe.

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GOVERNMENT AGENCIES + ASSOCIATIONS

Critics of the new law would have you believe that you’re somehow expected to eliminate all risks. That’s not possible and is certainly not what WorkSafe expects.

And where there’s more than one business working at a site they need to talk to each other and agree on sensible health and safety measures. These measures should be based on the level of risk and who is best placed to manage that risk. WorkSafe is finding that most businesses are getting it right. A lot of effort is going into finding innovative ways of communicating with workers and involving others on site, from health and safety-focused apps, to junior team members running pre-start meetings. Site inductions are becoming far more interactive, with subcontractors taking the time to talk with others on site before starting work. The tired old hazard board that is usually days out of date and shows no real assessment of the best way to manage risks, is being replaced with bolder, clearer and realistic measures noted from actual team meetings. This is all evidence that workers are actively looking at the risks, reviewing them, coming up with more appropriate controls and clearly communicating this to others. Critics of the new law would have you believe that you’re somehow expected to eliminate all risks. That’s not possible and is certainly not what WorkSafe expects. For us, it is business as usual – encouraging good practice and helping businesses implement a risk management approach. Anecdotally, positive stories about the new Act are far outweighing the bad ones – it’s clear that people are recognising that everyone has a role to play in keeping each other healthy and safe at work. We urge you not to get distracted by the myth-spinners and the inaccuracies. If you need reliable information, WorkSafe has helpful resources targeted at your industry here: http:// construction.worksafe.govt.nz/. We have also got some excellent examples of businesses that are passionate about health and safety, and want to share their approach to risk management. Have a read here: www.worksafe. govt.nz/worksafe/hswa/tools-and-resources/case-studies. CP


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Rocks roll in the rock star economy ROGER PARTON, CEO, AGGREGATE AND QUARRY ASSOCIATION

The big picture of our aggregates sector from its main representative association. PART OF THE BRIEF for this article was to review 2016 successes, so by the most important measure of all, the quarrying industry has had a much better year than previously. As I write at late November 2016, quarrying across the country headed to the year’s end with no fatalities recorded compared to the black year of 2015 when four deaths took place. That deserves to be acknowledged and celebrated; most quarries have really been working at lifting their game on health and safety. However, as we head into 2017, some smaller quarries in particular face a real challenge meeting the December 31 deadline for all quarries to have qualified, competency-proven managers in place. Some small quarries may not be in a position to legally re-open in 2017 as WorkSafe increases compliance requirements. WorkSafe continues to target an estimated 1000+ unregistered quarries, mostly small backblock operations producing low volumes but presenting the highest health and safety risks. We look forward to the promised review of quarry-specific regulations which will clarify the requirements for the industry. The economy continues to enjoy good growth, in what some commentators were earlier calling ‘rock star’ performance, a term the quarry industry rather likes! While quarries are certainly continuing to benefit from good ongoing demand for aggregate, there are signals that things have flattened a little. Agriculture plays an important part in the economy via limestone. However, roadmaking and building dominate demand. The building industry softened in 2015 to use 10 million tonnes of aggregate following three years of growth from six million to 11.7 million tonnes in 2014. We produced some 39 million tonnes of assorted aggregates in 2015 – down from 42 million in 2014 (revised figures from NZ Petroleum and Minerals). This equates to 8.5 tonnes per capita in 2015, just a little down on the 2014 figures. What is interesting to note is that in 2005, the industry produced a record nearly 12 tonnes for every man, woman and child. Canterbury has of course had a bumper few years since the 2010/11 earthquakes but that is starting to level out as the rebuild loses momentum, though it is still second only to Auckland in production. Auckland’s biggest challenge remains meeting demand and delivering it. The AQA recently commissioned a review of the often-stated quote about the cost of aggregate ‘doubling every 30 kilometres it is carried’.

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While that remains broadly true for the first 30 kilometres and costs do continue to mount, the level of increase does generally moderate after the first 30 kilometres. In Auckland, however, the issue is the time trucks spend on the road, not the distance travelled. We can only hope that the major roading programme for our biggest city will eventually ease the gridlock which often plagues it. The triennial elections for local authorities – around 70 councils – saw a number of new mayors, including in Auckland and Wellington, elected along with many new councillors. The quarry sector is now looking to newly-elected councils to get a sense of any improvement in council policies which have tended to rope off access to urban/urban fringe quarry sites. There are particular concerns with Auckland, as our largest city, where the council recently signalled it wants to do away with a current dividing line between rural and urban parts of the city to assist with accelerating house prices and increasing demand for new homes. Quarries fear this could see urban encroachment on the few remaining areas where quarries operate within the greater Auckland area. A number of other councils are also implementing new 10-year district plans which uphold the controversial Supreme Court decision which maintains that no economic activity can take place in areas of outstanding natural landscape. These plans are seen as potentially meaning adverse and perverse impacts on quarries such as no longer being able to extract river shingle in flood zones which sit in areas of outstanding natural landscape. The AQA continues its efforts to promote to all politicians the need for a better understanding of the importance of quarries to New Zealand’s economic progress and our commitment to sustainable environmental management. Our industry chose the country’s leading wine region – Marlborough – as the venue for its 2016 conference. Quarries from the adjoining region of Canterbury took out most of the industry honours. Road Metals won the awards for safety, engineering, operations and quarry leadership. Road Metals’ Murray Francis and health and safety manager Amanda Burke accepted the GBC Winstone Aggregates Safety Award from WorkSafe’s Mark Pizey. Three Canterbury quarries won annual MIMICO environmental awards with Isaacs Construction getting special recognition for its unique model where all its commercial activities – quarrying,


dairy farming and a salmon farm – finance the conservation goals of its Trust owners. Perversely, Isaacs was one of 10 Canterbury quarries which had a bid to dig deeper at existing sites rejected by ECAN commissioners, partly on the basis of supposedly poor environmental management. It is appealing the decision. The 2017 industry conference is in Auckland in July and is being redesigned to allow attendees to gain the maximum Continuing Professional Development hours. That signals the increasing professionalism and maturity of our quarry sector. We are determined to do our best to look after everyone who works in our industry and the communities and businesses we serve. As this article was being finalised, the earthquakes affecting

Kaikoura, Marlborough, North Canterbury and even Wellington occurred with considerable damage to homes, commercial buildings, farms, businesses and infrastructure. Most of the repair work will require aggregates in one form or another for roading, concrete, railway ballast and bitumen. The aggregates industry will respond as it has done in the past but its ability to do so sometimes is curtailed by planning issues that either frustrate access to or sterilise aggregate resources for this important work. Local and regional authorities must be aware that the industry’s ability to help them very much depends on their willingness to ensure aggregates can be extracted as close as possible to the location where they are to be used. CP

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A robust landscape ROB GAIMSTER, CEMENT & CONCRETE ASSOCIATION OF NEW ZEALAND (CCANZ), AND NEW ZEALAND READY MIXED CONCRETE ASSOCIATION (NZRMCA)

A bird’s-eye view of the country’s essential concrete industry. CONSTRUCTION INDUSTRY metrics indicate that over the past 12 months the Auckland region continues to be a ‘rock star’ performer, with a definite influence spreading south. Although other regions experienced a drop in activity, most notably in ready mixed concrete production, overall the concrete industry continues to prosper – an environment most likely to continue into 2017.

under construction south of Whangarei. Holcim New Zealand completed its $100 million investment in cement storage and distribution facilities with the opening of its Auckland terminal in July, following the January opening in Timaru. The 30,000 tonne storage structures are the first of their kind in this country, the creation of which saw the cessation of production from the company’s Westport plant.

The 2016 year – construction metrics

Kaikoura earthquake

When reflecting on the recent performance of the concrete industry, the go-to metric is ready mixed concrete production. There was a national increase of three percent in the annual total of ready mixed concrete production to June 2016; down somewhat on the previous two years, but still ‘growth’ and close to historic highs. Data from BRANZ showed concrete slab-on-ground as the preferred foundation (ground floor) material for residential construction across the country – averaging 85 percent nationally. In the dominant markets of Auckland and Christchurch, these figures were 80 percent and 82 percent respectively.

