The construction industry faces multiple challenges.
Terry Buchan is the General Manager of Major Projects at Hawkins Construction Company.
OPINION: New residential construction in Aotearoa New Zealand is plagued by a “perfect storm” of problems: record demand, labor shortages, supply chain uncertainty, soaring material costs.
Across the country, builders and contractors struggle to keep all the balls in the air, while owners wince when their deadlines and budgets explode.
Solutions (like so many building materials) are rare. In commercial construction, best practice models developed by industry leaders may be the way forward.
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By having your contractor and subcontractors think and act more like a commercial construction company, you can navigate and mitigate the worst effects of the “perfect storm” that will otherwise slow and increase the cost of your new construction.
The elephant in the room (still unbuilt) is a risk. Or more precisely, who owns the risk? At Hawkins, we deliberately launched a tender to move as far away as possible from fixed-price contracts, where traditionally the risk of rising prices is held by a single party.
As a future owner, you may feel like you’re “winning” with fixed price contracts. But the cost to you, and to New Zealand, is unsustainable. No one in the construction industry, whether a sole proprietor or a multinational construction company, can afford to absorb ever-increasing costs. Businesses fail, demand exceeds supply, and prices rise. The end result is fewer homes at higher prices.
Hawkins took a different approach. Rather than trying to better calculate risk (crystal balls are hard to come by in the midst of a global pandemic), we choose models that share risk more evenly between client, prime contractor and sub-contractors. contractors.
Two-stage bidding contracts with a pre-agreed margin and fixed preliminary and known general (P&G) details. Trades are then progressively allocated according to design to minimize delays in pricing during procurement. This model allows for the early purchase of longer-term items and generates certainty in the market.
The second thing new home builders can take from Hawkins’ playbook is early contractor involvement (ECI). This is easily done in a two stage tender contract and means that you will run your design and procurement in parallel while getting input from the contractor and specialist trade.
Without ECI, owners are essentially choosing from a catalog with outdated prices. Yes, you may be able to afford the cost of that Italian tile today, but how much will it cost in a month when your contractor comes on board? How much will it cost when the tiler orders it once the frame is up? How much does the project cost when supply chain issues delay its arrival and everyone has to shut down their tools for weeks?
ECI helps all parties, from the architects and designers to the main contractor, sub-contractors and of course the client, to better understand what the real material costs and delivery times are and to make better decisions accordingly.
ECI leads to better planning, better decision-making, fewer delays and lower costs – and not just for individuals. Avoidable delays hit trades in the pocket and make consistent job offers farther away, more attractive.
At a time when our borders are closed and demand for new homes is at record highs, we simply cannot afford to send our New Zealand-trained workers across Tasmania.
The other thing New Zealanders may no longer be able to afford is bespoke design. Commercial construction has already moved closer to the European and North American model where you choose from a smaller set of standard fronts and finishes (still premium).
This does not mean that we have to live in houses that all look the same. Individual style can be created where materials are not integral to structural design and weather sealing. But significant savings can be made because materials can be imported in bulk, in advance.
These are difficult times and many things will remain beyond our collective control for some time to come. However, by sharing the risk more equitably, working more collaboratively from the start, and standardizing certain aspects of design and materials, New Zealanders will be able to afford to continue building the new homes we so desperately need and need. we want.