Fear contractor may quit if HNZ still ‘changing minds'

Otago Daily Times

26-05-2025

Pete Hodgson. PHOTO: PETER MCINTOSH
One of the former leaders of the new Dunedin hospital project is worried the protracted negotiations will convince the lead contractor to "walk away", resulting in the project's costs spiralling out of control.
It comes after the Otago Daily Times reported CPB Contractors' lawyer, Tom Horder, had publicly slammed the government's approach to contracting major infrastructure projects.
The Australian construction giant is set to build the new Dunedin hospital, but Mr Horder said New Zealand governments over the past decade had gone with the lump-sum model for contracts, which had been inappropriately applied to major projects, with "disastrous" results.
Former Labour health minister Pete Hodgson, who led the early stages of the project, said Mr Horder's remarks were "concerning, to say the least".
"If Health New Zealand Te Whatu Ora [HNZ] go back to the market, sooner or later CPB are going to say, we will not build this thing at a fixed price at $1.88 billion because we won't get subbies [subcontractors] to come and do their bit."
Mr Hodgson said there was always a risk of unknown problems with major infrastructure projects.
"It probably just goes with the territory that you walk into problems that will have to be resolved once they've been discovered — and you can't prediscover them."
He described HNZ's approach to contracting the new hospital as a "shambles" and a potential reputational risk.
"If CPB pull out, then I'm sure [Christchurch-based construction company] Southbase and others would look at it, but they would be adding money, and some of that money would be the risk of the client's behaviour.
"They cannot stop changing their minds."
This would lead to further delays and ballooning costs beyond the $1.88b set aside by the government, he said.
"HNZ have been deciding and undeciding themselves for years now and that means that the Crown, or the health system, will get a reputation across Australasia for being a bad client. That puts the price up."
The project was delayed for several months last year after the government deliberated over whether to build a new hospital on the former Cadbury's site or retrofit the existing hospital.
Financial commentator Bernard Hickey told the ODT he would not be surprised if CPB decided to walk away from the contract.
"It was a mistake [to stop work] because it alienated and shocked so many people who had geared up for significant infrastructure spending for many years; they had invested in people, invested in plant.
"When you're in the contracting game, you need certainty."
An HNZ spokesman said it was progressing commercial negotiations with CPB and was also finalising designs following decisions announced by the new Minister of Health, Simeon Brown, in January.
"While negotiations are continuing, Health NZ is progressing work to get pile capping and foundations work under way by the middle of this year."
Mr Horder has been contacted for comment.
Mr Brown met CPB on February 3.
"Contract negotiations for the completion of the new Dunedin hospital are being led by HNZ," Mr Brown said yesterday.
"What matters now is getting the best possible value for taxpayers — and delivering the hospital that the people of Otago and Southland have been waiting far too long for.
"New Zealanders elected this government because they wanted action, not excuses. ... This government is focused on delivery — and that's exactly what we are doing."
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