The seismic events around the centre of the country late last year have raised questions about the performance of multi-storey buildings. Engineers have stated that Wellington’s mid-height buildings were worst affected, specifically those between eight and 15 storeys, as the quake generated intense accelerations in buildings in this height range, especially those on softer soils. The performance of reinforced concrete structures was ‘as designed’, with lessons learnt adding to the knowledge gathered post Canterbury earthquakes, which will be reflected in design philosophies and updated Standards, such as a potential revision of NZS 3101 Concrete Structures Standard.

Notable projects

Association activity

A range of interesting concrete-based projects were prominent during 2016, notable for their complexity, scale, sustainability and aesthetics. For instance, the ‘strong’ floor and wall at the University of Canterbury Structural Engineering Laboratory showcased state-of-the-art concrete mix design and associated construction methodology. The concrete components of roading projects across our country have been significant, with the Waterview Tunnel cross passages and super T beams of particular note. More unique in their concrete features were the refurbishment and extension of 133 Molesworth Street (the William Clayton Building) in Wellington, which took home the 2016 Supreme Concrete Sustainability Award, and the Harewood Underpass/Russley Road Upgrade in Christchurch.

Both CCANZ and the NZRMCA have had busy years with a number of milestones achieved. For instance, CCANZ has managed a programme of research into reinforced concrete that arose from Canterbury Earthquakes Royal Commission recommendations. The research is coordinated through the University of Canterbury Quake Centre and when completed will feed into Standards revisions. Quality remains a tenet of the concrete industry. This is evident in the NZRMCA Plant Audit Scheme which operates to provide an audit of the quality systems in place at ready mixed concrete plants. During 2016 the Scheme completed its online transition and also underwent amendments.

Cement supply Last year saw the ‘bedding-in’ of a new cement supply model. Golden Bay Cement moved to a different distribution model, which involved a South Island supply chain that uses 500 ISO tanks; a new ship capable of over twice the current ship capacity; and a 6000 tonne storage silo and ship loading upgrade currently

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Opportunities and threats 2017 Over recent years the National Construction Pipeline Report has become a key document in forecasting construction industry activity. If the latest edition proves as accurate as previous versions then: National construction value is forecast to grow to a peak of $37 billion in 2017; and Auckland will account for a third of building and construction, by value from 2015 to 2021. These forecasts, coupled with others from the banking


sector and Treasury, suggest that the medium term outlook for residential and commercial construction remains positive.

“...the Building and Construction Industry Training Organisation, in collaboration with industry, has developed Workforce Development

Concrete industry investment A sign that momentum in the economy is strong is the concrete industry’s recent level of capital investment. In addition to the changes that have taken place in cement supply, trade media is reporting that expected growth, and in turn potential capacity constraints, is a key area of focus. The Hunua quarry in Auckland has received a $30-million redevelopment, and a new $22 million masonry plant at the quarry is due to be commissioned in June 2017. A number of ready mixed concrete plants are also scheduled to begin construction in West and South Auckland. Add to this the opening in November 2016 of a large precast factory in Pokeno and it is clear that expected levels of activity, particularly in and around Auckland, are considerable.

Skills shortage There is a concern however that a skills shortage, influenced in part by a decline in net migration, could threaten the industry’s ability to maximise opportunities. One strategy to address this is to have more people enrol in qualifications. As such the Building and Construction Industry Training Organisation (BCITO), in collaboration with industry, has developed Workforce Development Plans to help create a workforce that has the capability and capacity to meet current and future needs.

Plans to help create a workforce that has the capability and capacity to meet current and future needs.” Another skills related concern, one that impacts on the haulage industry and therefore the ready mixed concrete sector, is the lack of Class 3 and more so Class 4 drivers. This has been an issue for a number of years, particularly in Christchurch, and is now become a limitation as Auckland expands.

Moving forward In summary, 2017 looks to offer growth opportunities for the concrete and wider construction industry in a similar manner to the past two to three years. It appears however, that activity will focus predominantly on the Auckland, Waikato and Bay of Plenty regions. While this brings forecasts of prosperity, it also gives rise to concerns about constraints caused by a potential lack of skilled workers. This will have to be managed carefully, requiring collective responsibility to develop policies and practices that balance the needs of today with those of tomorrow. CP

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Cranes – integral to our development ROD AUTON, CHIEF EXECUTIVE, CRANE ASSOCIATION OF NEW ZEALAND.

National non-residential construction is forecast to increase by 20 percent over the 2016-2018 period peaking at the end of 2018.

WITH THE AVERAGE annual growth in the economy of 3.6 percent for the past 12 months, this is not only historically strong for our sector, but is right at the top of growth performance across the developed world. The construction sector is the underlying driver of this strong growth. The annual National Construction Pipeline Report for 2016 states that the total national construction value has experienced sustained growth averaging seven percent per year since 2011 and is expected to grow at this rate to 2017. Residential building in Auckland accounts for more than half of the construction growth by value nationally. National nonresident building has been forecast to peak in mid-2018. National non-residential construction is forecast to increase by 20 percent over the 2016-2018 period peaking at the end of 2018. Financially significant projects include: Transport projects (Roads of National Significance); Canterbury rebuild and earthquake strengthening; mixed use developments (mixtures of residential, retail, office and parking); and industrial developments (milk processing and timber plants). This growth brings its own set of problems. Booming activity levels, lengthening lead times, shortages of resources including staff, rising costs and some concerns about the viability of some projects are all indicators of a constrained sector experiencing capacity strains. The RLB Crane Index for the second quarter of 2016 stated that projects with cranes in the commercial and commercial sector account for 42 percent of all cranes surveyed and the residential sector accounts for 35 percent of cranes predominantly from multi-use residential projects in Auckland. Net migration climbed to new record highs of over 65,000 to the year ending 2015, with the bulk of arrivals settling in Auckland. This accounts for the strong growth in residential construction in Auckland. A strong tourism market is also driving the need for accommodation and growth in tourism infrastructure.

Advances in crane technology Research and development in the crane industry are being driven by the users of cranes to reduce the size, weight, and costs. Manufacturers are responding to those requests with innovation and thinking outside the box. Computerisation and

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the use of apps on the site are giving manufacturers instant information allowing them to adapt relatively quickly to a changing environment. There is already research being done on robotic cranes, particularly for the port sector. For mobile cranes, some of the key advances in recent times include the ability to deliver higher load capacities over larger working areas through crane support technology. Advanced on-board computer systems allow the operator to monitor all aspects of the lifting process and allow the computer systems to be adjusted to fit specific lift requirements. New boom technology improves boom telescoping capabilities and with the introduction of carbon fibre technology, booms are now stronger and lighter.

Computerisation and the use of apps on the site are giving manufacturers instant information allowing them to adapt relatively quickly to a changing environment.

Tower crane technology has advanced, with research being undertaken in Israel to semi-automate a tower crane. Remote tower crane operation already exists, and the researchers believe by adding an on-board micro-computer, encoders, and sensors that can memorise benchmarks and paths of the hook, and send instructions to the motors then automation is possible. New gantry cranes are modular, adaptable and intelligent. New technology has enabled cranes to be more compact and energy efficient, which will eventually render legacy systems obsolete. Modular technology gives users the ability to change existing features or add new ones depending on the business need. Additional features could include remote diagnostics, maintenance monitoring or automated positioning. New technology enables companies to be more agile and realise larger returns on investment. Truck loader crane technology has changed dramatically since the development of the remote control and now with the development of flexible stabiliser setups and automatically-


corresponding load chart calculation markets will benefit where there is a deeply embedded understanding of the technology and well-trained operators. There is a movement away from knuckle-boom to stiff boom cranes as the truck loader cranes seek greater operating radius and capacity. Truck loaders are the largest by number in the New Zealand crane fleet and can be considered the most versatile.

The economic outlook bodes well for the crane sector, but more work means more staff who are trained and competent and we see a shortfall that is going to be an issue

Moving forward

for the industry moving forward.

In July 2016, the Crane Safety Manual version 3.1 with the updated health and safety information was released, and the manual has been accepted across the industry as a training reference as well as a guide to the industry. There is a constant battle to ensure best practice is followed in the industry and the realisation that undertaking best practice will reduce compliance costs and reduce regulatory oversight. This can only be good for the industry, and the association has provided a new resource for crane owners, users, hirers, operators and dogmen called safecranes. Many have found it too difficult to look through the myriad of websites seeking crane-related information and we have put together this repository that contains most of the information and links to many of those sites that relate to the crane industry. You can view it at www.safecranes.nz. Moving forward, we are likely to see changes across the training, best practice, legislative and regulatory front as older legislation and regulations adapt to the arrival of the new Health and Safety at Work Act 2015.

