Client leadership

Since launching the Transformation Plan 2022-2025, the Accord has refined the Client Leadership focus area. In addition to the procurement and contracting priority, the Accord now has explicit priorities to improve broader outcomes and enhance public procurement planning and phasing. These areas were originally captured as plan initiatives but have been elevated to priorities to reflect the potential of procurement as a catalyst for better outcomes and the importance of reliable pipelines to enable businesses to invest and grow.

Priority: Improved Procurement and Contracting

Strong procurement and contracting practices can set a collaborative, trusting and transparent culture that can have immense benefits for the project, contractors, workers, and clients themselves. Conversely, poor procurement and contracting practices can result in inefficiencies and lost productivity through lengthy negotiation, litigation and rework. The Accord has seen more recognition from clients, especially from government agencies, around the inconsistency of contract terms and an increased appetite to improve their procurement practices. However, sector feedback suggests that there is a high level of dissatisfaction with client interactions, indicating there is still room for clients to improve their ways of working.

The New Zealand Standard 3910:2013 Conditions of Contract for Building and Civil Engineering Construction, commonly known as NZS 3910, is the is the most used construction contract in New Zealand. However, industry has raised concerns for years that the contract is out of date and not fit for purpose. The Accord and Te Waihanga commissioned Standards New Zealand to do a Review of the NZS 3910 Construction Contract. A committee of 25 industry representatives went through the contract line by line, engaged in hot debates, and challenged assumptions for almost a year to improve the contract. Public consultation of the review concluded on 30 June 2023 and the updates are due to be released in late 2023.

The Accord has been progressing work on the Engineer to Contract update. The Engineer to Contract is a specific role currently required under the NZS 3910 contract. This panel was established in 2021 to address concerns regarding the capability and independence of Engineer to Contracts. The Accord has partnered with Engineering New Zealand to support a transition to the revised set of roles and responsibilities that will be required under the updated NZS 3910 contract.

The Accord is also working to reduce the use of special conditions in government contracts. In December 2022, the Accord published a review of how procuring agencies across the public sector use special conditions in construction contracts. The review found there was a lack of standardisation and inconsistent application of special conditions and risk transfer in public sector construction contracts. In response to the review, the Accord Agencies have made a number of commitments through the Standardised Special Conditions for All-of-Government (AOG) initiative to work towards more standardised and consistent contracts by removing unnecessary special conditions and ensuring fairer risk allocations.

Contracts are only one of the tools that procurers need for strong client leadership. The Accord has initiatives underway to improve the capabilities of procurers and the tools available to them. The Construction Rfx Procurement Templates initiative is focussed on developing standard construction templates that are effective for planning, sourcing, and managing construction contracts. Additionally, the Accord has partnered with the New Zealand Construction Industry Council to deliver Digitisation of Design Guidelines, which are commonly used by multiple disciplines. The Accord’s commercial sector reference group is also working on Construction Procurement Capability and Training projects to support procurers develop their capabilities, and the Kōtuiā te hono Māori sector reference group is working to develop clear pathways for Māori businesses to procure government-led construction work by establishing Māori Procurement Panels.

In 2023, the Accord completed a Retrospective Project Review Phase 2 to test an approach for analysing procurement performance by collecting data that links project outcomes to procurement activities and choices. The aim was to move from anecdotal claims and perceptions about business case and procurement practices to an evidence-based assessment of actual performance. While this work did not collect the level of data that was initially sought, separate government projects have improved data monitoring and reporting practices since then. New Zealand Government Procurement has enhanced the data capture of the GETS electronic tendering system and the Treasury has introduced quarterly investment reporting.

Priority: Public Procurement Planning and Phasing

The construction sector is vulnerable to boom-bust cycles and the sector has been particularly nervous recently given reduced residential construction activity and lower business confidence across all industries. The sector can become more resilient, productive, and confident with a secure pipeline of work, because pipelines can help businesses plan for growth, invest in capital, and staff, and improve productivity overtime.

Over the past year, the Accord has observed that there has been greater input into the forward pipeline and better use of information for planning. The Accord has supported Te Waihanga's forecasting work on skills and labour requirements to meet the forward pipeline. The Accord has also been supporting Te Waihanga and Waihanga Ara Rau to gather data relating to workforce demand from the North Island post-floods rebuild. See the Emerging issues and opportunities section for more information.

Priority: Improve Broader Outcomes for Public and Private Sector Projects

Each year, clients spend billions of dollars in New Zealand's construction sector. This spending can be leveraged to create a range of positive social, cultural, economic and environmental outcomes. Public and private clients alike now have a greater understanding of what broader outcomes mean for procurement and purchasing activity. Government agencies have made strides through increased application of New Zealand Government Procurements broader outcomes requirements and private companies have increased their use of independent environmental, social governance (ESG) strategies.

In November 2021, the Accord published guidelines to help public sector procurers embed broader outcomes into their procurement functions. From 2024, the Accord will scope further opportunities to support public and private sector clients to deliver broader outcomes (see Next Steps below).

Next Steps

Over the coming year, the Accord will start progressing initiatives to improve Broader Outcomes from Public Sector Initiatives, so the sector delivers more public value. Additionally, the commercial sector reference group will explore Benchmarking and Accreditation that could lift business performance and enable clients to carry out due diligence. Depending on the status and timeframes for the modern slavery legislation, the Accord may also support early scoping of a Modern Slavery Framework for the construction sector.

The Accord Agencies will work with Te Waihanga to support Public Procurement Planning and Phasing - Regional Pilots, where government agencies can coordinate among themselves to sequence major projects in a single area. It will help clients understand market capabilities and enable local businesses to prosper with feasible and long-term project pipelines.

Hawke's Bay has been identified as an initial pilot to bring clients together to plan and phase projects whilst considering market and workforce capacity. The project will be enabled by the Accord's work on workforce projections models.