MARKET UPDATE: How to navigate construction’s perfect storm: contractor shortages and impending receiverships

White Associates - How to navigate construction's perfect storm

By Graham White

Never in my 40 years in the construction industry have I seen contractors be as selective in the work they choose to take on as they are now. Just getting a contractor interested in bidding for work can be a challenge in itself.

The onus is now on developers to come up with more attractive propositions and consider alternative forms of procurement.

Piquing contractors’ interest

A year ago it seemed that contractors had the desire and the capacity to undertake new projects. Finding a contractor was relatively easy: you could go out to market and get several good, competitive bids.

Today however, many are suffering the consequences of overtrading last year and are struggling with resources – both internally and externally. We’re finding a lot of projects are under pressure as contractors battle to meet programme dates and quality standards. As a result, they’ve become very particular about which new projects they take on, and they are turning down large volumes of work.

The solution?

When we talk to contractors, they tell us that they’re busy, but they also say that if you come to them with a good proposition they will be interested. So what does ‘a good proposition’ involve?

  1. The ability to negotiate – Go and talk to contractors. And do it early on. If it’s just a straight out negotiation, they’re more likely to be interested.
  2. Minimal tender effort – Contractors make money when they’re building, not spending time and money tendering against three other firms for a project that might not eventuate. And from a developer’s standpoint at the moment, for many projects it can be too risky to spend money on going to tender only to find that not enough contractors want to bid for it, the prices aren’t competitive enough or contractors withdraw during the tender period.
  3. A reasonable budget and timeframe – More so than ever, contractors are putting project budgets under the microscope, asking themselves if they will be able to make enough money on a job. They’re paying more for materials and for staff – both to get the resources they need and hang on to the resources they have. If the budget isn’t there and the timeframes are too tight they will just pick another project over yours.
  4. Funding already in place – Get funding upfront so that when you speak to contractors you can reassure them that funding in place and that the project will definitely go ahead. Come and talk to us at White Associates about how we can help you do your due diligence to help strengthen your bank funding application.

Selecting a contractor in a strong financial position is particularly important given what we’re hearing…

Protect yourself from the black cloud looming over the industry

Several industry experts believe a perfect storm is brewing and it’s just a matter of time until a relatively big player – or players – in the construction industry go under.

The flow-on effects from a contractor, or subcontractor, going into receivership could have catastrophic effects for some developers.

This is why at White Associates our payment policies have so many qualifications to make sure our clients never pay for work ahead of progress. Every month, before we sign off payments for contractors we ensure onsite inspections and quality checks by design consultants have been carried out so that the work our clients are paying for has been completed to spec.

Engage QS teams to make informed decisions

All of this highlights the importance of having skilled quantity surveyors on board to help engage the right contractor for the right price, control cost and minimise risk.

As one of New Zealand’s leading quantity surveying consultancy firms, we’re in a unique position at White Associates to offer solutions to help developers navigate what has been described as the most dangerous time in the current construction cycle.

If you have a project you’d like to discuss with us, please feel free to get in touch on (09) 362 0624 or email