The Government has reached a “reset or death” fork in the road with its procurement policy, according to Senior Ministers.
This comes after some of the building industry’s biggest players called on the Government to use its 20% stake in the market to address some of the issues in the sector.
The Government Ministers responsible for building, infrastructure and procurement met with building industry representatives on Monday, following the “spectacular collapse” of Ebert Construction last week.
“This is a health episode,” Minister of Infrastructure Shane Jones told media after the meeting.
“And when a health episode strikes either an organisation, a sector or an individual you do a reset, or you contemplate certain death.”
Minister of Housing and Urban Development Phil Twyford says it’s time the Government “took a hard look at [its] approach to procurement… to help the industry get back onto a stronger footing.”
The first step of this reset is reassessing procurement guidelines.
The Ministry of Business, Innovation and Employment (MBIE) does have procurement guidelines, Minister of Building and Construction Jenny Salesa says.
“Unfortunately, they’re not something that every business takes into account or adheres to and it’s not compulsory.”
Salesa said she would be be taking an “oral item” to Cabinet on Monday afternoon, where the reset in the Government’s procurement policy would be discussed.
“One of the things we would like to ensure is that ministries and agencies adhere much more to MBIE’s Government’s procurement guidelines,” she said.
This could involve requiring agencies bidding for Government contracts to provide evidence that they have taken the new procurement guidelines into consideration during the contract’s negotiation.
Most vertical sector contracts in the market belong to the private sector, with Central Government holding roughly 20%.
But, given some of the issues in the industry, Jones says some of the “good players” are calling on the Government to do what it can to influence better practices.
Calling a spade, a spade
“Let’s call a spade a spade,” Jones says.
“We have had Ebert, we have had the red ink from Fletchers – we’re not ignorant to the fact that there is a lot of pain and pressure there.”
Also with the Ministers was Master Builders’ Chief Executive David Kelly, who said it was time for his sector to “step up.”
“The larger commercial sector does have some problems at the moment, I don’t think that’s any secret.”
He says Salesa taking this issue to Cabinet was “a good start.”
“We need to start with simple things we do right now… If the Government sets the scene, others will follow.”
He says there has been a general trend over quite a long period for a lot of players to go for the least cost model.
“Unfortunately, far too many construction companies have ended up buying into that system.”
Kelly says new procurement guidelines will be released to its members next week.