The Pressure Equipment, Cranes and Passenger Ropeways Regulations 1999 and the Approved Code of Practice for Cranes will need to be amended to meet the H&S requirements soon, and there will be amendments to training with this regard as well. Other sectors, such as the pre-cast concrete and steel erection, will also be making changes to their training, legislation, regulations and best practice and the Crane Association will support these initiatives. The economic outlook bodes well for the crane sector, but more work means more staff who are trained and competent and we see a shortfall that is going to be an issue for the industry moving forward. This year is going to be a year where the construction sector will be growing, and cranes are an integral component of our country’s infrastructure and building sector. CP

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Moving forward in heavy haulage JONATHAN BHANA-THOMSON, CHIEF EXECUTIVE, NZ HEAVY HAULAGE ASSOCIATION

Heavy haulage is an industry sector that accepts continuous change as the norm and this year will be no different. THE NEW YEAR brings a new set of regulatory requirements for transport operators moving oversize loads, which simply continues the theme of continuous change that industry members have come to recognise as normal. The past 12 months have seen a number of changes both directly with transport policy as well as wider regulatory changes that mean that transport operators have to strive to stay up to date with new and updated rules in their operating environment. The role that industry associations play in keeping members up to date is important to ensure that industry members are engaged with the consultation process as well as remaining on top of compliance.

VDAM Rule Convention appears to show that any document that NZTA is involved with needs to have an acronym as the title needs to encompass all the right terms, hence we have the Vehicle Dimensions and Mass Rule, which came into force nearly 15 years ago. The key for the oversize sector is that the Rule contains the specific provisions for why, where and how overdimension and overweight loads can travel on NZ’s roads. While there have been minor adjustments, the VDAM Rule Review was the first opportunity for this sector to have input into a major revision of the Rule. So for the past two years the

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CONTRACTOR PERSPECTIVES 2017

Association and its members have been engaged in a process to enable enhancements that the industry wanted to see. Essentially the provisions in the Rule for oversize loads have been well established for many years – some of the provisions can be traced back to 1978 – but it was with the future in mind that the Association wanted to advance the rules. So the past 12 months in particular have been spent intensively working on the provisions of the current Rule as well as developing our own ideas about how the Rule could be improved to result in operational and safety benefits for the industry. This has included two members meetings earlier in the year to canvass ideas and feedback, then when the ‘Yellow Draft’ of the Rule was produced, a series of teleconferences to talk through the details of the proposals. Finally, five face-to-face meetings with NZTA project staff discussed the concerns and ideas of the Association. This has resulted in a new Rule, finally gazetted in December 2016 that has a number of enhancements sought by the Association, as well as some concessions for extra compliance requirements, but which should result in better safety outcomes. This year will see the application of the new Rule provisions from 1 February and the Association will be assisting both NZTA and members to implement the new provisions in the Rule. We expect that there will some operational aspects that will take some time to bed down and we intend to be at the forefront of ensuring that these are resolved efficiently and effectively.

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Health and safety Last year saw the Health and Safety at Work Act come into force which brought a new focus on safety practices in the oversize transport industry. This combined with a Coroner’s Report and two accidents within the past 18 months caused the industry to take a good hard look at itself. While we believe that there was nothing systemically wrong that caused these accidents, the members of the oversize industry are proactive and are always looking at ways to make the transport of large loads on the nation’s roads safer. This provided motivation for industry members to trial a range of new warning signage and types of displays, while other members have been trialling distinctive marking schemes for load pilots. Our aim is to take forward our learnings from these industry trials with the option for NZTA approval in the new VDAM Rule to provide warnings that keep the industry ahead of the game. The other area of work that has been scoped and planned in recent months is the development of Good Practice Guides for the three main sectors of the oversize industry, namely Heavy Haulage Transportation, Transport of Buildings, and Load Piloting. The aim is to provide guidance to our members about what good practice is for the transporting and piloting of large loads. These Guides will pull together legislative requirements

alongside technical specifications, with good practices detailed to provide a comprehensive document for members to reference in their Health and Safety Policy documents. The documents will not undertake the responsibility for individual companies to identify and mitigate hazards, but will provide a framework as well as detail industry methods for mitigating various risk-related situations that members can refer to. It is expected that these Guides will form a major part of the work programme for the forthcoming months.

Advocacy One of our key aims is to maintain and proactively identify opportunities for the oversize route network. While responding to the many requests to provide feedback about proposed roading projects underway, we also this year want to be proactive to identify those pinch points on the network to lobby to improve the restriction at these locations. The way to achieve this includes involving the input of members and this year we have refreshed the range of industry Area Representatives to provide that local knowledge and on-the-ground feedback. Put together, all these actions sum up to represent that as an industry and as an industry group we are seeking out opportunities to keep ahead of the game and keep on top of an ever-changing environment. CP

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The critical place of water JOHN PFAHLERT, CEO, WATER NEW ZEALAND

The Kaikoura earthquake put the spotlight on the infrastructure around our precious water asset and the need to ensure we build resilience into communities. THE QUAKE HIGHLIGHTED the importance of Civil Defence planning and collaboration between local authorities, engineers and contractors in order to get three waters infrastructure up and running as soon as possible after a disaster. Major earthquakes reveal the necessity to quickly reinstate safe drinking water supply, and then how vital it is to re-establish wastewater infrastructure. But it’s not just earthquakes – increasingly chaotic weather means stormwater systems are becoming more vulnerable. Resilience was the theme of our three-day Stormwater Conference in Nelson where 330 delegates from around the country took part in discussions about what was referred to as “one of the most important issues facing New Zealand today”. At the conference, many spoke about flood prone Christchurch, both pre and post-quake, the damage done to the city and how subsequent heavy rainfall events adversely affected the region, as well as the various models proposed to best cope with future floods. The Christchurch quake has already helped spark a joint venture project between Water New Zealand, the Institute of Public Works Engineering Australasia (IPWEA) and the University of Canterbury Quake Centre. Though still in the early stages, the Evidence Based Investment Decision Making for 3 Water Pipe Networks programme aims to help local authorities find the most cost-effective ways to make the best decisions around the maintenance of water infrastructure. We know that New Zealand faces a multi-billion-dollar liability as drinking water, wastewater and stormwater pipes nearing the end of their useful lives need replacing. This vital infrastructure is worth $50 billion. Yet its replacement is one some local authorities have an “out of sight, out of mind” attitude to. Perhaps that’s not surprising given the competing demands on local authorities when libraries, swimming pools and parks make a much more attractive and visible investment. The Evidence Based Investment Decision Making for 3 Water Pipe Networks programme aims to provide real data to allow community representatives to better understand what they are investing in. It will help them to understand the risk, the value of the asset in the ground, and the balance between resilience and cost. The programme could hold the key for unlocking billions of

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dollars of potential savings for ratepayers. If we could improve decision making by five percent on a $50-billion asset, that’s $2.5 billion of potential savings. This project is linked to the development of metadata standards for water assets that have been worked on over the past year. This government-funded project represents an opportunity, through providing consistent and commonly used standards for infrastructure projects, to ultimately enable better decision-making in capital and operations maintenance and investment. The implementation of these standards in coming years will give an opportunity for collaboration within the water sector, with Water New Zealand playing a central role to achieve our stated aim of a “self-determining future”. The roll out of these data standards is expected to start mid-2017. The past year at Water New Zealand has seen a number of changes made to the way we operate that are relevant for members of the construction industry. Our new modus operandi will see us working in a more collaborative manner with industry and councils, being a stronger advocate for the sector on waterrelated issues and strengthening our technical capability. An organisational restructuring to align staffing with those objectives was completed in 2016. Every year our Association undertakes a benchmarking exercise – The National Performance Review – among councils on how councils manage their three waters assets. We seek information on a range of issues including the following: • How do councils charge for water – through general rating or via targeted rates? • Have councils undertaken a climate change assessment and what are the expected impacts on water-related assets from climate change? • How are councils managing in over-allocated catchments? • How are councils designing their stormwater assets for flooding? Fifty councils participated in the review in 2016, and results are freely available early in 2017 on our website. The other big water issue of 2016 was the contamination of drinking water in Havelock North. Members of our Association and our staff have been assisting Hastings District Council and we are taking an active role in the Government Inquiry into the crisis.


