insight

Big Build

01 July 2021

Big Build is our quarterly publication tracking legislative and regulatory reform and other developments affecting the construction and infrastructure sector. 

Some of the key highlights we touch on in this publication include the new construction procurement guidelines, a prospective timber-only policy for the state sector, proposed changes to the Licensed Building Practitioners scheme, and the passage of the Building Amendment Act.

We also look at the proposed GPS on Housing and Urban Development, the local government review, MBIE’s summary of the submissions it received on its two emissions mitigation frameworks, the 30 year strategy being consulted on by NZ Infrastructure Commission Te Waihanga, and the creation of four entities to implement the Government’s Three Waters Reforms.

 

 

Contents

Construction

Government and regulatory

Industry

Infrastructure

Construction

Government and regulatory

New construction procurement guidelines

The Government has released new construction procurement guidelines for the state sector. They include: standards of good practice, how to set up a project for success, analytic and assessment tools to match capability to complexity, how to develop a procurement strategy, project governance, whole-of-life considerations, risk management, health and safety, skills and training, sustainability, and emissions reduction.

The Construction Sector Accord said the guide:

Sets a clear expectation that government agencies will play a key role in leading the sector by reducing carbon emissions generated by the construction of new government buildings.


To learn more, read the statement and procurement guide.

Timber-only policy for state sector

Economic Development Minister Stuart Nash says the Government is moving toward a timber only policy for new state sector builds as part of its drive to achieve carbon-neutrality by 2025.

“What that will look like is if you are building a building for the state sector or the state sector is building a building itself, then it has to be built out of wood," Nash told TVNZ.

He also said (perhaps inaccurately) that there is “nothing you can do with steel and concrete that can’t be done with timber”.

A one-pager outlining the benefits of using wood in construction is included in the new procurement guide under the sustainability section but it is dated November 2019 and is informative rather than directive. And according to the Ministry for the Environment (MfE), the immediate priorities for the Carbon Neutral Government Programme are to:

  • phase out coal fired boilers, beginning with the largest and most active
  • optimise the size of car fleets and buy electric vehicles or plug-in hybrids, and
  • require NABERSNZ for agencies occupying over 2,000m2 of office space and covered by the Property Functional Leadership mandate.

To learn more, read the article, one-pager, or see more on the MfE website.

Building Amendment Act passed

The Ministry of Business, Innovation and Employment (MBIE) is now developing supporting regulations for the Building (Building Products and Methods, Modular Components and Other Matters) Amendment Act, which was passed on 3 June.

These will cover:

  • a minimum set of information on building products
  • a new modular component manufacturer certification scheme, and
  • CoreMark – a strengthened product certification scheme to improve confidence that innovative products and methods will comply with the building code and be accepted by building consent authorities.

Submissions closed on 11 June.

Read the discussion document.

Changes to Licensed Building Practitioners scheme

MBIE is strengthening the Licensed Building Practitioners (LBP) scheme. Proposed changes include:

  • introducing a Code of Ethics
  • improvements to the complaints and discipline model with provision for independent investigators, and
  • enhancements to the licensing process, including a grace period for late renewals.

MBIE will refer its recommendations on these matters to Cabinet “in coming months”.

Three elements of the review were put out to consultation: LPB’s ability to supervise non-LPBs undertaking restricted building work; licensing classes, and whether the minimum competency standards are still appropriate. Submissions closed on 4 June.

Read the statement.

Feedback sought on proposed GPS on Housing and Urban Development

The Government is seeking public input on a Government Policy Statement on Housing and Urban Development (GPS-HUD), to be published by 1 October.

The GPS-HUD will shape future government policy, investment, and programmes of work. It would perform a similar function to the GPS on Land Transport and would become a standing document, to be updated at least every three years.

Submissions close on 30 July.

See the online survey form here.

Bill to reform retentions scheme now in the House

The legislation to repair the defects in the Construction Contracts Act retentions regime is now going through Parliament. It deals with many of the problems which have bedevilled the existing system, but may give rise to issues of its own if passed in its current form.

