Government and industry collaborating to improve good business practice

MoE has been leading the way with their financial assessment tool for suppliers, with RMBA and VCLG leveraging this work to define what a 'good construction business' looks like.

"Due to long-standing liquidity and cash-flow issues in the construction sector, many government agencies now feel compelled to undertake financial due diligence of their suppliers to ensure that their financial position does not jeopardise their ability to deliver services", says Alison Murray, General Manager of Infrastructure Procurement at Ministry of Education.

"Supplier insolvency has damaging consequences for subcontractors, the region and community."

Chief Executive of Registered Master Builders, David Kelly, says, "In response to this issue, RMBA and VCLG launched their industry-led initiative that acknowledges that many businesses can improve how they look after their finances and manage risks; there is now a willingness to change business practices to restore confidence and deliver a sustainable and prosperous sector."

MoE, RMBA, and VCLG are living the Accord principles and values by providing skills and tools to create healthy and sustainable organisations, and improved business resilience. This is a key part of the Accord's Business Performance workstream, in which promoting better business practice and sharing good practice information and material is a core initiative.

Financial Assessment for suppliers

MoE has developed a financial assessment tool to identify a contract value limit for each supplier to ensure risks of over-exposure are mitigated.

"The great thing about this tool is that the information can be shared across multiple agencies, with the consent of suppliers, reducing the compliance burden on those businesses that contract to multiple-agencies," says Alison.

"This assessment will be presented back to suppliers to enable a 'teach-back' on how contract value limitations are linked to a company's liquidity or contingent liabilities. This initiative isn't just about managing our financial risk; we are developing a supply chain of resilient and capable businesses, which will benefit the communities in which these firms operate."

Industry leveraging the approach to define good business practice

RMBA and VCLG are building on MoE's approach to improve business performance in the Vertical Construction Sector. They are assessing members in the vertical construction sector across three key categories – Financial, Operational and Commercial – to determine whether they are following the attributes of a 'good' construction business. The financial metrics mirror those developed by MoE, to ensure that businesses know where to improve to meet the requirements set by a number of government agencies.

"The aim of this initiative is to give organisations a clear understanding of what a 'good' construction business looks like and then embed the 'Good Criteria' that we are assessing them against," says David.

"Organisations will be given a report which tells them where they are performing well and, more importantly, where they could improve. We will provide links to a knowledge library to assist organisations to develop faster."

A voluntary accreditation scheme will also be offered for RMBA members.

"Once accredited, RMBA members can market this accreditation to stakeholders to engender confidence that the organisation is able to deliver."

For more information about the initiatives, email EIS.Commercial@education.govt.nz