24 August, 2011

Waterview contract offers lessons for central and local government planners

The timing of the Government’s contract letting for Auckland’s $1.4 billion Waterview roading project reinforces the construction industry view that counter-cyclical forward planning is critical to the achievement of best value for ratepayers, taxpayers and the industry.

A spokesman for the Construction Strategy Group (CSG), Bruce Kohn, said today that by agreeing the contract at a time when construction costs have rarely been cheaper, because of the recessionary state of the economy, the Government has achieved a financial coup.

“At least six highly specialised and competent civil contracting firms in Auckland went out of business in the past year because of a lack of work. Waterview represents a life saver in terms of employment and the health of the civil construction industry, as well as best value for money spent.

“It represents a lesson that the CSG hopes will be learnt by a range of other central and local government entities when considering infrastructure, commercial and residential building and the provision of facilities for health and education”.

Mr Kohn said anecdotal evidence within the civil construction industry suggested tenders were regularly coming in for contracts at 20 to 30 percent below engineers’ estimates because many firms were desperate for work.

“This re-emphasises our contention that through careful planning of forward programmes central and local government can achieve best value by ensuring they have major projects to let when times are tough. Delays in contract letting during difficult economic periods mean that often there is a rush of projects when the economic cycle turns up. This in turn leads to prices becoming inflated as contractors bid for scarce workers and resources to get through the welcome but potentially wasteful over heated demand.

“At this point both major project, commercial and residential building prices are at advantageous levels for consumers. On the horizon is at least a mini-boom period through spending on Christchurch reconstruction, leaky home remediation and pent up demand for new housing in Auckland.

“The industry does not want to see the hoped-for period of plenty promptly turn into a depressing construction drought, such as that it is now going through, when the upswing comes to an end. We hope central and local government will take on the lesson of Waterview.” – that mid-term and long-term co-ordinated project planning can smooth out the process to the benefit of all stakeholders.”

ENDS

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