Auckland s Procurement Forum

Transcription

1 Auckland s Procurement Forum Proactive Engagement of Auckland s Building and Construction Industry AUCKLAND PIPELINE REPORT NO.1 MARCH 2012

2 Contributing organisations DATA SUPPLIED AT A DETAIL LEVEL Auckland District Health Board Auckland Council Property Auckland Transport Counties Manukau District Health Board Massey University New Zealand Transport Authority University of Auckland Vector Watercare Waterfront Auckland WILL SUPPLY DATA AT A FUTURE DATE Auckland Airport Housing New Zealand Corporation Transpower Westpac PARTICIPATING IN AUCKLAND PROCUREMENT FORUM BUT UNABLE TO PROVIDE DATA AT THIS POINT Chorus Telecom DATA SUPPLIED AT A SUMMARY LEVEL Auckland University of Technology Department of Corrections Ministry of Education SUPPORTED BY Property Council New Zealand Statistics New Zealand Construction Clients Group NZ New Zealand Defence Force Unitec Waitemata District Health Board Building and Construction Sector Productivity Partnership The Secretariat c/o Department of Building and Housing Level 6, 86 Customhouse Quay PO Box , Wellington 6143 P F

3 Foreword BILL SMITH, CHAIRMAN OF THE PRODUCTIVITY PARTNERSHIP Following the release of the report of the Building and Construction Sector Productivity Taskforce in 2009, the sector took stock of its ability to lift productivity and realised that the key to success lay in working closely together. The Productivity Partnership is the result - a partnership between the Sector and Department of Building and Housing, BRANZ and the Built Environment Training Alliance - with the objective of lifting the sector s productivity across many fronts. One of the clearest recommendations of the Taskforce was to take a joined-up approach to the construction procurement. Overseas experience has clearly indicated that the process of purchasing buildings and infrastructure is the most critical value-adding point in the system from the client s perspective. The Auckland Procurement Programme is therefore all about getting the most critical construction clients on the same page ; with timing, resources, and expectations all widely understood for each project or group of projects. Auckland is New Zealand s biggest city, and we are heartened by the leadership shown by the Auckland Council in helping the Procurement Programme off to a fine start. This is our greatest opportunity to demonstrate what professional construction procurement means in practice other cities are watching closely. I d like to take this opportunity to acknowledge the team who have got us to this point, and especially to the construction clients themselves together we re already making a difference, and we re only at the start line. Our collective future is brighter thanks to your efforts. LEN BROWN, MAYOR OF AUCKLAND It s an exciting time for Auckland in terms of its growth and development as New Zealand s biggest city, which is why the Productivity Partnership s Procurement Programme of work is so important. Improving the productivity and value-for-money of the procurement is an essential for effective and efficient delivery of a bigger and better built environment in Auckland. For this to happen, then it is vital everyone pulls in the same direction by sharing information and investment plans so we have a much more cohesive, joined up approach. Auckland Council views Auckland s Procurement Forum as in important step of bringing together Auckland s most significant procurers of our built environment and infrastructure. It is therefore in the council s interest to engage with industry to reduce the effects of boom bust where possible and provide a collective, intelligent approach to long-term capacity planning for the city s needs. The council is consequently looking forward to playing an active part in the partnership and having a key role in supporting the ongoing collaboration to deliver a better place for people to live, work and play as well as a more productive industry. 2

