The government has announced only some 30 shovel ready projects. Photo / 123RF
The government has announced only some 30 shovel ready projects. Photo / 123RF
COMMENT:
Despite the promise of the 150 Shovel Ready projects, many more need to be confirmed now to provide the stimulus needed to keep the construction sector alive and 250,000 people in jobs, writes Gary Walker.
The construction sector is one of New Zealand's biggest engine rooms – the $42billion of activity across vertical, commercial, residential, and horizontal (or infrastructure based) construction is critical to the health of the overall economy.
This is primarily through 250,000 jobs and billions of dollars flowing through thousands of suppliers, contractors, engineers, advisors, and small businesses who all support and are part of the construction ecosystem.
Not surprisingly, the impact of Covid-19 has seen more than 200,000 construction workers receive the wage subsidy which has been a lifesaver during lockdown, but this will end in September.
The clock is ticking to ensure that when the wage subsidy ends there is enough construction work in the pipeline so that these workers keep their jobs.
The announcement of the $3b of 'Shovel ready' projects in May was received positively by many in the industry as one welcome initiative to stimulate the construction sector with infrastructure work that could span public/private projects and keep tens of thousands in work.
Almost 2000 applications were received by the Infrastructure Reference Group (IRG) and from a shortlist of 802 projects presented to ministers, 150 projects were then approved by Cabinet.
While the government has announced only some 30 shovel ready projects, it looks like they are drip-feeding them out as we run up to the election on October 17.The government set up the Infrastructure Commission that has responsibility of issuing a pipeline of work for the New Zealand market. The premise of a pipeline is to give the market the ability to plan and ready itself for delivery.
A shovel-ready drip feed approach flies in the face of the fundamental principle of a pipeline of work.
We know that the delay in confirming these additional projects is already having an impact as people in the construction sector are losing their jobs as employers cannot operate without a degree of certainty that there will be work to do.
October's election adds to the uncertainty, and presents a risk for even more delays in announcing further shovel ready projects.
Post-election negotiations between political parties to form a new Coalition Government could stretch into November. By then many of the 250,000 construction workers may be unemployed.
Recently, the University of Otago announced that a planned $170 million, six-storey building as part of its Christchurch 'campus' could be placed on hold or reassessed if government support does not eventuate.
The project was one of five shovel-ready projects submitted to the Government's infrastructure industry reference group and will employ hundreds of workers including around 159 businesses across construction, consultancy, and supplier industries.
The new building will be home to research groups, studying cancer, heart disease and mental health conditions, laboratories, and nursing students.
The University justifiably decided to go public because despite having approval for the business case it has still not had confirmation for the 25 per cent of the estimated $170m project cost it had applied for from the $300m for shovel-ready projects allocated to Canterbury from the $3b Covid-19 recovery infrastructure fund.
Perhaps there is a plan to announce the list of confirmed additional shovel ready projects across New Zealand but the time is now if the Government and Minister of Finance Grant Robertson want to deliver the certainty the construction sector has needed desperately for several months.
Pleasingly, last week the Government with help from the Construction Accord announced the launch of the Rapid Mobilisation Playbook which is designed to fast-track construction and shovel ready projects.
Gary Walker, chairman of the Construction Strategy Group. Photo / Supplied
The Playbook is meant to help those organisations and project teams that lack experience on large-scale projects information to help guide them.
While the intention of the playbook is meritorious, the reality, however, is that time is of the essence and the construction sector needs the $3b shovel-ready fund projects to be confirmed now so that planning and resource allocation of tens of thousands of jobs can be made with good foresight.
Most of these multi-million-dollar projects require detailed significant project management time to organise all the necessary parties from designers to contractors needed to ensure work can commence.
Delaying this means a flow-on effect that will grow exponentially throughout the entire construction and building supply chain as cashflow is impacted and forward decisions around employment are made.
The lack of certainty is causing many in the construction sector to start planning for additional redundancies.
It is somewhat ironic given there is a list of other projects that have been approved but not yet confirmed publicly by the Government.
So hopefully the playbook will allow the list of confirmed projects to be announced soon as any more delays like we've seen in Christchurch, which see tough decisions being made that will cost jobs and put the construction industry even more on the back foot. Let's get on and just do it – the time is now or never.
- Gary Walker is the chairman of the Construction Strategy Group.
