Construction crisis: Contractors 'will walk away' if clients don't change ways

Cabinet ministers and construction leaders met yesterday to discuss how to solve the major challenges facing the struggling industry.

The sector has been plagued by issues related to skill shortages and receiverships.

It also comes off the back of recent revelations that nearly a third of New Zealand construction companies are failing to comply with the new law to keep retention money in trust.

New Zealand Specialist Trade Contractors Federation president Graham Burke told Radio New Zealand’s Morning Report that there was too much risk with open-ended contracts involving fixed prices, causing more pressure on contractors and sub-contractors.

"The Government is a major client in the construction sector and they can lead the way by actually sharing some of the risk with these bigger contracts," Mr Burke said.

"I don't think it's to anyone's benefit to push the contractors down to a level where major contractors are going out of the industry or going into receivership."

The flow-on effect from long-term fixed price contracts was not limited, he said.

"These are long-term projects as well, where costs are bound to rise over a period of time.

Those risks have been taken on by the main contractor but they actually end up being transferred down the supply chain to suppliers and sub-contractors."

He warned that if contractors were pushed too hard, the construction crisis would only worsen.

"If the client is too tough, then people will walk away ultimately."

While negotiating better terms in long term contracts was part of the issue, another part was the focus on the bottom line, Mr Burke said.

"The tendering process has been concentrating solely on the cheapest possible price, a race to the bottom."

It comes after the Ebert Construction went into liquidation today. Source: 1 NEWS

Registered Master Builders chief executive David Kelly told Morning Report that clients were taking advantage of contractors entering into projects where they underestimated the risk.

"They probably got a little bit bullish in terms of their ability to manage that risk, they haven't priced it accordingly, and on the clients' side taking advantage of the fact that they will find someone who's prepared to enter into that and take the risk on."

Mr Kelly said the taxpayer was already paying the price for taking the cheapest quote, and over time would get better value for money from a strong construction industry with fairer procurement processes.

"I think the Ministry of Education's issues with schools that have emerged over the last decade really is a good case in point, the taxpayer is already paying for it but it's not understood up-front."

Hundreds of home-buyers are in the dark over the future of their apartments. Source: 1 NEWS

"(Local government and Government) need to have a strong confident industry that will deliver value over time. If we continue to have businesses going bust then they simply will not get competitive pricing."

He said it was agreed at the meeting with officials yesterday that the Government should shoulder more of the risk in complex, long-term contracts where it was hard to assess or predict costs.

"What we're saying is we need to do some things ourselves and we have already started that - working with about 30 of the largest commercial builders to develop guidance and list awareness. And on the Government's side they've committed to taking action particularly around their own procurement," Mr Kelly said.

Recent firm failures, including Ebert Construction last week, have led to thousands of dollars and hundreds of jobs being lost.
Source: 1 NEWS



Most read: Diamond disappears from engagement ring but no cover under warranty - 'I just think we've been unfairly treated'

This story was first published on Monday August 6.

Shauni and Shane have been at logger-heads with Michael Hill over their lifetime diamond guarantee. Source: Fair Go

Shane Partington bought fiancée Shauni an $1800 solitaire diamond engagement ring from Michael Hill jewellers in August last year.

Seven months later the diamond disappeared. Shauni doesn’t recall banging it or it catching and dislodging the diamond.

The couple were told that Michael Hill’s Lifetime Diamond Warranty would not cover the stone’s replacement, because they believed the ring had been in an accident.

Shauni said she had been careful with the ring, and it had only had normal wear. 

Michael Hill sent the ring away to Australia for inspection. It returned three months later – same result, no cover under the warranty.

Then, Fair Go contacted the company asking whether they were correctly applying the warranty in these circumstances.    

Michael Hill are satisfied with their original assessment that the damage was due to the customer's handling of the ring, and that they followed company policy and process regarding the replacement of faulty product and their diamond warranty.

However they agreed the assessment process took longer than it should have and Shane and Shauni were inconvenienced as a result.

For that reason, they have offered the couple a full store credit to the value of the ring.

Shane and Shauni have decided on a diamond cluster replacement ring not a solitaire  - so that if a diamond does fall out – it won’t be such a big deal.

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Croatians in love with Auckland-based Samoan singing group after their Football World Cup anthem proves a hit

An Auckland-based Samoan male singing group has become a sensation in Croatia after a video of them singing a traditional Croatian song went viral.

A video in support of the nation’s football team has made Klapa Samoana Group a viral hit in Croatia. Source: Tagata Pasifika

The video was a song supporting the Croatian football team on their way to their very first World Cup final last month.

Klapa Samoana Vocal Ensemble group was formed back in 2011 by founding members Christian and Austin whose main inspiration was Croatian folk music.

TVNZ1's Tagata Pacifika spoke to the group to find out why they’re such a hit in the European country and where they got their love for Croatian music from.

Watch the full video above.