The results are in: BDO’s latest construction survey report

BDO New Zealand recently undertook a comprehensive survey of almost 100 New Zealand construction companies, with the aim of providing a useful insight into the reality of the New Zealand construction sector as it stands today. A full copy of the report containing the survey can be found here.

The survey results highlight some clear challenges facing the construction industry today. Nevertheless, the industry remains largely optimistic growth rates will continue to rise, fuelled in part by the government’s ambitious plans for housing and infrastructure over the next decade.

We summarise some of the reported highlights and challenges below.

Highlights in the industryChallenges facing the industry
The pipeline of work is strong

94% of companies said they had sufficient confirmed work for the next 3 to 12 months.

Adequate advice on business planning

An encouraging proportion of companies felt they were getting the advice they required regarding financial and business planning. However, 20% of companies reported that they do not prepare budgets or have a business plan.

_ Industry optimism

Between 71% and 78% of companies predicted some level of growth in their sector – across all sectors (Housing, Commercial, Construction) and at Sub-contractor level.

Availability and quality of staff

Staff related matters are the biggest concern for the construction industry. Two thirds of companies surveyed said they are looking for more staff.

Project delays

Commercial and housing companies (large and small) are facing issues with project delays, with a significant proportion of projects reported as being delayed for 3-6 months.

Tight margins

Companies reported that poor profit margins are a challenge being faced nationwide in the industry, particularly for smaller companies which do not have the resources to undertake larger projects with better margins.

Inability to obtain additional performance bonds

With banks and insurers taking a more cautious approach to issuing performance bonds, bonding is the second biggest concern for companies with turnover of over $10M.

Key Recommendations

Companies should consider:

  1. Obtaining legal advice on the recently enacted mandatory retention regime (via the Construction Contracts Amendment Act 2015).

    The regime appears to be poorly understood in the industry, which can lead to future retentions issues.

  2. Using their permitted rights under the Construction Contracts Amendment Act 2015 to inspect their clients’ trust records in order to confirm that any retentions are held in trust.

    10% of companies surveyed identified at least 1 client that was not holding retention funds on trust, or did not have a legally compliant alternative instrument in place, such as products being offered by some insurance providers. See our article on retentions here.

  3. Using recruitment agencies to address their staffing issues.

    The report found that companies who used agencies experienced less trouble meeting their recruitment needs than those who rely on word of mouth or do their own advertising.

We recommend you read the Full Report for a comprehensive understanding of the current state of the industry. For advice on any of the issues arising out of the Construction Contracts Act, contact one of our experts.

Who can help

Janine Stewart

Partner - Construction

Janine is a specialist construction, property and projects lawyer who acts on the full spectrum of construction projects and property disputes. She has particular experience in claims under the Public Works Act 1981 (for land acquisition relating to development) and mid-project and post-project phases of construction. Janine is known for her pragmatic approach, adopting either litigation and/or dispute resolution to achieve a commercially-effective outcome for her clients.

Janine also has significant experience in landlord and tenant obligations and contentious rent review disputes. She regularly appears in various dispute forums.

Named Young Private Practice Lawyer of the Year at the 2015 New Zealand Law Awards and up and coming in 2016 Chambers directory, Janine is actively engaged in thought leadership on issues impacting the property and construction industry.  Janine regularly contributes to a number of publications and presents widely on complex construction and property issues.

Janine lectures ‘Law for Construction” in the Masters of Project Management programme at AUT University, is a member of the New Zealand Society of Construction Law and a member of the Building Advisory Panel to MBIE.

Janine Stewart

Partner


Construction
Auckland

P: +64 9 353 9922
M: +64 21 784 808
Email

Mark Crosbie

Partner - Construction

Mark is highly-regarded for his specialist legal work in all aspects of property, construction and development projects. His legal experience spans more than 20 years and includes high-end strategic advice about commercial and construction issues, including funding, procurement, development, legislative and regulatory compliance, and construction of large infrastructure projects.

He has extensive industry experience in construction, health and aging, ports and agriculture. Mark has a formidable track record of achievement in infrastructure and development projects that include roading arrangements, hospital and medical premises and associated amenities, airport and port developments, quarries, regional parks, utilities – electricity schemes, water treatment and waste water projects, education assets, and social housing projects.

Mark acts for owners, developers, contractors, consultants, tenants, investors and financier businesses, both domestically and internationally, on all aspects of property, construction and development projects. Mark has extensive experience in property transactions with particular expertise in real estate finance transactions and in the acquisition and sale of commercial property, property development and corporate sales programmes.

