Govt's infrastructure contracting criticised
A lawyer at CPB Contractors, the Australian construction giant set to build the new Dunedin hospital, has gone public to slam the government's "disastrous" approach to contracting major infrastructure projects.
Meanwhile, any contract between CPB and Health New Zealand Te Whatu Ora (HNZ) to get on with the delayed inpatient build is pending, despite a promise by Health Minister Simeon Brown in January that work would start mid-year.
In a social media post liked by a senior HNZ infrastructure boss, CPB legal manager Tom Horder wrote that New Zealand was "very bad at delivering major infrastructure" and pointed the finger at contracts demanding delivery for a fixed price.
"There are some practical things we can do to improve.
"One of them is picking the right contract model for our big projects ... Over the past decade in NZ, the lump-sum model has been inappropriately applied to major projects, with disastrous results."
In the post, Mr Horder links readers to a document listing alternate contractual arrangements including agreeing some costs with the client as a build progresses and challenges emerge.
Sources have said HNZ and CPB have considered various contract arrangements, but the government is demanding a fixed price.
The decision rests with ministers, but there is an indication that an alternate contract model has been preferred by at least one senior HNZ staffer.
Mr Horder's post was liked by HNZ head of infrastructure commercial and procurement Paul Hrstich, who first worked on the project in March 2020, but has "not been involved in the project since January 2023", according to HNZ chief infrastructure and investment officer Jeremy Holman.
CPB has also worked on the project for years, under an Early Contractor Engagement (ECE) contract signed in 2021 with HNZ to plan and price the project.
However, last year former health minister Dr Shane Reti and Infrastructure Minister Chris Bishop forced a tools-down on the former Cadbury factory site after claiming a budget blowout.
After the decision to proceed again, the chance of CPB undertaking the build has been thought to be a certainty for continuity reasons and due to limited big-build competitors.
However, HNZ has issued an invitation for construction firms to tender by mid-June to finish the "substructure".
The invitation asks for a fixed price.
Naylor Love former chief executive Rick Herd said a fixed price for the Dunedin inpatient build, determined by a set-in-stone design, was "unlikely to happen due to the quality, competency, calibre and capacity of the design teams we have got in this country".
He also blamed poor government leadership.
"The government struggles to get consistency, continuity and agreement within their own teams and clinicians of what a big hospital should look like and in my experience are constantly changing their mind. This makes it impossible to fix a price."
Any agreed price would likely require a "huge contingency" and result in the contractor filing for variations throughout the build, causing "stress, antagonism and conflict".
A price tag should be attached to "unknowns" and a decision made about who carried that financial risk.
CPB declined to comment.
mary.williams@odt.co.nz
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