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Prefabricated components have been used in the construction of terraced homes at the McLennan Development, situated between Papakura and Takanini in south Auckland

KiwiBuild attracts international interest –
By Dave MacIntyre

Companies from across the world have thrown their hat into the ring to help support the delivery of 100,000 new affordable homes over the next 10 years under the KiwiBuild initiative.

KiwiBuild is the NZ government scheme to accelerate the supply of affordable homes. Initially, the government’s targets included 1000 homes by mid-2019, 5000 homes by June 2020 and 10,000 homes by June 2021. However, in late January this year, the minister announced these “interim targets” would be scrapped and the government would “recalibrate the programme”, although the target to build 100,000 homes over 10 years would remain.

While the scheme has met with some controversy and political debate, work has been going on in the background to prepare for the future.

Offsite manufacturing

In September, an invitation to participate (ITP) was launched to companies interested in working with KiwiBuild to supply homes and housing components to the KiwiBuild programme through offsite manufacturing (OSM).

OSM could offer a real step change in the availability, quality and cost of affordable housing, in terms of innovation and scale. It is seen as having the potential to significantly increase the output and productivity of the residential construction centre through modular construction, while also reducing costs and increasing speed of construction.

Modular buildings and homes are prefabricated buildings or houses that consist of repeated sections. ‘Modular’ is a construction method that involves constructing sections away from the building site and then delivering them to the site to be pieced together.

The ITP is seen as an important stage in the procurement process to deliver large numbers of affordable homes using offsite manufacturing. The Ministry of Housing and Urban Development (HUD) says a key objective of KiwiBuild is to foster innovation and increase the capacity of the construction sector while reducing the cost of building new homes.

“Offsite manufacturing is an important tool in this process. It can deliver high-quality design while speeding up the supply of new homes to the market,” a HUD spokesperson says. “While the first KiwiBuild homes in Auckland are already on the market and we have deals with a number of developers around the country for hundreds more over the next 12 months alone, offsite manufacturing has long been identified as a potential game-changer.

“There is a real opportunity through 
KiwiBuild to leverage the procurement power of the government and drive productivity and performance gains in the residential housing sector through appropriate offsite manufacturing housing solutions.”

The next stage

The ITP closed in November last year with 105 responses received. KiwiBuild has now invited 44 respondents to proceed to the next stage of the OSM evaluation and present their proposals in the first part of this year.

Discussions will begin in July. KiwiBuild expects the majority of commercial negotiations and contracts to be finalised by the end of this year.

A KiwiBuild spokesperson has told NZ Construction News that responses have been received from companies in Australia, Asia, North America and Europe. “The responses have come from a variety of organisations, ranging from large domestic and international firms to small businesses. The standard of proposals was high. The proposals that are being taken forward to the next stage best match KiwiBuild’s objective of developing large-scale, transformative projects.

“There may be opportunities for firms whose proposals are not advancing through the ITP to work with KiwiBuild and other NZ government building programmes in other ways, and we will work with them to do that as appropriate,” the spokesperson says.

Less prescriptive

The ITP was open to suppliers to present proposals for delivering modular homes. Proposals had to be within the KiwiBuild parameters and include elements of design, manufacturing and assembly.

Consistent quality was a high priority alongside the other inherent benefits that OSM should offer, such as reduced construction costs and speed to market, and to encourage flexibility the procurement process initiated by the ITP was designed to be less prescriptive than traditional processes, enabling a high degree of interaction between KiwiBuild and respondents.

Asked what KiwiBuild was mainly looking for from the ITP, the spokesperson pointed to “new construction methodologies, scale not yet seen in New Zealand, and new business models. At this stage, we cannot go into detail on the ideas put forward for reasons of commercial confidentiality.”

Now, a period of negotiation will be undertaken with successful respondents to work through terms of engagement, the duration of which will be determined by the scale and complexity of the proposal.

“We have asked the firms to present to us in person in a two-hour meeting and be ready to answer detailed questions on their proposal, and to supply up to 45 pages of written materials to support their presentation,” the KiwiBuild spokesperson says.

“Following evaluation of the presentations, there will be a dialogue phase. The duration of the dialogue phase will depend on the complexity and scale of the presentations, but we anticipate the majority of commercial negotiations and contracts will be finalised by the end of 2019 (subject to the course of negotiations arriving at agreeable terms for all parties).”

Alternative solutions

The flexibility in the ITP process may lead to alternative solutions – unsuccessful respondents may choose to partner with the programme in other ways. “We anticipate many of these firms will participate in any other activities we might look to initiate that encourage greater OSM uptake across the industry, including the building of KiwiBuild homes,” says the KiwiBuild spokesperson.

“Other potential avenues include offering proposals for the KiwiBuild Buying Off the Plans and Group Home Builders procurement processes, and supporting large-scale developments to be further enabled in the future by the recently-announced Housing and Urban Development Authority.

“We also received some proposals that were out of scope or were not yet at a stage in their commercial development to warrant further advancement at this time through this procurement exercise. For these firms or consortia, there may be an opportunity for us to assist with referrals to other arms of government which could be interested or better placed to support them than KiwiBuild is at this time.”

A unique opportunity

Overall, KiwiBuild is pleased with the number and quality of responses to the offsite manufacturing ITP. “We are confident that this process will lead to agreements that will help KiwiBuild deliver on its targets and grow the residential construction sector,” the spokesperson says.

“KiwiBuild offers a unique opportunity to transform the residential construction sector. In the past, the boom-bust cycle has made it hard for companies to invest and grow. By offering large, dependable demand for housing products, KiwiBuild can give firms the confidence to upsize and increase their investment in technology and plant for offsite manufacturing.”

Dave MacIntyre is an award-winning journalist who specialises in transport and infrastructure issues within New Zealand d.macintyre@xtra.co.nz

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