Government told “get real” over construction costs

Government told to “get real” over construction costs

The Government needs to get real over the true costs of major infrastructure projects, says the New Zealand Contractors’ Federation following the decision to delay construction of a 7.2km bypass of one of the country’s deadliest stretches of highway south of Auckland.

Transit announced on Thursday night that it was delaying the project at Mangatawhiri, on State Highway 2 between Pokeno and the turnoff to Thames by at least six months due to high costs.

“We have been campaigning for more than a year for funders to get real about funding and the true costs of projects such as this one,” said NZCF Chief Executive Richard Michael.

Mr Michael said rising interest rates, the high cost of fuel and increasing employment costs caused by the ongoing skills shortage all contributed to higher overheads for contractors.

“It’s certainly not a case of our industry being greedy – contractor margins remain very tight all around the country, including Auckland. In fact I believe these margins are ultimately unsustainable and this can only lead to further delays. It’s just time funders woke up to the real economic factors influencing the sector.”

Mr Michael reiterated his call for more certainty around national infrastructure spending, saying that without it the contracting industry would find it virtually impossible to upskill and upresource to effectively meet future demand.

“Large contracts require civil contracting companies to invest heavily in their own equipment and resources. For every $1 billion worth of contracts, the industry has to invest $200-$300 million in equipment and resourcing to make sure we can deliver.

“We believe that the Government, industry and other funders should be working to develop a 10-year infrastructure plan.

“This could be used to develop a multi-period funding agreement between the Government and Transit that would lock in project funding for 3 to 5 years – not the inadequate 12 months as at present. This approach has been successfully used in Australia.” Mr Michael said.

ENDS

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