Read our commentary here.

Climate Change Commission – ‘start now and keep going’

The Climate Change Commission’s final advice to the Government, released on 9 June, is that New Zealand can achieve its 2050 net zero emissions target, but only if we get started now and keep going.

The Commission calculates that the transition will reduce GDP by around 0.5% in 2035 and 1.2% in 2050. It calculates the cost of inaction at 1% and 2.3% respectively.

This message seems to have been taken on board by the Government, which has until the end of the year to develop an Emissions Reduction Plan (ERP) for presentation to Parliament. Climate Change Minister James Shaw said over 30 government departments were working on different aspects of the ERP and that he expected policies would be set by October.

Read our commentary here.

new houses

IRD consulting on tax treatment of new builds

The Government has confirmed that new builds will be exempt from the tax moves to cool the investment market in residential property. The confirmation was made with the release of IRD discussion documents on the new interest limitation and bright-line rules, to be legislated for implementation from 1 October 2021.

To find out more, read the statement.

1. Construction

Industry

300 skilled construction workers from June to October

The extra capacity in MIQ facilities created by the trans-Tasman bubble will allow the entry to New Zealand of 300 skilled construction workers between June and October. The Construction Sector Accord is consulting with the industry to identify the specific skills needed.

They include civil and structural engineers, project managers and a range of specialist technical workers such as hydraulic modellers and mass transit specialists.

Read the statement.

Construction Sector Accord funds benchmarking scheme for specialist trades

The Construction Sector Accord is funding the development of a benchmarking scheme to lift business performance for construction specialist trades.

The Registered Master Builders Association will adapt measures already developed for lead contractors in the vertical construction sector, which include around 60 financial, operational and commercial metrics.

Businesses will upload metrics into a web-based system and they will receive reports on their business and wider industry trends.

To learn more, read the statement.

Building for climate change

MBIE has released a summary of the 374 submissions it received on its two climate change emissions mitigation frameworks; whole-of-life carbon reduction and transforming operational efficiency.

The results in relation to operational efficiency showed: 96% agreed that thermal performance requirements should be imposed; 87% supported efficiency requirements for fixed services; 70% supported making energy use intensity part of consenting and certification processes, and 50% wanted to make renewable energy generation or energy storage capacity mandatory.

The results for embodied carbon had: 74% support for a whole-of-life cap on new builds; 80% support for establishing a data repository and 73% opposition to the proposition that reporting on, and ultimately capping, embodied carbon should apply to new buildings only.

To find out more, read MBIE's statement.

MBIE wants to get close and cosy

MBIE is using the regular Building Code update programme to support higher density housing and better energy efficiency.

Submissions closed on 28 May.

Read the consultation paper.

MATES in Construction endorsed by WHO

The World Health Organisation has identified the Australasian, industry-led MATES in Construction programme as an example of global best practice in the prevention of suicide.

To learn more, read the statement.

Infrastructure

Big numbers attached to three waters reform

The Government will base its Three Waters Programme around creating four, large, publicly-owned entities to take responsibility for the country’s three waters infrastructure. 

Local Government Minister Nanaia Mahuta announced the move yesterday (30 June), saying it was the best way to ensure the required $120m to $185m of investment would be available.

Mahuta’s strong preference had been that New Zealand’s 67 councils would choose to stay in the new structure but if that was unlikely compulsion could be required.

The political ground had already been laid in a press statement on 2 June reporting a Deloitte analysis which estimated that full reform implementation would deliver a $14b to $23b increase in GDP and support the creation of 5,900 to 9,300 jobs.

View Mahuta's statement on 30 June, Mahuta's statement on 2 June, and the Departmental briefing to the Minister.

Local government review

The Government has appointed an independent review, to be led by former Waimakariri District Council Chief Executive Jim Palmer, into how local government needs to evolve over the next 30 years.