We know that New Zealand faces a multi-billion-dollar liability as drinking water, wastewater and stormwater pipes nearing the end of their useful lives need replacing. This vital infrastructure is worth $50 billion. Yet its replacement is one some local authorities have an “out of sight, out of mind” attitude to. Perhaps that’s not surprising given the competing demands on local authorities when libraries, swimming pools and parks make a much more attractive and visible investment.

Water New Zealand is registered as a Core Participant in the Inquiry. We will be submitting evidence on what changes we believe are necessary to improve performance of the sector for the future benefit of consumers. This matter is likely to be a significant issue in 2017. The Inquiry probably presages the onset of several years of discussion about the appropriate level of regulatory control of the sector and what changes may be required to the existing system. I expect to see changes to regulations governing water supply, treatment, oversight and operational practices in the years ahead. This could well result in the need for local authorities to spend more on public water supply networks. The government is looking at developing a stronger national direction around improving freshwater management and those of us in the water sector need to make sure we’re determining

how that future develops. It’s reasonably clear that the National Policy Statement (Freshwater Management) will have significant implications for the future management of stormwater in particular. Water New Zealand had a very successful annual conference in Rotorua in 2016. Collaboration and customer focus was a recurring theme. We came away with the message that we need to ensure that our stakeholders, including those in the government, know what we are doing and why we are doing it. We also heard about possible new technologies, such as the atmospheric harvesting of water which could eliminate the need for a pipeline reticulation network. It is clear that all of us in the water sector, whatever our role, need to be thinking towards the future and open to new ideas, including those that test our current paradigm about the provision of infrastructure. CP

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On board with Civil Trades DAVID WORSNOP, INTERIM CHIEF EXECUTIVE, CONNEXIS.

A two-year view of the civil construction industry from its Infrastructure Industry Training Organisation (ITO). THE 2016 YEAR was one of growth and development for Connexis

and the wider industry, particularly around Civil Trades. The next 12 months will see more options for employers than ever for the continued upskilling of their employees, and I am excited to be coming on board at such a pivotal time. With over 35 years of experience gained at organisations including Fletcher Construction, Transfield Services, and Watercare, it is interesting to have come full circle from life as a contractor and asset owner to now being involved in the professionalisation of the industry. The ongoing skills shortage, the introduction of the Health and Safety at Work Act 2015, and the release of the 30 Year Infrastructure Plan have all put the spotlight on the importance of a competent, qualified workforce for the civil infrastructure industry. Demand for skilled workers is at an all-time high, with a forecast of an additional 49,000 people required by 2025 to deliver on the planned $110 billion government investment in infrastructure. Civil Trades is a significant step forward in enabling employers to have easy access to a work-ready workforce and provides an unrivalled opportunity for the wider industry to meet the skills challenge. Connexis believes that Civil Trades will change the face of the industry as we know it and we strongly encourage employers to get on board. The introduction of one consistent industry standard and recognised trade will enable employers to get the skills of their existing employees recognised, and to attract new entrants to careers in the civil infrastructure industry. In addition, embracing Civil Trades is one of the most effective ways for employers to meet their increased health and safety responsibilities. In the 12 months since its launch in December 2015 (and the successful pilot scheme with 14 Recognition of Current Competence [RCC] candidates) Civil Trades has gained considerable traction and the number of Certified Civil Tradespeople is growing rapidly. Throughout September, October and November 2016, Connexis toured New Zealand with the Civil Trades roadshow. These events, held throughout the North and South Islands, provided an opportunity for employers and local councils to meet with Connexis to get their questions and concerns answered. Connexis has received more than 100 expressions of interest in new enrolments from employers as a direct result of the roadshow, and this number is increasing all the time. More than 300 people are currently enrolled in qualifications

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with the objective of becoming Civil Trades certified. Our focus on RCC candidates has allowed those with significant industry experience and knowledge to be recognised, and we will carry this on into 2017. The highlight of 2016 was the rollout of a suite of New Zealand apprenticeships for civil infrastructure, which can lead to Civil Trades certification. The timing couldn’t be better as government signalled the importance of investment in industry training with the November 2016 announcement of its target of 50,000 people in apprenticeships by 2020. Connexis also partnered with other ITOs on Got a Trade 2016 – an initiative to promote trades as a viable career option, and attract more young people to the infrastructure industries. Looking at this year and beyond, we will continue to partner with Civil Contractors New Zealand (CCNZ) to boost momentum and industry uptake of Civil Trades. We have just entered year two of a five-year plan for the full integration of Civil Trades into the civil contract process, and by 2020 we expect that Civil Trades will be embedded into Local Government tender attributes. This five-year window will give contractors time to promote, engage and qualify staff on the new Level 4 qualifications and apply for Civil Trades certification. We will also work closely with CCNZ at national and branch level to promote Civil Trades. As competition for job seekers intensifies we will step up our drive to attract new talent to our industries, and to promote civil infrastructure as a legitimate career which will assist with succession planning for the future. We will be working to strengthen stakeholder partnerships and identify opportunities to close the gap between job seekers and employers. We will be providing advice to Ministers on apprenticeships, focusing on what works in terms of entry programmes and how enrolments can be encouraged. We will develop our work with other ITOs on Got a Trade, and will lead the way in gender diversity through the promotion of females into non-traditional roles within our industries through activities under our brand ‘Ultimit – Women in Infrastructure’. The emergence of Civil Trades means that the civil infrastructure industry is now in a stronger position than ever before to meet the skills challenge. While it is not a ‘silver bullet’, the benefits to employers, employees and the wider industry cannot be understated. If you haven’t already done so, then we do hope you will get on board with Civil Trades in 2017. CP


RESOURCES

CONTRACTOR PERSPECTIVES 2017

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Legal report card SAM M c CUTCHEON AND ARIE MOORE, KENSINGTON SWAN’S CONSTRUCTION LAW TEAM.

A report card review of the year that was, a general comment on the industry, and a list of e-things to watch over the next 12 months. IN A NUMBER of respects 2016 was similar to 2015. The civil industry was still performing strongly and there appeared to be a good level of work around. A number of major projects were completed or approaching completion, with many others underway in earnest. Although, when we take a step back it shows that there were also a number of significant developments. In this perspective we have approached our review in the same format as a report card; first a review of the year that was, a general comment on the industry, and finishing with some things to watch over the next 12 months. So let’s get into it.

2016 – Law, law and more law The 2016 year has been particularly notable for the amount of law and legislation which has been changed and/or come into force. There has not been this level of change for many years.

Health & Safety A major revamp to health and safety law meant that everyone stopped and considered their health and safety processes. The Health and Safety at Work Act 2015 came into force on 4 April 2016 and this implemented an important shift towards collaboration and discussion around health and safety issues. While most contractors and principals that we have talked to

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had begun reviewing their health and safety position well before 2016, you would have noticed a shift in the way health and safety are discussed and documented both at tender time and on site. This law change also raised the penalties for breaches of health and safety, although it is too early to see the actual impact of these increases.

Construction Contracts Act This year saw the amendments to the Construction Contracts Act really bed in, particularly around payment claims and adjudication. This trend is likely to continue into 2017. Additionally, from 1 September 2016, consultants have been brought within the ambit of the Act. The Act now applies to all new contracts for design, engineering or quantity surveying work. The effect of this being that consultants will be able to invoke the payment claim/payment schedule process as well as being subject to the Act’s enforcement provisions (debt due and adjudication). If you are engaging design, engineering or quantity surveying work consultants it is important to understand this change.

Building products Earlier this year the Supreme Court held that building products were not ‘building work’ as defined in the Building Act 2004,


and are therefore not subject to the 10-year limitation long-stop under the Building Act. This finding has clarified that claims in relation to defective building products can still be brought after 10 years. This is a significant development in relation to defective products as defects are often not discovered until well after they have been installed. This finding is likely to apply equally to products in the civil works space and has had a number of construction suppliers questions, such as whether the activity they are carrying out would be considered ‘building work’ for the purposes of that 10-year long-stop.

