Interesting times
By Kieran Shaw, CEO, Association of Consulting Engineers New Zealand

While it might seem difficult now to take positives from the global economic crisis, the consulting engineering and wider construction industry may eventually look back on this period as vital ‘breathing space’. The CEO of a large engineering firm recently said to me, “time to take a breath, take stock, and look for opportunities”.

At the ACENZ Conference in August last year, Tony Alexander, chief economist, BNZ, was among the first to predict the looming credit crisis and he urged companies to use the recession as an opportunity to re- position for the future.

The industry has experienced a lengthy period of high demand while facing escalating skills shortage and critical issues regarding upskilling.

The most frequent concern expressed to me since I joined ACENZ over two years ago has been about lack of appropriate resources.

Now, with some skilled staff likely to become available, companies could grasp the opportunity to take a long-term view and boost relevant resources, potentially benefiting their business for years to come. Certainly it will be firms that are robust, well managed and with good understanding of cyclical ups and downs who will be in the best position to take advantage of the situation.

In November, I talked to a selection of ACENZ small and medium size member firms across the country. While reporting a downturn in the residential, small commercial and land development sectors, most had work to carry them into the middle of 2009.

Many also reported that not being over-stretched for the first time in a long period, made it easier to meet client targets, and foster valuable relationships.

As well as strategic recruitment and staff development opportunities, the recession provides the chance to consolidate, focus on internal efficiencies through prudent management, and enhance capacity and capabilities.

Some firms reported that the effect of a ‘first recession’ on young professionals, with the inherent impact on bargaining power and security, has had a positive effect on internal relationships and intergenerational communications.

The Government’s planned steps to stimulate the economy, including identifying funding sources, reviewing the RMA and Building Act and bringing forward planned infrastructural programmes, are very positive.

It is crucial to the national economic recovery and to ensure the retention of skills, resources and capability in the wider construction industry, that the Government rapidly instigates the infrastructural spend with a long-term and sustainable investment strategy.

The outlook for local government infrastructural spending looks more restrained. As drops in real estate value bite, councils’ ability to fund planned works will be impacted by reduced rates, and their ability to raise credit.

We would like to see Rodney Hide, in his role as Minister of Local Government, encourage local government investment, and divert non-core service expenditure into essential infrastructure developments.

Improved networking and communication can be another benefit of the current climate. Engineers are not acknowledged to be the best communicators – but one of the biggest handicaps to productivity in the construction industry is fractionalisation and poor communication amongst the sectors. All members of the industry need to communicate more effectively and share knowledge and best practice to benefit the future of NZ construction.

In particular, engineers need to work more closely with contractors and, to this end, ACENZ has been forging closer bonds with contactor organisations. Our members face similar challenges, including shortage of resources and the need to up-skill and develop staff. There are real advantages in looking at those issues collectively.

Over 30 organisations from various sectors of the industry are represented by the Construction Industry Council, and there is a growing commitment among these industry leaders to work more closely together.

The financial crisis has caused many organisations to reflect upon their current performance, and to develop key strategies for the immediate and longer term future. This period of ‘interesting times’ provides a potential for the industry to become more consolidated and efficient, to work more cooperatively and holistically together, and focus upon improved and sustainable productivity.

The term sustainability is widely used in terms of environment, buildings or design but we also need to look at the sustainability of the industry as a whole. There will always be peaks and troughs when workload and demand vary. Sustainability means a strong construction industry that is able to collectively withstand these movements, and will be proactive in ensuring they do not impact so severely in the future.

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Nervous times - positive signs

By Richard Michael, chief executive of the Construction Industry Council

While few areas of business will have remained untouched by the global financial slowdown, the construction industry has been hit particularly hard. A major reason for this is that construction is about housing, Sub Prime was all about houses and so the Sub Prime crisis and construction are inextricably linked in most people’s minds.

So, while banking communities have currently closed their doors on a lot of investment, they have closed them particularly firmly on the construction sector. In some parts of the world there is a perceived over supply of housing stock – many people have lost their homes or walked away from them.

That has not happened in New Zealand but the legacy of international events has led to a reluctance by banks to invest in construction per se. This effect has extended to the civil sector too but the property development market has suffered most of all. read more