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Industry leaders say construction companies taking unnecessary risks to secure contracts

Building experts are blaming a culture of undercutting for playing a role in the demise of several major construction firms.

Industry leaders say despite growing prospects, companies are taking on unnecessary risks to secure contracts.

BDO head of construction James MacQueen has labelled the trend "a race to the bottom".

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"There's a lot of companies out there, including quite a few new companies that are probably less experienced and they're all very eager to get a job, so they put in a price to win the job," he said

"Then later on try and work out how they're going to try and do it for that sort of price."

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It’s affecting both residential and commercial contractors with one Christchurch company saying they've been undercut by as much as 15  per cent.

Sinclair Builders director Chris Sinclair says although the practice is worrying, it isn’t sustainable.

"You might be able to carry them sometimes but if it keeps happening time and time again or you underpricing jobs relying on variations things can bad pretty quickly," he said.

Contractors are meeting in Wellington later this month to discuss the changes needed to provide stability to the industry.

Industry players say something needs to be done urgently. Source: 1 NEWS