The Construction Industry: Risk allocation and minimisation

Last week, I attended the Registered Master Builders (RMBA) ‘Constructive’ conference in Wellington. With the unfortunate collapse of Ebert Construction fresh in the minds of the industry, much of the conversation focused on risk, and how it was being allocated between client and contractor.

Peter Fehl of Auckland University received applause when he called for the industry to avoid ‘a race to the bottom’ and encouraged construction contracts that were equitable for both client and contractor. Rick Herd, CEO of Naylor Love, urged his fellow constructors to be aware of risks in contracts and avoid taking on contracts that carried excessive contractor risk.

RMBA also highlighted that the most critical issue affecting the industry was a ‘lack of skills’. The shortage of skilled tradespeople results is an inconsistent quality of work. Even for trades with a skilled team on site, their work is impacted by a frenetic environment caused by under-skilled peripheral trades. The result: trades have less control over their productivity and rework risk, and are pricing higher as a result.

There is an opportunity to address the industry's skill shortage whilst mitigating contractor risk; robust Quality Assurance protocols.

QA can help the business leadership at main & trade contractors establish a step-by-step process, informed by best practice and lessons from past mistakes, for their site teams to follow. This serves two key purposes for a contractor: ​it helps to upskill new recruits, and significantly reduces the risk of poor quality work being handed over.

At its core, QA is the process of ensuring a building is being built as per design, and recording that process. In practice it’s done with checklists. The trouble is, many players in the NZ market are often too stretched to enact a QA process during construction, let alone capturing QA consistently. We know this because we have been talking to NZ construction companies about QA for over three years.

Much of their frustration stems from traditional QA being such a manual process. The majority of the industry is using paper checklists, photos, followed by manually filing & scanning to compile QA documentation. It’s a tall ask of site managers to do this much administration, given the current market conditions.

This is why Conqa exists, to make QA simple. With Conqa, QA can be collected on smartphones, making  it easy for the site teams to complete and collate ​meaningful QA: time stamped activities, rich in site photos and information, to the point, and with no paperwork.

Plus, because QA is the last step in a process our customers are using the data to monitor site progress, support progress claims, and proactively resolve issues.

When all trades follow this process it significantly decreases the overall risk on a project. With over 12% of costs on a project caused by rework, getting it right the first time can have massive impacts on project profitability. Especially in an industry working with 3-4% margins.

There are many issues facing the industry, but giving the site teams the tools to champion their own quality is a step in the right direction. As Craig Hudson, MD at Xero, pointed out, every site worker has powerful technology sitting in their pockets, and now is the time to start using it.

Author: Dan O'Donoghue, Conqa Director

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