Minister Nanaia Mahuta said councils were facing a “wave of reforms” that would significantly affect their traditional roles and functions – a reference, presumably, to the Three Waters Programme, the pending Resource Management Act rewrite and the response to climate change. Mahuta said: 

 

They have told us the timing is right to determine what our system of local democracy should look like to make sure it is fit for the future, and I agree. 

 

The review’s final recommendations are due with the Government in April 2023 following an interim report on the probable reform direction in September this year and a draft for public consultation in September 2022.

The sector was last comprehensively reviewed in 1989, when more than 800 local bodies were amalgamated into 86 local authorities. Other panel members are: John Ombler, Antoine Coffin, Gael Surgenor and Penny Hulse.

To learn more, see the announcement.

Housing Acceleration Fund now in action

A $1b slice of the $3.8b Housing Acceleration Fund is now available for applications. To be eligible, projects must be for transport, three waters or flood management.

Read the statement.

Consultation on an infrastructure strategy for New Zealand

New Zealand Infrastructure Commission Te Waihanga has put out a 175-page discussion document to feed into the development of a new 30-year infrastructure strategy for New Zealand. In our view, the circumstances are right to deliver meaningful change.

The need for a massive investment in infrastructure and the importance of a coordinated response are well-understood, and there are a number of complementary workstreams already in play – in particular the public health restructure, the impending climate change budgets, the local government review, the Three Waters programme and the rewrite of New Zealand’s resource management law.

Submissions closed on 24 June, and will be used to finalise a draft report to go to Infrastructure Minister Grant Robertson in September this year. The work to date reflects the Commission’s engagement over the past year with representatives of local and central government, private sector infrastructure providers and the general public.

The Commission has also released state of play sector reports on the water, telecommunications, energy, resource recovery and waste, education, transport and health sectors.

Read the consultation paper, our commentary, and the sector reports.

Much to digest in Transmission Gully Interim Report

The review was commissioned by the New Zealand Infrastructure Commission Te Waihanga on the instruction of the Government and is led by Steve Richards, an Australian assurance expert of over 25 years’ experience, with Sir Michael Cullen and former Fulton Hogan CEO Lindsay Crossen making up the panel.

The interim report identifies four main reasons for the problems which have afflicted the project – pushing out deadlines and blowing out costs from an original $850m to $1.25b.

Lead among them was that the decision to use a PPP format was made after the scheme had been consented (largely for cost reasons as the Key Government dealt with the fiscal burden created by the Christchurch earthquakes).

This meant, in our view, that it was almost inevitable cost changes would occur….as an inputs-focused design was adapted through PPP procurement to focus more on service needs and performance standards.

 

The other three were:

  • that the Affordability Threshold (AT) was set too low, resulting in bids being value managed down (e.g. in design and timelines), creating risks which became manifest in the construction phases
  • poor management of consenting risk by all parties, and
  • a lack of transparency in project governance. “We expected to see stronger checks and balances when making key PPP decisions, particularly the clear articulation of the consequential impacts of setting the AT too low.”

Infrastructure Minister Grant Robertson and Transport Minister Michael Wood emphasised in their press statement that Te Waihanga and Waka Kotahi would implement the review’s final recommendations to ensure that the lessons of Transmission Gully would be learned and applied to future projects.

To learn more, read the interim report and press statement.

Resource management system rewrite

Environment Minister David Parker has released a partial (Part 2) exposure draft of the Natural and Built Environments Bill to replace the Resource Management Act (RMA). 

The Bill will be referred to the Environment Select Committee for public input and consideration before going through the normal legislative process. This will give it two formal consultation rounds – reflecting the foundational nature of the legislation and the importance of getting the design right. But there will be some additional time and cost involved with the two-step approach, which the Government recognised in the Budget with a $131.8m allocation toward the drafting.

Parker said the funding would allow the new regime to be delivered effectively:

Something that did not happen when the original Resource Management Act was implemented.