4 The Report Recent reports both in New Zealand and overseas have identified the construction industry s short term forecasting ability, combined with endemic boom bust cycles, leads to poor levels of productivity, performance and inability to retain skilled personnel. Without investment certainty, the industry cannot effectively plan for and train resources. The Building and Construction Productivity Partnership believes that bringing together high-volume procurers to collaborate in developing a shared programme of Auckland s capital investment, will contribute significantly to improving construction industry productivity by Working with a wide range of stakeholders, the Partnership is acting to bring this idea into reality via the Auckland Procurement Forum. PURPOSE The Auckland Pipeline Report is designed to provide a combined view on future capital investment across the Auckland region. The report sets out to assist both client and supply side organisations in understanding the future state and nature of the Auckland construction market. Its main aim is to support improved efficiency in planning, ultimately to help remove waste from the construction planning and delivery processes. This is the first of a series of reports which will be updated quarterly with an annual review released in August each year. The scope of the information at this point covers public sector capital expenditure (new build and refurbishment and upgrading projects). Private sector data will be added to each subsequent quarterly update. The data refers to spend across three financial years from 1 July to 30 June and each subsequent annual review will comprise a rolling three year outlook. Over time this could increase to five years and more where practical and where a need is perceived. The Data The report is not yet comprehensive as a limited number of clients have contributed to date, albeit, the major investors from the public sector. A list of contributors is given on page 1. Over time, the data will be improved in both depth and extent as the number of contributors grows. While the report provides an indication of the current plans of those providing data, the level and detail of data provided varies and this is indicated under a range of categories of contribution on page 1. Forecast data can change at any point and care should be taken in any interpretation of the data. Generally, three years data has been provided by each contributor. Notes under each table list any exceptions. Year 1 being 1 July 2012 to 30 June Year 2 being 1 July 2013 to 30 June , Year 3 being 1 July 2014 to 30 June PPP (Public Private Partnership) projects are not included in this report. How to use the Report Each section sets out a table showing aggregated data granulated to show spend across a range of criteria i.e. sector, geography and time. Some of the tables which refer to trends are either not populated or use indicative data where actual data for historic activity is not available. Where graphs show a trend, the current year of 2012/13 is actual data, but previous years are indicative data. This will change over time as the report is updated quarterly and annually. Notes below each table provide further details of the data sources and scope. The executive summary sets out an overall view of the data at a headline level. A general market piece has been provided by the Chief Economist of Westpac Institutional Bank for this first report. This piece is not intended to be an analysis of the data set out in the report, however as the data becomes more robust over time, this section may provide analysis and commentary. 3 You are welcome to provide comments and suggestions to the Auckland Procurement Forum which will assist in the development of the Report. Contact details are provided on page 1 and the back cover.

5 Data categorisation by sectors The data has been collected from each organisation using a standard template (see page 1 for a list of contributors and their level of data contribution). The aggregated data has been granulated into a series of tables to show spend across a range of criteria. Table 1 below shows how the data has been aggregated into sectors derived from Statistics New Zealand. The Horizontal and Vertical sector split is derived from the contributor s core activity e.g. Auckland Transport s data has been categorised into Horizontal Sector spend, although this activity comprises some element of vertical construction. As the report develops, more accuracy can be built into categorising data into sectors. Specific instances of how the data has been aggregated are given in the notes below the table. Table 1 Organisations Categorised by Sector Government or Private Horizontal or Vertical Sector Organisation Private Vertical Office Westpac Government Education Ministry of Education Auckland University Massey University Unitec Auckland University of Technology Hospitals Waitemata District Health Board Auckland District Health Board Counties Manukau District Health Board Social, Cultural + Religious Auckland Council Property Waterfront Auckland Misc. Auckland Airport Department of Corrections New Zealand Defence Force Other Housing New Zealand Horiztonal Road Auckland Transport New Zealand Transport Authority Rail Power Infrastructure Auckland Transport Vector Transpower IT/Telecoms Chorus Telecom Water Watercare NOTES: the Waterfront Auckland (WA) spend has both public and private sector elements, this edition of the Report contains only Public Sector planned work - therefore the WA spend has been applied to the Social, Cultural + Religious category. the Housing New Zealand Corporation data has been included in the vertical sector Other for this Report. the Auckland Council Property data includes a small social housing element. 4

6 Executive Summary Review Point March 2012 for data covering the period 1 July 2012 to 30 June Review Highlights Table 2 Predicted capital expenditure over three years ($M) 2012/ / /15 Three Year Total Horizontal Sector Vertical Sector Total Table 3 Predicted changes and inflationary pressures (%) 2012/ / /15 Expenditure Growth (2012=100%) 100% 122% 122% Percentage Change v's last Quarter 1st report 1st report 1st report Estimated Inflation (%) CIV see notes on Page % +2.0% +4.0% NOTES: capital Expenditure is aggregated by primary sector of the supplying organisation inflation (Cost Index Value) has not been applied to the totals estimated inflation is derived from CIV and CGPI-NRB data and is given as a general estimate only (non-building residential) Public Private Partnership (PPP) projects have been excluded from this report. Horizontal and vertical split derived from analysis of organisation s key construction delivery mode. statistics NZ 2010 calendar year data for Non-residential Building Work put in place, (Institutional,- Government, sector) = $659M. For comparator purposes this can be related to Table 2 - Vertical Sector, as it is calculated from consented building works, (i.e. does not include horizontal infrastructure) this report Central and local government sector only. 5

