Construction industry in urgent meeting with government ministers over sector problems

Some Government agencies aren't following guidelines when negotiating big construction projects and there are fears the problem could deepen a growing crisis in the building industry.

Prime Minister Ardern said after Cabinet today that she was awaiting more information from Building and Construction Minister Jenny Salesa as to whether any further action was required.

"We need to lead by example and if there are things that we can do to take a leadership position with that industry then we should be," Ardern said.

Government-procured construction makes up around 18 per cent of the vertical construction sector and Salesa today said all Government agencies would be reminded of the rules around procurement.

Salesa met with building industry representatives at Beehive today, together with Housing Minister Phil Twyford and Infrastructure Minister Shane Jones.

"One of the things we would like to ensure, moving forward, is that we ensure that our ministries and our agencies adhere much more to MBIE [Ministry of Business, Innovation and Employment] government procurement guidelines," Salesa said after the meeting.

"We're also looking at a reset. One of the things in terms of contracting in the government sector we have not always adhered to is having a whole of life approach. So we're looking, moving forward, at getting some advice from MBIE about what we should as Government, taking a leadership position to reset this."

Salesa said a possibility was government agencies having to produce evidence that the procurement guidelines had been taken into account during contract negotiations.

About 97 per cent of contracting was done by the agencies themselves, so a broader government approach was needed and more ministers needed to get involved.

"This is a whole of government approach. There are many other sectors in government that have their own contracting processes," Salesa said.

Master Builders chief executive David Kelly, who convenes a vertical construction group, said it was no secret the larger construction sector had problems.

"We as a sector need to step up, so we're undertaking some work ourselves around guidance to our members, to really understand the risk they're taking on, to think harder about what they're signing up to. We do need to address some issues around the margins that contracts are being tendered for."

Jones likened the issues facing the construction sector to a health problem.

"When a health episode strikes either an organisation, a sector or an individual, you do a reset or you contemplate certain death."

"How do we effect a reset while not endangering taxpayer liability but giving greater confidence to the construction sector, and it's linked to the work that Phil Twyford and I are driving in terms of the creation of an independent infrastructure entity that houses the best quality of advice the Government can get."

Twyford said although government contracts were a minority, the Government had an obligation to lead by example.

Jones said there was a lot of pain in the industry, with Ebert Construction going into receivership and Fletcher Construction withdrawing from high-rise after nearly $1b losses over two years on big jobs.

National leader Simon Bridges said the Government was getting involved in the construction industry as compensation for "stuffing up" the market with overseas investment changes and immigration uncertainty.

"What they're going to do by effectively paying more for construction projects like the Kiwibuild and the trams is spend more taxpayers' money," Bridges told reporters.

But National was open to seeing what the Government came up with, he said.

"Lets actually see if Shane Jones, Jenny Salesa, and this Cabinet come up with something here that's sensible and deals with some real issues in the construction sector.

"But throwing more taxpayers' money at it, I'd be pretty cautious about."