Mark’s strong projects and development background encompasses project planning, procurement and implementation expertise and he has advised on shopping centres, city precinct redevelopment, commercial head office developments, corporate campuses, harbour and seabed developments, coastal land, unit title developments and re-developments, and property refurbishments.

Mark Crosbie

Partner


Construction
Auckland

P: +64 9 353 9968
M: +64 21 633 131
Email

Sarah Sinclair

Partner - Construction and Infrastructure

Sarah is a highly-regarded construction and infrastructure specialist.  She has extensive experience acting for both Government and private sector clients in large-scale, complex infrastructure projects.   She is known for providing commercially pragmatic, strategic advice on infrastructure funding models, procurement strategies and contracting structures.

Sarah has extensive experience in combining the commercial components of a project with a deep understanding of procurement processes, particularly in pathfinder projects.  Sarah leads MinterEllisonRuddWatts’ roles on the City Rail Link project (CRL) and the Anchor Projects in Christchurch, meaning she is adept at conceptualising strategy and navigating challenges inherent in projects carried out in the public eye.  Sarah also has particular expertise in Public Private Partnerships (PPPs), having acted for sponsors, banks or sub-contractors on all PPPs closed or brought to market in New Zealand to date.

Sarah has been on the Board of Infrastructure New Zealand since 2012 and is an officer of the International Construction Projects Committee of the International Bar Association.  She is also a Board member of MinterEllisonRuddWatts.

Sarah Sinclair

Partner


Construction and Infrastructure
Auckland

P: +64 9 353 9984
M: +64 21 532 995
Email

Stephen Price

Partner - Construction

Stephen is a highly-regarded construction disputes lawyer, and leads MinterEllisonRuddWatts Construction Division in New Zealand.

Stephen’s expertise is in resolving large scale construction contract disputes particularly regarding claims for variations, delays/disruption, and the like, as well as defective works claims. He is very experienced in bringing and defending adjudications under the Construction Contracts Act 2002. He appears regularly in the New Zealand Courts at all levels (including the appellate Courts) and arbitrations, as well as in dispute resolution processes such as mediation and Dispute Resolution Boards.

Stephen’s team is also one of the largest “leaky building” specialist teams in the country, representing parties involved in all aspects of such claims (plaintiff owners and bodies corporate at one end of the spectrum, and builders, subcontractors, consultants, product manufacturers and the Council at the other).

Stephen is named by the Chambers Directory as one of five ranked lawyers in the New Zealand construction field, and by the Asia Pacific Directory as a recommended lawyer (in which MinterEllisonRuddWatts is ranked as tier 1 in Real Estate and Construction). He has previously lectured on Construction Law for the AUT Masters of Construction Management degree, and now lectures on Construction Law for the AUT Law School Masters of Laws degree.

Stephen Price

Partner


Construction
Auckland

P: +64 9 353 9961
M: +64 21 521 244
Email

Jennifer Wilson

Special Counsel - Construction

Jennifer is an experienced general litigation lawyer who advises her clients on large and small-scale corporate-commercial litigation matters. Her expertise includes legal analysis and advice on construction contracts and building disputes. She also advises on intellectual property issues including copyright and software licences, competition and Commerce Commission investigations and health and ageing.

Jennifer regularly undertakes high profile litigation work. Recently she advised an American software company on jurisdictional, contractual and intellectual property matters relating to a software licence agreement, heard in the High Court during an eight-week trial. Another key matter was advising a leading New Zealand bank in a major Commerce Commission investigation, alleging price fixing and anti-competitive behaviour by major New Zealand banks and card schemes.

Jennifer had a previous career as a registered general nurse, specialising in intensive care. During this time she worked in the Australian, British and New Zealand healthcare systems. This healthcare experience coupled with her legal experience means she can offer clients a unique and pragmatic approach to healthcare and ageing issues within a legal context.

Jennifer Wilson

Special Counsel


Construction
Auckland

P: +64 9 353 9894
M: +64 27 558 5862
Email

Philip Bremer

Special Counsel - Construction

Philip is an experienced litigation lawyer in our construction division. His experience encompasses a broad range of legal and commercial areas.

Philip has more than 25 years’ experience in construction litigation and weathertightness related claims, the resolution of commercial and residential property related actions, trade practices (competition and fair trading), the resolution of large multi-party high value defective building disputes, company compliance governance shareholder and solvency issues, the resolution of partnership and joint venture disputes, and general legal disputes in contract, tort and equity.

Prior to joining MinterEllisonRuddWatts, Philip was a Partner at a specialist litigation and dispute resolution law firm.