Class actions and direct agreements Sticking with building products, the Supreme Court decision above cleared the path for a number of class actions to proceed against cladding suppliers. There are separate high profile class actions against a cladding manufacturer that are progressing through the courts. The class action is still relatively novel in New Zealand and allows claimants with similar causes of action to join together and have their case heard as a representative action. In late 2015, the High Court found that where a developer enters liquidation, direct payments made by a financier to a contractor could be clawed back through the insolvency regime. This was a significant shift in understanding and has the potential to have a major impact on the way projects are financed. The High Court decision was appealed when the appeal was heard earlier in 2016. We are still waiting for the decision to be released on this appeal and this will be something to look out for in 2017.

Industry comment There continue to be some strong performances and a good level of work around the country. A number of major projects are complete or approaching completion, with many others getting underway in earnest. The industry continues to be a star performer in the economy. However, this means that many areas of the construction industry are at capacity and there is a real resource constraint. This is reflected in the types of questions we see, with a notable trend towards questions about quality, responsiveness, and progress of works. This increased focus on quality can lead to increased disputes where works have not been completed to an appropriate level. This can be a result of the current environment, where the level of demand can easily lead to contractors over-stretching themselves without fully appreciating the additional risk as a result. These pressures are only going to increase as a result of the Kaikoura earthquake and remedial work that is required in the upper South Island and greater Wellington region.

2017 – the crystal ball 2017 will be notable for a number of reasons. First, it is clear that the level of work will continue, and current resourcing constraints will only get more difficult. For starters, the earthquakes near Kaikoura have caused major infrastructure disruption that will need to be remedied sooner rather than later. The government is also continuing with a significant infrastructure programme with a number of projects well underway around the country. Second, the amendments to the Construction Contracts Act that will require retentions to be held in trust are due to

come into force from 31 March 2017 and there is still significant uncertainty around the details of this legislation. Expect to be busy in the first quarter of next year implementing the details of this once they are released. Going wider than simply the physical damage caused by the Kaikoura quake, there are discussions in government around how the Building Code is drafted and how it operates in practice. We are likely to see some kind of legislative activity in this area which will also have an impact on infrastructure. One aspect that snuck under the radar was the long-running reforms to the Resource Management Act 1991. Around the same time as the US elected Mr Trump to lead their country, over here in New Zealand National announced that it had finally received the support from the Maori Party to push through RMA reforms that had been sitting on the cards for a number of years. The Bill is currently being reviewed by the Select Committee and although it will not be the silver bullet some have been hoping for, it will provide some change to an area where change is much needed. Finally, and staying away from purely legal predictions we believe there is likely to be a larger increase in private developments. This will be driven by the current low interest rates and the government’s focus on housing affordability and social housing. So that is our report card for 2016. Overall we would say 2016 gets a solid pass but we are expecting even more activity in 2017. CP

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RESOURCES

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Tackling future challenges ROBERT JONES, CHIEF EXECUTIVE, FULTON HOGAN NZ.

We are a small nation, with global ambitions. Achieving those ambitions means we need to focus on the triple helix of infrastructure effectiveness: productivity; innovation; and collaboration. THE FINAL SCENE in the 1985 film Back to the Future captured the imagination of many kids – including the adult ones – when one of the characters declared that “where we’re going, we don’t need roads”. Cut to their DeLorean car lifting off the ground. That scene hit a fantasy hot button for futurists who believed that flying cars would solve our 21st century urban mobility problems. More than 30 years later, drones are commonplace – but flying cars are still on the drawing board. Meanwhile, electric and selfdriving cars are a big part of today’s chatter about tomorrow’s modes of transport. While it’s easy to get carried away by the wave of optimism about new auto technologies solving the mobility issues plaguing our big cities, there is little doubt that we have entered an era of disruptive change in the transport sector. Like many others Fulton Hogan is committed to researching and developing ways to make our national road network safer, more efficient, and responsive to new vehicle technologies and environmental standards. We want to do all that, while also respecting budgetary constraints and the careful use of tax and ratepayer dollars. We are a small nation, with global ambitions. Achieving those ambitions means we need to focus on the triple helix of infrastructure effectiveness: productivity; innovation; and collaboration.

The productivity challenge Infrastructure productivity is a challenge here, and in most advanced economies. A recent McKinsey report claims that cost overruns for some large international projects average 20 to 45 percent. Fortunately in NZ this is the exception rather than the norm. Often it’s taxpayer money that’s wasted, meaning other projects miss out. But the reality is that construction productivity in many advanced economies is either flat, or falling. The report had a long list of reasons for flat-lining performance. Industry fragmentation, skills shortages, poor planning, limited use of new technologies, and risk aversion were among them – along with ineffective procurement processes and contracts. McKinsey went on to say that “improving project selection, delivery, and management of existing assets could translate into 40 percent savings”. The NZ Transport Agency’s new Network Outcomes Contracts model was introduced with the aim of “efficiency and effectiveness through better asset management and service delivery”. It’s still early days but our gut feel is that this is driving the right outcomes towards smarter asset management. Increased certainty and longevity is a big step towards wiser purchasing and deployment of plant and equipment as we have also seen on operational alliances such as the Auckland Motorway Alliance and the operation of SCIRT in Canterbury.

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The innovation challenge In our age of disruption, we soon grow weary of current technologies and train our eyes on the likely next big thing. The pressure to innovate is huge. There is already a lot of discussion about what we must do right now to get ready for the age of the driverless car. Quite often there is media focus on the shock of the new. Driverless cars sound exciting. But we can’t afford to pin all of our hopes on them. The pragmatic, proven way forward for transport infrastructure – particularly in our big cities – is the same as it’s always been. Give people transport choices by investing in proven technologies like bus rapid transit, cycling infrastructure, rail, and well-maintained roads. Even though it is not exciting or new, we need to optimise the use of our existing assets. It is way cheaper than reconstruction, and helps to keep our cities moving. We can do this by making our existing assets more efficient by investing in smart technologies that we know work well elsewhere. In Europe, for example, there is much that we can learn about managing our roads so they are safer for both motorists and cyclists. At Fulton Hogan, we strive for a balance between R&D, innovation, and collaborating with those who have products and technologies that would benefit Australia and New Zealand.

The collaboration challenge When it comes to infrastructure innovation, we need to decide if we go it alone or leverage global leaders. Kiwis are a stubborn breed. Our long-standing tradition of DIY often comes to the fore when seeking international expertise could save us from the need to re-invent the wheel. Disruptive change is going to present some huge challenges for our sector in the future. We need to apply some fresh thinking to how we get ourselves match fit for new modes of transport. Most of us tend to hunt alone to meet the specific needs of our customers. This is frustrating. We are only a small country, and it’s time our sector came up with a smarter way of doing this. McKinsey identifies the desire to embark on unique projects, or provide unique solutions to clients as one of the factors that can contribute to slow infrastructure productivity growth. It can also discourage contractors and owners from drawing on lessons learned across projects.

The establishment of the National Infrastructure Unit and its action plan was a welcome step in the right direction. The actions outlined in its 2015 report are focused on what central government, local government and infrastructure peak bodies will do to change how infrastructure is planned, developed and managed. But what are those of us in the private sector doing to bridge the productivity challenge that arises from competing to be unique? Perhaps it is time that we engaged in some collaborative disruption on our R&D and innovation efforts. With some mature thinking we as an industry can work together to coordinate and prioritise our efforts to determine what is best for NZ Inc. Over the summer ahead we should all give some time to thinking about the options in 2017 to drive greater productivity, leverage the innovation leaders, and join forces to lift our infrastructure to world class more quickly. CP

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Savvy technology JIM FRENCH, HEAVY CONSTRUCTION SPECIALIST, TELETRAC NAVMAN.

Productivity gains through embracing technology to improve efficiency is the way of the future for smart contractors. PRODUCTIVITY AND SLIM margins have long been issues in the

heavy contracting industry, and there are challenges ahead in 2017. The earthquakes in Kaikoura and North Canterbury will put further strain on the industry, which was already stretched from the Canterbury rebuild, as will demands from Auckland for housing and infrastructure investment, and from weathertightness remedial work. Currently productivity in heavy and civil construction here is generally lower than in other construction sectors, and construction productivity growth here is about half the rate of our neighbours, and Australian construction costs are amongst the highest in the world.1 The Building & Construction Productivity Partnership aims to deliver a 20 percent increase in productivity by 2020 – a very ambitious target. I think the only way to achieve this is for contractors to embrace new technology and new products. The basic tenet of productivity is doing more with less, which has clear financial outcomes for the business through greater profitability. Although there are ongoing issues around inefficient operations, there has been a reluctance to utilise new technology to achieve greater efficiencies, so there is huge opportunity in this area.