7 OVERVIEW OF EXTERNAL INFLUENCES ON THE MARKET Provided by Westpac Institutional bank Construction activity has been a notable area of weakness in the New Zealand economy over the last few years. We think there is evidence that activity in the sector has turned, and expect it to expand further over Even our expectation for a slow rebuild in Canterbury will provide a huge stimulus for the industry in And a shortage of housing in Auckland should spur new house building further North. Over the coming years we expect the construction industry as a whole will experience rapid growth off its depressed base, eventually taking the industry back to the level of activity seen in However, the coming boom will be distinct from the 2000s episode in type of building, means of finance, and region of focus. In a nutshell, we anticipate rapid growth in residential construction for Christchurch and Auckland (leading to 30 percent growth in residential construction during 2012 compared to 2011), and a great deal of infrastructure work in Christchurch. However, we expect commercial construction to ramp up only gradually in Christchurch, and to remain relatively weak elsewhere for a while yet. We estimate there will be around $160m of residential activity, $100m of other construction and $25m of non-residential building work in Canterbury in the final quarter of this year. The outlook for the construction sector is not just about Christchurch. There is also the issue of an emerging housing shortage, due to the prolonged period of low house building. Recent evidence suggests that the shortage is most acute in Auckland, and that construction activity there is about to ramp up in response. Commercial construction outside Canterbury is expected to pick up more slowly. Demand for industrial property has been picking up in the last year or so, and there is evidence of building activity starting to follow suit. Vacancy rates for retail space are generally considered to be low and there has been a modest pickup in construction, perhaps most prominently by the major supermarket chains. In contrast, office vacancy rates are only just starting to settle at cyclical highs, and the pipeline for new projects is minimal following the recent completion of some major projects that were committed to during the boom. There is a more active pipeline of infrastructure work planned for coming years. Investment in infrastructure remains a priority for the current government even with the move towards fiscal belt tightening. The electricity sector will also be a major contributor, with high prices in recent years encouraging generators to look into increasing capacity. Those projects already approved or under way, and due to be commissioned as early as 2013, add up to about 15% of current generation capacity. However, the imperative to repair Christchurch s infrastructure could constrain some forms of infrastructure activity in other parts of the country, for example in road building. Dominick Stephens, Chief Economist, Westpac Institutional Bank 6

8 Overall Expenditure Table 4 Proposed Expenditure by Organisation ($M) Organisation 2012/ / /15 Total Auckland Transport New Zealand Transport Authority Watercare Ministry of Education Vector University of Auckland Counties Manukau District Health Board Auckland District Health Board Waterfront Auckland Waitemata District Health Board Auckland University of Technology Auckland Council Property New Zealand Defence Department of Corrections Unitec Massey University TOTALS NOTES: data displayed in order of 2012/13 year proposed spend Waitemata DHB was not able to provide 2014/15 data at this time Table 5 Relative Change in proposed three year spend profiles, from 2010 to 2012 (example data) CHANGE IN 3 YEAR SPEND PROFILES $ MILLION NOTES: this graph is to show how three-year spend profiles have changed from 2010, through 2011 to those published this year. indicators to look for include changes in overall spends and/or changes in spend profile over time i.e. whether proposed spend has been pulled forward or fallen back within the three-year profile as time has progressed nb. For this first Report Year 2010 and 2011 are example three-year data profiles and do not represent real data data is real data.