Philip Bremer

Special Counsel


Construction
Wellington

P: +64 4 498 5033
M: +64 27 567 5217
Email

Thomas Kelly

Special Counsel - Construction

Thomas is a highly experienced construction, projects and commercial lawyer. He provides front-end contractual and procurement advice to businesses including some of New Zealand’s largest organisations.

Prior to joining MinterEllisonRuddWatts, Thomas worked for another top tier New Zealand law firm and in a number of in-house legal roles in New Zealand and the UK.

His experience spans a wide range of industry sectors and types of work, including construction, major projects, infrastructure, property development, procurement of goods and services, ITC and intellectual property, consumer promotions, events and sponsorship, and film and television.

Thomas Kelly

Special Counsel


Construction
Auckland

P: +64 9 353 9809
M: +64 21 030 4941
Email

Iain Stephenson

Senior Associate - Construction

Iain is a Senior Associate in our Construction team and advises clients on both non-contentious and contentious residential property, commercial property and construction matters, having been involved in some of the more significant infrastructure and housing projects in New Zealand in recent times. Iain has significant experience in defective and non-compliant building disputes including acting in the largest residential and commercial defective building proceedings in New Zealand.

Iain is an expert in the management and governance of apartment buildings and multi-unit developments, including for new builds, existing builds, refurbishments, remedial works and, post-project defects and governance disputes.

Iain Stephenson

Senior Associate


Construction
Auckland

P: +64 9 353 9896
M: +64 21 031 4142
Email

Julia Batchelor-Smith

Senior Associate - Construction

A specialist property disputes resolution lawyer, Julia provides expert legal advice and dispute resolution services in all aspects of construction and commercial property. She advises clients on both contentious and non-contentious aspects of construction and commercial property matters, including construction contracts, acquisitions, divestments, leasing issues, due diligence, joint venture development arrangements and adjudication disputes under the Construction Contracts Act 2002.

Julia has particular expertise in weathertightness issues. She represents the full spectrum of affected parties (including bodies corporate and owners, developers, builders and contractors) in mediation, Court and the Weathertight Homes Tribunal.

Julia has also written extensively on strategies to achieve work/life balance, effective practice management and gender diversity. She is the author of Balancing Work and Life: A Practical Guide for Lawyers published by Lexis Nexis (2015) and regularly comments in the media on diversity in the legal profession and the full spectrum of issues impacting the working parent. Julia is a sought-after speaker, having addressed the Ministry of Business, Innovation and Employment (MBIE), Universities, legal associations, private and public companies, and industry bodies.

Julia Batchelor-Smith

Senior Associate


Construction
Auckland

P: +64 9 353 9930
M: +64 21 299 1094
Email

John Morrison

Senior Associate - Construction

John is a specialist construction litigation lawyer and provides advice to various commercial clients in this area. This work includes commercial and residential construction issues. John also has extensive experience in “leaky building” claims and has represented clients in mediations, Court and the Weathertight Homes Tribunal.

John Morrison

Senior Associate


Construction
Auckland

P: +64 9 353 9806
M: +64 21 183 9705
Email

Riaia Donald

Senior Associate - Construction

Riaia is a specialist construction and property dispute resolution lawyer, having worked in this area of law since 2009. She has particular experience in construction contract disputes (particularly regarding claims for variations, extension of time and defective works) and in bringing and defending adjudications under the Construction Contracts Act 2002 and High Court proceedings for such disputes. Riaia also has experience in arbitrations for commercial property and lease disputes, in particular landlord and tenant obligations and rent review disputes.

Riaia Donald

Senior Associate


Construction
Auckland

P: +64 9 353 9865
M: +64 21 152 8928
Email

Scott Thompson

Senior Associate - Construction

Scott is a specialist construction and projects disputes lawyer.  He advises on a range of construction projects and general construction and property-related disputes, including project contract disputes and project management of multi-million dollar negligence and warranty claims. He has acted for commercial developers, owners, contractors, consultants, and subcontractors.

Scott previously spent considerable time working in the United States for a top-tier US law firm as a transactional and projects lawyer in the oil and gas sector, advising public companies, private equity firms and their portfolio companies, and major US financial institutions.

Scott has significant experience leading major mergers and acquisitions related to oil and gas assets, advising clients on joint-venture projects and, in each case, advising and counselling clients on contract and project disputes related to the same.

Scott Thompson

Senior Associate


Construction
Auckland

P: +64 9 353 9994
M: +64 27 642 5179
Email

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