Emerging trends Traditionally the construction sector has been less likely to implement new technologies than other commercial sectors and there has been a low level of engagement with innovation and change. But what we’re seeing now is contractors changing how they work in order to pursue higher margin work. For example, contractors are moving away from large excavators in favour of small to medium excavators. Savvy contractors are focusing on how they can better compete and how they can improve productivity in order to win the high margin work. If you think about a complex project in the CBD, the job must be planned and managed so people can still go about their work and move about the city. There are lots of constraints around such complex, high margin projects, including noise pollution rules, restrictions around times of day work can be carried out, and of course, the work being carried out cannot damage existing infrastructure. We’re seeing more contractors realising that in order to

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efficiently manage such complex jobs with higher margins, they need a lot more information. They need data, lots more data, and they need it on a day-to-day basis to help them make decisions.

Putting data to work Making sense of data and using it as an asset is one of the core functions of the software component of GPS fleet management systems. Heavy construction firms can either drown in a deluge of data, or harness it to gain competitive advantage for their business. Such systems draw the data together to help organisations measure and manage things like fleet expenditure and help them leverage their data for KPI based decisionmaking and generate insights into future trends. In the heavy construction industry, there is a need to capture data from both plant and people. What’s needed are systems that can enable enterprises to further drill-down on data and draw out informative insights. A telematics systems allows a heavy construction company to monitor and manage heavy assets and their operators as well as service vehicles and their drivers to ensure efficient and safe usage. The ability to observe the distribution and use of all assets in real time across every single job site regardless of geography, helps companies ensure that utilisation is maximised. It also helps companies pinpoint areas of inefficiency such as excessive idling, poor operator behaviour, or machines sitting idle. Through reporting, such as on fuel usage patterns, asset utilisation, job-site usage or maintenance needs, telematics systems can make sense of the data, and assist managers to operate jobs as efficiently as possible. Maintenance schedules can also benefit from the data-driven approach, allowing companies to determine whether they have over serviced and/ or underserviced vehicles, and enabling them to remedy this.

Remote management and monitoring For some of the more complex, high margin work, contractors also need the ability to manage the job remotely and make data-based decisions remotely. I think that remote management of jobs will become more and more important, as contractors choose to take on more complex jobs. Measurement will also be an issue in 2017. Expert industry commentator David Chandler, OAM, said it well when he commented that: “Construction is often dismissed as being


“Through reporting, such as on fuel usage patterns, asset utilisation, job-site usage or maintenance needs, telematics systems can make sense of the data, and assist managers to operate jobs as efficiently as possible. “

measurement resistant. The reality is that construction companies resist measurement. The institutions of construction make measurement comparison more difficult that it needs to be. This need not be so.”2 In my experience, construction companies often don’t want to be monitored, but if you turn that on its head – by monitoring you can demonstrate what you’ve done, so this is a positive thing. Being able to prove the amount of time worked (through measuring ignition on/ignition off, for example) helps contractors to respond with hard data to any disputes over invoices.

The role of government Another challenge for 2017 is for the industry to reduce the time taken from inception to completion of work. How to go about this? I think that government and local authorities need to be faster to approve works. But contractors also need to be smarter about processes and products. I think it’s useful to look at the Australian Productivity Commission, which recommended that the provision of data should become a requirement in the funding of major

infrastructure projects. Will this country head in this direction? It’s too early to say, but I think that our heavy construction firms should take note.3 Taken together there are many challenges for the heavy construction industry in 2017, but I’m seeing a clear shift amongst contractors toward embracing technology to improve efficiency. Only time will tell how tell how long these initiatives will take to flow more widely through the industry. CP

References: 1.  Construction productivity: An evidence base for research and policy issues (NZIER 2013) and Improved productivity key to a better construction future (2015). 2. Improved productivity key to a better construction future (2015). 3.  Productivity Commission: Inquiry Report Volume 1, Public Infrastructure, No. 71, 27 May 2014.

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Skilled professionals in short supply JASON WALKER, MANAGING DIRECTOR, HAYS NEW ZEALAND

A strong civil market, candidate movement and local skill shortages have combined to create a high volume of vacancy activity.

MOST REGIONS WILL continue to experience an active civil

job market in 2017, but employers will need to take action in response to the scarcity of local skilled professionals. The 2016 year saw an unprecedented investment in commercial construction and transport projects across Auckland. Add the development of areas such as Pukekohe, Pokeno and Hobsonville into new subdivisions, and civil contracting vacancy activity has been, and remains, high. Wellington’s market meanwhile moved forward slowly thanks to new highways and seismic strengthening work, with the M2PP and TG projects in particular absorbing a huge number of skilled workers. In contrast Christchurch entered the next stage of its rebuild and so the heat went out of its civil market. In place of SCIRT (Stronger Christchurch Infrastructure Rebuild Team) work, the active residential sector fuelled civil needs. In fact, net migration and population growth in 2016 put a strain on services across the country, driving investment in a number of new and upgrade projects nationwide.

The year ahead These trends are likely to continue into 2017, with government infrastructure projects such as new roads and bridges adding to an active jobs market.

However, it is the Kaikoura earthquake of November 2016 that will have a huge impact on the civil contracting jobs market in the year ahead. For example, in the week following the earthquake our Christchurch office was called upon to urgently recruit 12 project managers with commercial, residential and infrastructure experience for an insurance company. These people are now managing projects in the Kaikoura area and awarding work to subcontractors. In addition our Wellington office supplied 110 tradespeople and labourers for immediate earthquake clean-up work. These are just two examples of initial staffing needs. While at the time of writing the full scale of damage and the extent of necessary repairs has yet to be determined, there’s no doubt that a large number of civil engineering, construction and trades professionals will be required in 2017 and beyond. In other trends for 2017, Auckland will see the start of the $250 billion City Rail Link, consisting of 3.4 kilometre twin tunnels. Work is expected to continue through to 2023/24 and will create an enormous number of civil contracting job opportunities in the area. Ongoing residential subdivisions will add to vacancy activity. With Auckland-based employers already experiencing a shortage of skilled professionals, many are talking of looking overseas for candidates, particularly the Philippines. Highway work will continue in Wellington in 2017, while the expected commencement of the airport runway extension will add to vacancy activity. Similarly to Auckland, projects have absorbed skilled civil professionals and employers are considering sourcing people from Australia and the Philippines. This shortage of skilled and experienced local civil professionals will be a major challenge for employers in 2017. This includes quantity surveyors and estimators, who have already seen some light salary increases as a result of demand.

With Auckland-based employers already experiencing a shortage of skilled professionals, many are talking of looking overseas for candidates, particularly the Philippines.

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Land surveyors will be needed too, as will project managers with large infrastructure experience. Civil engineers at all levels with strong technical 3D skills will be sought for land development. Many consultancies are either top heavy and require staff at this level to complete the modelling and design work, or do not have enough chartered engineers to manage projects, teams and sign off work. Demand is already so high that employers are prepared to create positions for good candidates. Civil engineers will also be required for infrastructure work on water services and road projects, while senior CPEng level geotechnical engineers will be needed for infrastructure and building projects. Civil tradespeople are in short supply too, especially ticketed machine operators (digger/roller/grader) for new subdivision projects and major motorway and road upgrades. Plant and machine operators with a class 2 licence or above are also sought, as are certified and CCC approved drain layers and senior concrete cutters. Finally, the UFB rollout to new subdivisions has increased demand for senior cable joiners.

The skill shortage In response to the local shortage of civil candidates, employers have started to create a role for those with good experience, even if they are not actively looking. In addition, the scarcity of engineers here with experience may force employers to increase salaries for local talent in 2017.

Already top candidates receive multiple offers and employers will therefore need to move quickly and offer competitive rates if they are to secure their preferred candidate in the year ahead. The industry also needs to encourage more young people to study and pursue civil careers. Perhaps one solution is to give apprenticeships more attention. This is a subject I’ve been talking about for some time, and I passionately believe that gaining technical knowledge and experience in an area of candidate demand is important for a secure long-term career – and this can be achieved through an apprenticeship just as it can through a degree or postgraduate qualification.