9 By Sector Table 6 Vertical Sector Detail ($M) Sector 2012/ / /15 Total Education Retail * * * Office * * * Industry * * * Hospitals Social, Cultural + Religious Hotels * * * Misc Other * * * Table 7 Horizontal Sector Detail ($M) Sector 2012/ / /15 Total Road Rail Power Infrastructure IT/Telecoms * * * * Water NOTES: sectors align to Statistics New Zealand survey sectors, (See Table 1) *Not all sectors are fully represented in this Report - i.e. Other (Housing New Zealand Corporation), Power Infrastructure + IT/Telecoms. Data will be added over subsequent updates 8

10 Table 8 Vertical Sector Proposed Expenditure VERTICAL SECTORS $ MILLION Others Misc. Hotels Social, Cultural + Religious Hospitals Industry Office Retail Education / / /15 Table 9 Horizontal Sector Proposed Expenditure HORIZONTAL SECTORS $ MILLION Water Power Infrastructure Rail Road / / /15 NOTES: the sectors Other (Public Sector Housing) and IT/Telecom were not able to provide data for the Report at this time Hospitals Sector does not contain 2014/15 data sets for Waitemata DHB. 9

11 Table 10 Change in expected Sector expenditure Quarter by Quarter ($M) Non representative data ($M) Other Water IT/Telecoms Power Infrastructure Rail Road Misc. Hotels Social, Cultural + Religious Hospitals Industry Office Retail Education Total Change Note: Indicative data only for this first Report 10

12 By Development Stage Table 11 Overall spend by delivery or development stage Stage Year 1 Year 2 Year 3 Feasibility $AA $ $ Concept $BB $ $ Design $CC $ $ Construction $DD $ $ Maintenance $EE $ $ De-commissioning/renovation $FF $ $ Total $XXX M $YYY M $ZZZ M Table 12 Change % from previous Q and previous year Stage Year 1 Year 2 Year 3 Feasibility +A% % % Concept +B% % % Design -C% % % Construction 0% % % Maintenance D% % % De-commissioning/renovation E% % % Total +XX% YY% +ZZ% Note: This section is for example only and will be developed over future updates. 11

13 By Project Size Table 13 Total expenditure by project size Project Size 2012/ / /15 Less than $10M 39% 29% 22% $10 - $50 M 31% 18% 34% Greater than $50M 30% 53% 44% By Region Table 14 Expenditure by geographical region ($M) Location of Spend 2012/ / /15 North + West Central + East Southern Pan-Auckland Total NOTES: Where no specific regional data was given data is applied to Pan-Auckland. Where proposed work extends across regions it was attributed to Pan-Auckland Where organisations only provided high level (annual data) this is included in Pan-Auckland 12

14 Auckland Procurement Forum Auckland Procurement Forum was formed in December The Auckland Procurement Forum s purpose of demonstrating Client leadership can be articulated through six goals. These are set out below along with the outputs required to achieve them: 1 to share the proposed forward plan workload of Auckland s major clients (demand-side) with the supplyside of industry. Output: The Auckland Pipeline Report. 2 smooth the impacts of the boom bust nature of NZ s construction market within the Auckland regions. Output: Consultation and review between Client organisations through the Forum group. 3 clients acting more efficiently through sharing best practice and resources. Output: Forum Member Meetings and possibly extra-curricular activity. 4 improved efficiency and reduction of resourcing waste through alignment/unification of: a. Process b. Procurement c. Project delivery d. Land use and planning, when related to procurement. Output: Forum Member Meetings and possibly extra-curricular activity. 5 engagement with industry Output: The Annual Industry Event and one-to-one meetings with clients and or specific client groups as appropriate 6 engage major private sector clients Output: Increased Forum membership to cover Auckland Procurement, increasingly robust Auckland Pipeline report covering more of Auckland s planned expenditure 13

15 Further notes on the data set To be read with the Notes on page 3 and throughout the report The data has been reconciled to a Year 0 cost for 2011, no inflation effects included. Where practicable, a comparison with existing current and historic data sets provided in cooperation with Statistics NZ will be given in future Reports. NZTA & Statistics NZ: The latest Cost Index Values for Infrastructure and Public Transport Data Collection Data will be updated on a quarterly basis and republished overall annually for the next three years rolling forward. The Annual Report will be published in August based on revised forward spending plans developed for approval in June each year. Disclaimer Note: While the authors have taken all care in preparing this report, it should not be relied on as a comprehensive view of the future capital investment in the Auckland region. The data provided is for the readers information only and does not constitute a commitment by the persons to which the information relates, or the authors, to the indicated levels of spending. Forecasts are based on data from a limited pool of third party contributors, and will change from time to time after publication of this report.

16 Building and Construction Sector Productivity Partnership The Secretariat c/o Department of Building and Housing Level 6, 86 Customhouse Quay PO Box , Wellington 6143 P F