The Problem With Procurement Processes In New Zealand And How We Can Do Better

New Zealand’s procurement processes are renowned for being complicated and incredibly slow moving, with the burden of risk laying with contractors rather than owners. This can cause significant delays and extra costs in construction projects due to the extensive processes that must take place in order for work to commence.

Yet in today’s market, delivering timely, affordable infrastructure could not be more important. With the current Government investing heavily in infrastructure, there is a substantial level of activity in the market.

This has led to a competitive environment with a lowest cost principle being seized. A good political outcome has often meant the lowest, most competitive, bid wins, rather than decision making being based on best project outcome. However the lowest bid does not necessarily mean an overall cheaper project.

When problems arise and delays occur, contractual variations can cost up to tens of thousands of dollars and even more. The current procurement model sees contractors having to juggle those risks and justify the decisions being made.

Often these contracts have elements that penalize the contractor for not delivering when there are unforeseen delays.

A better way forward

A shared-risk approach to procurement helps to avoid issues such as interruptions and budget blowouts. Collaborating involves informed consent, meaning all stakeholders have the opportunity to mitigate risk by sharing the burden.

Compared to old processes where the contractor selectively shares information, a shared-risk approach looks at collaborating on data collected in the field, from before work commences, and even after a project has been completed.

“Data is as much a part of the end project as the materials used to build it”, says Rob Bryant from InEight.

“So many things are missed in isolation. Enabling better decision making and providing the environment for people to communicate and share the data they are gathering is key.

“If a contractor discovers something for a different and better project outcome, then the discussion about who is liable for those changes can happen.”

“If parties don’t agree, this doesn’t mean the project will get away without necessary changes taking place, but the information is available, and the conversations can take place.”

Bryant says with a shared-risk approach, stakeholders will have access to more agile planning where they can see the appropriate visibility of those accessible data points. This risk mitigation will improve the chances of a project’s success and also makes maintaining the asset much easier post-project.

“We are challenging how projects are run. There is another way to do it, and that is through collaboration, where we make data-based decisions.”

Bryant says that while construction has been slow to adopt technology, the industry is going through an evolution its life cycle. Companies are now seeing technology as a point of difference.

“Being able to demonstrate that data as a point of different is massive. Anything contractors can do to mitigate risks for owners won’t be ignored.

“Those who are adapting will continue to win more work. And those who don’t, will be challenged to have a seat at the table for those larger projects.”

InEight provides field-tested project management software for the owners, contractors, engineers and architects who are building the world around us. InEight has powered more than $400 billion in projects globally across infrastructure, public sector, energy and power, oil, gas and chemical, mining, and commercial.

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