We are in a changing world. Disruptive technologies and services, virtual technology, artificial intelligence, 3D printing and self-drive vehicles may well be commonplace within the next 20 years. A number of roles that professionals do today will be replaced. Yet with growing populations, increased longevity and global disasters both natural and manmade, there will always be a need for tradespeople and skilled professionals to design, build and maintain infrastructure, transport, housing, educational and health facilities. Do we need to encourage more parents, teachers, students, employers and jobseekers to recognise the benefits of a civil career? And could more apprenticeships be the solution to bridging the skills gap? It’s certainly an option worth exploring. CP

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Exciting advancements and opportunities ALAN SHARP, BUSINESS AREA DIRECTOR STRATEGIC SOFTWARE SOLUTIONS, TRIMBLE CIVIL ENGINEERING AND CONSTRUCTION DIVISION.

The coming year will deliver exciting advancements and opportunities, from more sophisticated design methodologies, to rapid-to-deploy Wifi connectivity. IN 2016, THE civil engineering and construction industry saw

capital spending decrease and heavy machine sales decline. This slow-down was due in part to the collapse of oil prices, which caused energy companies worldwide to delay projects. Although this market contraction had some impact on the construction technology industry, heavy equipment manufacturers felt the results most acutely. As we look ahead, I anticipate an uptick in construction spending in 2017. In the civil engineering space, the coming year will deliver many exciting advancements and opportunities, from globalisation driving more sophisticated design methodologies, to rugged, rapid-to-deploy Wifi connectivity solutions, to the continued adoption of technology solutions by small contractors. I believe the following five key trends will shape the civil engineering market in 2017.

part by globalisation. Traditionally, designs and models have been tied to a PC, which makes collaboration challenging and cumbersome. We are seeing an increase in the number of organisations outsourcing design work to India, Eastern Europe or Asia where skilled engineering talent is less costly and readily available. The result is a lot of cross-border, cross-time zone, cross-language, and cross-discipline design happening 24 hours a day, seven days a week. Cloud-based design technologies help meet the need for collaborating in a global environment, making model sharing easier and more prevalent. A recent example of this shift is the move of the popular design software SketchUp from the office to the cloud. SketchUp in the cloud, for example, allows a collaborative design approach, data storage in the cloud, and enables multiple people to work on the same model almost simultaneously from anywhere in the world.

Increased BIM awareness and adoption of model-based construction

Leveraging the connected site on large and small projects

I anticipate that we will see significant advancement of BIM – Building Information Management – in the civil construction space in the coming year. We are seeing increased adoption of BIM technology throughout Asia Pacific; in Europe, where government agencies are driving the adoption of BIM technology; and in North America, where Department of Transportation (DOT) agencies are requiring its use for projects more frequently. Contractors at all levels globally are becoming more aware of the benefits of model-based construction, and I believe we will see more engineers and owners moving away from paper design delivery to digital delivery in 2017. In addition, with BIM there’s a push to improve communication among different disciplines when generating models. These groups need to be on the same page to build a common model that’s accurate and can be delivered between various disciplines such as highway or railway design, utilities, structures and landscaping, for example. People want more integrated solutions that can provide real-time information to each party. However, this also requires a change in the requirements around design methodology to facilitate this integrated model approach. We will start to see those changes appear in the marketplace in the coming year.

Over the past five years, there has been growing adoption of what we call the “connected site”, and that evolution is continuing full speed ahead in 2017. The goal of a connected site is a project environment where equipment is connected and communicating seamlessly, and information is being shared on project progress and machine diagnostics, back and forth between everyone involved in a project, both in the field and in the office. In the coming year, I anticipate that contractors will continue to look for opportunities to more deeply leverage their intelligent job site technology on both large and small projects. I also expect that we will see an increase in the number of equipment manufacturers providing factory-fit machine control programmes in the coming year, making it even easier for contractors to adopt machine control technology. And while machine control on the high end has evolved over the past several years, we’re now seeing the demand for the same kind of technology by small and mid-size contractors and for use on compact machines. In addition, as machine guidance and GPS solutions have become simpler, easier to use, and less costly, contractors are realising they don’t have to hire a professional surveyor to get the most out of the technology, whether it’s site positioning technology or machine control. Nor do they have to be a large-scale contractor to be able to afford it in the first place.

Cloud-based design spurred by globalisation Big changes are coming in design methodology, driven in large

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Automated machine guidance can help save a significant amount of money on a job, both in time and in material savings, so the payoff is relatively quick. This is helpful for all businesses, but particularly for small contractors with smaller budgets. I expect to see increasing adoption of machine control solutions on smaller equipment such as skid steers or compact track loaders, especially when used on projects such as sidewalks, bicycle paths, parks, and other small sites that have complex topography.

Site-wide connectivity with Wifi While the speed and availability of cellphone coverage is improving, the cost of cellular service on a job site is still relatively high because contractors must pay for multiple users and assets. This is why new advancements and options to bring high-speed broadband connectivity to a job site, at relatively low cost, is truly ground breaking. Rugged wireless connectivity solutions are already available and being used to manage shipping containers at harbours and ports. Today, these wireless networks monitor inventory and continually process containers across the yard. I anticipate that the civil engineering industry will flock towards this calibre of reliable Wifi hotspot technology. Wifi will become more typical for corrections and data transfer, sharing of data between a machine and a field asset, or machine-to-machine or field asset-to-field asset, and then back to the office as well. These small, rapid-to-deploy Wifi solutions will allow contractors to deploy more technology on the job site, but they will also enable more data-gathering and data-sharing technologies. This will drive greater change in terms of information management, and it will give contractors more flexibility, at significantly lower costs.

Continued advancements in positioning The appetite for a connected site and intelligent construction technology is in part being driven by advancements in satellite or internet delivery of GPS corrections. This is a move away from traditional base station technology where customers set up and operate their own base station, to a service-based model. In the new era of GNSS technology, Positioning-as-a-Service options will give contractors access to accurate positioning and GNSS corrections on-demand. Now we are starting to see those types of services be delivered not just by satellite, but also through the internet. These positioning services will certainly proliferate significant opportunities and new applications for GPS technology. These technology advancements will essentially allow contractors of all sizes to mobilise an entire workforce of people using cellphones with relatively low-cost antennas and services to get centimetre-level positioning accuracy anywhere on the planet, within seconds. This major shift will fuel a whole new generation of application development, and it will let contractors leverage high-accuracy GPS for an even wider variety of constructionrelated tasks. In all, these market dynamics and industry advancements mean civil construction contractors will have access to more sophisticated, digitally-evolved design methodologies, more real-time information sharing, better real-time decision making, and more collaboration across the project site, driving productivity and, in short, giving us a lot to look forward to. CP

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CONTRACTOR PERSPECTIVES 2017

RESOURCES

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Infrastructure contracts – the debate continues ALAN TITCHALL, CONTRAFED

This article was originally published in the November 2016 issue of Contractor magazine and covers a long-term industry debate over the choice of two contracts. And it is a debate that will continue through 2017. THE ONE-DAY NEC workshop was held on October 27, a few days

before the IPWEA-owned RIM conference in Dunedin, and was organised in partnership with Constructing Excellence in New Zealand, which is the NZ licensed re-seller of NEC3 information and currently acts as the secretariat to the Australasian NEC3 User Group. The NZS:3910 Conditions of Contract for Building and Civil Engineering Construction is still the most widely used contract here. Written specifically to reflect our civil construction industry, NZS:3910 was first published in 1984 following a radical rewrite of the previous standard NZS:623. Supporters of NZS:3910 say it has been developed (and regularly reviewed) collaboratively by industry peers (clients, consultants, contractors, insurers, lawyers) and has benefited from many revisions – generally at five-year intervals. Each revision has followed an extensive industry-wide consultation period. The latest revision of NZS:3910 accommodates the Construction Contracts Act 2002 (CCA), which is not covered by overseas standard forms of contract. For instance, a main component of the CCA provides processes for payment and dispute resolution (it is illegal to contract out of the Act). However, over the past decade, with an influx of engineers from overseas (particularly the UK) there has been a push to use alternative forms of contracts that are held up to be ‘relational’ contracts. NEC says it is gaining ground in the Australasian region with the use of its contracts, especially among local councils. Recently, the Horowhenua District Council appointed local contractor Caldow Builders under an NEC3 Engineering and Construction Contract (ECC) option D (target contract with bill of quantities) to build a new $4.3 million community centre in Foxton Project manager Marc Palmer says: “NEC’s strong cooperative principles and its tried and tested target cost provisions were central to the council’s decision to select ECC. “The contract also aligns with the community-driven project’s aims to maximise collaboration between the key groups supporting it as well as harness the skills and capacity of the community.” Other major projects that have adopted NEC3 include Watercare’s Hunua 4 project in Auckland – featured in this issue on page 32 – the Christchurch Art Gallery re-levelling project (featured in the October 2016 issue of Contractor); the Waitaki hydropower station refurbishment; and the Mill Creek wind farm.

