Call for government to support local industry more

The steel industry has called on the government to lead the way in awarding a bigger share of large scale projects to New Zealand companies.

Steel Construction New Zealand (SCNZ) manager Alistair Fussell has come out strongly behind a recent report that found local companies and the wider economy would benefit from a bigger share of large-scale projects.

The report, commissioned by the New Zealand Trade and Enterprise's Industry Capability Network (ICN), said Australian experience showed that for every $1 billion spent on major projects, there was the potential to boost New Zealand's share of revenue by up to $170 million.

Mr Fussell said it should be mandatory for New Zealand steel firms with appropriate credentials to be considered as potential suppliers for major projects.

“The reality is that too many procurement decisions for major projects in both the public and private sectors are based on price, and this has led to imports of cheap fabricated steel tripling over the past five years.

“Our analysis shows that in the year to 2009, steelwork imported into New Zealand increased by $43 million, resulting in the loss of more than 150 jobs in the steel construction sector, as well as the associated tax revenue.”

Procurement decisions based solely on price were invariably not good value for money, Mr Fussell said.

“Unplanned additional costs are likely to arise associated with poor design, sub-standard materials, late deliveries, low-quality fabrication, inability to correct errors, and penalties incurred for project delays.

“What’s more, all too often overseas competitors don’t follow our high standards of safety; many have never heard of sustainability; often subsidies and special procurement conditions apply, which amounts to dumping; and what they pay in wages is well below what we would regard as fair.”

He said government purchasing decisions were meant to be based on a whole-of-life approach, in which the true costs of a procurement decision are considered over the planned life of the product or service.

“Our concern is that this is not happening.”

SCNZ fully supported ICN’s development of local industry participation plans for major projects, he said.

“But at present these are just voluntary guidelines. We believe the time has come for the government to make the guidelines mandatory and help to grow local industry.”

Mr Fussell said SCNZ is not asking for preferential treatment for local industry.

“Instead, what local industry needs, and deserves, is a level playing field.”

More effective public sector procurement practices would see government entities working with local suppliers to build local capability and develop innovative solutions, Mr Fussell said.

“If the government takes the lead, the private sector will follow. The result will be local firms increasing their capability and capacity, and producing export-quality products.

“It should be our common goal to build competitive industries, but we won’t achieve this if we base our procurement on finding the cheapest option.”