Specific problems he identified with the RMA’s execution were the lack of adequate Environment Court funding, the lack of standard formats for plans and the many years it took before use was made of the instruments of national direction.

To learn more, view the latest statement and the Budget statement.

Another big budget for infrastructure

The Government has raised the multi-year capital allowance (created in Budget 2020) from $8b to $12b. This will bring to $57.3b the money the Crown has on the books for infrastructure investment over the next four years.

Specific allocations include:

  • $810m for KiwiRail
  • $761m for education
  • $700m for District Health Boards
  • $306m to redevelop Scott Base, and
  • $300m to New Zealand Green Investment Finance Ltd.

Read the statement.

Transport component of NZ Upgrade Programme tweaked

The transport component of the NZ Upgrade Programme has been tweaked to accommodate cost pressures and the need to reduce transport emissions. Announcing the changes, Ministers Robertson and Wood said rising global construction costs since COVID-19 had loaded another $6b to what was already a $6.8b budget.

However the Government had put in another $1.9b and re-scoped some of the projects, with the result that 26 of the original 32 would proceed as planned.  

The $817m Otaki to North of Levin expressway is going ahead to plan, but the Mill Road development has been cut back. The Government has opted for a standalone “Northern Pathway” alongside Auckland Harbour Bridge for walking and cycling after advice that a “clip-on” was beyond the bridge’s technical capacity.

Read the statement.

Early win for NPS on Urban Development

The proposed $1.2b Sleepyhead industrial and residential complex at Ohinewai near Huntly has been approved by a Waikato District Plan Hearings Panel in what can be seen as an early win for the National Policy Statement on Urban Development (NPS-UD). The project would create up to 2,100 jobs and up to 1,100 affordable homes over the next 10 years.

The proposal was opposed by Waikato Regional Council and Waka Kotahi due to what the Panel described as “a multitude of reasons” at the crux of which was a concern that it did not conform to existing plans.

But the Panel considered both agencies had given “little weight to the strong directions in the NPS-UD for decision makers to be responsive to development opportunities unanticipated by RMA planning documents”.

Either or both may lodge an appeal with the Environment Court.

To learn more, read the decision and article.

Son of Shane’s Provincial Growth Fund

Shane Jones’ Provincial Growth Fund has been replaced by Stuart Nash’s much smaller ($200m) Regional Strategic Partnership Fund, with a focus this term on: enabling economic and business growth; accelerating Māori economic aspirations, and supporting sector transformation.

To learn more, read the article.

MoT looks to net zero transport emissions by 2050

The Ministry of Transport (MoT) has produced a Green Paper to feed into the development of a 10-15 year action plan to decarbonise the transport sector. At the top left hand corner of each page it states, "NOT GOVERNMENT POLICY".

The Paper identifies opportunities across three broad themes.

  • Changing the way we travel – integrating land use planning to encourage compact mixed use urban development, while providing better transport options.
  • Improving our passenger vehicles – decarbonising the light vehicle fleet, moving to “cleaner” public vehicles and to aviation technologies.
  • Supporting a more efficient freight system – improving the efficiency of supply chains, shifting to low emissions models and improving the fuel efficiency and carbon intensity of freight modes and fuels – including biofuels, electrification and/or green hydrogen.

Submissions closed on 25 June.

Read the Green Paper.

Review of Public Transport Operating Model

MoT is also reviewing the Public Transport Operating Model (PTOM), which sets the framework for the planning and procurement of public transport services. Under the PTOM the provision of those services is the responsibility of the regional councils and Auckland Transport.

Read the consultation document.

Speak to our experts


We hope you find our insights within this publication useful. Please get in touch with one of our experts if you would like to discuss any topic in more detail. We offer market-leading expertise and a seamless service for all your project needs – from financing, planning and consent through to all stages and facets of the construction process.


  Hamish Bolland, Partner

 Greg Wise, Partner

 Fiona Bennett, Partner

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