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CONTRACTOR PERSPECTIVES 2017

Despite this, many in the contracting industry believe that NEC contracts will never improve upon the Kiwi-designed NZS:3910. Says Malcolm Abernethy, executive officer with CCNZ: “NZS:3910 was written by Kiwis for Kiwis and developed collaboratively by all sectors within the construction industry. “On the other hand, NEC was developed in the UK as a result of their dysfunctional contracting industry and litigious approach to contracts back in the ’90s or very early 2000s.” Malcolm says the local industry is relatively small, which requires contractors to have a “mature” approach to contract relationships. “As a result the industry is generally collaborative and has to be if the contractors and clients want to work together in the future.” He also notes that Horowhenua District Council a couple of years ago used NEC on a water maintenance contract and then retendered it as a NZS:3910. Gallo Saidy, group manager Infrastructure Services for the council says the three waters NEC maintenance contract is actually still in place and doesn’t expire until June 2017. “In the past the intention was to go about to tender using a simpler contract such as the NZS:3910, but the existing contract got extended for another two years. I can say (though) we will not be continuing with NEC.” Joe Edwards, an operations manager at McConnell Dowell Constructors, says NEC3 needs to be adapted to comply with New Zealand law using special conditions, while this is not the case for NZS:3910. “NEC3 does limit overall risk exposure on contracts by allowing a cap on liability and excluding consequential loss, and this is being adopted by some clients using NZS:3910. I believe there are now a number of litigations that are coming through in the UK over NEC3s.” Joe also notes that the NZTA, the country’s largest procurer, works exclusively with NZS:3910. “NZTA has also developed, and continues to expand, the collaborative contracting approach throughout its work. Watercare Services used to use NEC3 and has now reverted back to NZS:3910.” To work effectively, NEC3 imposes a number of key obligations on the client’s PM, says Joe, which is an area often not well managed and can be overlooked. “A key issue with a number of contracts put to the market is the


special conditions imposed and the implications of these. The reasons for including special conditions vary, but generally they move risk from what was the intent in the General Conditions of Contract. This in itself changes attitudes. “A contract I saw recently had a milestone payment clause proposed where the contractor would be significantly cash negative to a high percentage of the overall contract value, and for the majority of the contract. This is not collaborative and the general conditions of contract allow these changes. “Hence, a key aspect of collaborative contracting starts with the willingness to work together, have special conditions that match this, and a knowledge that the way the current contract goes will impact on the winning of future contracts.” Contract consultant Chris Olsen says he is not surprised to see NEC contracts picking up here. “NEC’s strength is that it includes formal contractual obligations and systems around collaboration whereas NZS:3910 and Conditions of Contract for Consultancy Service (CCCS) rely informally on a collaborative ‘culture’ only. “Some of my old Roading New Zealand members used to say that the NZS:3910 Conditions of Contract operating in a collaborative culture always went to custard when the real heat came on, whereas NEC has processes that keep collaboration working.” Dave Jewell from Bond Contraction Management says that while it is often stated that NEC is a ‘cooperative’ or ‘collaborative’ contract, this is wrong. “It is not correct to describe prescriptive notification requirements and strict communication protocols as ‘collaborative’. “While these are good disciplines in any contract, it is my view that NEC3 is no more ‘collaborative’ than NZS:3910. Collaboration is an attitude that the parties bring to their contractual relationship – it cannot be prescribed in a contract form that assigns risk to each party, and leaves each to the commercial consequences of those risks.” A feature of our market is that it is small, and poor relationships and/or poor performance on contracts become common knowledge and can be a significant factor in securing future work, says Dave. “So the parties work hard to maintain effective relationships,

and in that context, NZS:3910 serves everyone very well.” NEC3 also requires greater discipline with the management of the contract, he adds. “There are requirements for notifications and communication that apply equally to both parties, and NEC3 contracts can come unstuck if that management input is missing.” Dave concedes that NEC3 has one clear advantage over NZS:3910 – in that it is a suite of contracts for different situations and parties. “While NZS:3910 has recently added a D&C version (3916), NEC3 has standard forms for just about every construction contracting situation.” David Langford at New Plymouth District Council believes the industry will see more NEC contracts being used in the future. “There are some large local authorities, such as Christchurch City Council, that have been big NEC users over the past few years. As more and more clients deliver successful projects using the NEC form of contract, its profile increases. “New Plymouth District Council’s new Infrastructure Professional Services Contract is the first time we have used NEC. While our contract is still in its early stages, we are already seeing positive results, in particular regarding a strong swing towards a more collaborative working environment with our consultant.” David says he has extensive personal experience of using the NEC2 and NEC3 contract documents in the UK, plus experience with other contracts forms such as ICE sixth and seventh editions in the UK, and NZS:3910 here in New Zealand. “Over the years I have developed a strong preference for the NEC suite of documents due to their balanced nature, encouragement of collaborative working, flexibility, and stimulus of good project management practice. I say this having experienced working with the NEC contracts as both a client and as a contractor.” However, he also believes there will always be a place for NZS:3910. “As a client, I believe procurement is all about choice, which includes having a choice about which form of contract is going to best deliver your project objectives. As such, I very much see NZS:3910 and NEC3 sitting alongside each other to give project managers that choice.” CP

CONTRACTOR PERSPECTIVES 2017

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Last word KEVIN LAWRENCE, EDITOR CONTRACTOR MAGAZINE

WHEN YOU VISIT a casino all you have to do is understand how to beat the odds. For sure they may be stacked against you, but that’s the thrill of the game. To beat the house. When you buy a house, all you have to do is pay the mortgage on time, and the market will reward you when it’s time to move on. When you set up a business, all you have to do is understand how to beat the competition. Work faster, cheaper or smarter than your competitors, and you’ll do well. But these outcomes are only assured when there’s the proverbial level playing field. All it takes is the unbalanced roulette wheel; the builder using inferior products or unqualified labour for the home-owner to end up losing most, if not all, their equity; or the uncontrolled middle-manager offering (or accepting) undeclared incentives to sweeten the deal to the exclusion of a competitor. There are winners beating losers in every part of society every day. We’ve been told that if you could eat or drink an ‘incentive’ or gift in a day, it didn’t used to be considered either a bribe or corrupt. Unofficially, that’s probably still relevant, and gift registers should take care of that. But there are plenty of ways boundaries of good practice can be stretched that don’t include bribes, yet could never be considered saint-like behaviour. Because the pressure to perform better or faster, be accountable and transparent, and compete against different cultural mores is hard for everyone to ignore all the time. And some do bend rules. We know this. After all, it’s not a long walk

between “milking the asset” to “milking the goose that lays the golden egg”. BNZ Economist Tony Alexander reckons growth in New Zealand is forecast to average almost three percent per annum over the next five years, and fiscal surpluses seem assured, even after the cost of the Kaikoura earthquakes have been taken into account. And so what happens to our ability to handle these productivity pressures when the current economic boom takes a down-turn, as it inevitably will. It’s our systems that need to be sufficiently resilient. Good asset management knowledge and data. Open systems that can be accessed by many, not just a select few. And hiring practices that clearly state what’s acceptable, and why. It’s a reality that the ascendency of Asian economies over recent years means we’re increasingly dealing with people whose views of the world don’t match our own. As a case in point, there have been pockets of excitement created by the news that a record 64 tower cranes were operating in Auckland at the end of the year, according to the RLB Crane Index. To put that into perspective, I recently counted 30 tower cranes working on just one building at the Shanghai airport. Our work practices may not always match, but then again Shanghai has also built over 600 kilometres of incredibly efficient suburban underground railways in a little over 20 years. Auckland is still booming: but we’d better get used to our changing place in a changing world – and the changing pressures on our business culture that will bring. CP

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