Construction squeeze hits works projects
Infrastructure projects in Tasman district are $14.3 million behind schedule, with the council citing the stretched construction sector as the main cause.
Tasman District Council had a $52m capital works budget for 2018-19, funding roading, water supply, stormwater, wastewater and solid waste projects. However, it is estimating that only $38.2m will be spent by the end of the financial year on June 30, leaving $14.3m not spent.
At a council meeting on Thursday, engineering services manager Richard Kirby said the key factor in the delays had been Tasman’s stretched construction sector.
He said the increased level of activity had made it difficult for the council – which was reliant on suppliers within the construction sector to complete its capital works – to secure contracts at reasonable prices.
Contractors were reducing the number of tenders they were bidding for, Kirby said, with two contractors informing the council they would not be making any bids for the next 12 to 18 months because of their current workload.
He said prices had also been rising, with the higher level of activity lowering competition in the market.
For the most recent tender bid, for the Mapua water and wastewater upgrades, the price was $2.7m greater than the pre-tender estimates and council budget of $5.6m.
‘‘Contractors are very, very busy at the moment, they are picking and choosing, and if they are going to do a job, they are putting market premiums in because they are having to bring resources in, as they can’t do it themselves.’’
Kirby said that while the market went through cyclic stages of activity, it was likely to be another couple of years before things slowed down.
In a report to the council, two options were given to counter the problem.
The first was to delay some works until the market freed up, although this would not be an option for many critical council services. The second was for the council to review its procurement process, giving contractors longerterm commitments for projects.
Councillor Tim King said there was not much choice but to explore the other options.
‘‘It’s not sustainable to pay some of the prices coming through . . . [we may need to] make a conscious decision to say, ‘In these circumstances, we will wait until the market is more advantageous to get stuff done’.’’
Cr Dean McNamara said it was ‘‘disturbing’’ that almost 30 per cent of the work programme had not been completed.
‘‘When [Kirby] started the job, you said your number one priority would be to deliver the underdelivered work programme. I find it very frustrating, and am wondering how moving forward things will improve.’’
Kirby said he was equally frustrated about the holdups.
‘‘When you have a market the way it is – and you have estimates, and you went through and reviewed all of those estimates, and increased the scope of risk on those – even that hasn’t been sufficient to cater to what has happened in the market.’’
Cr Mark Greening said it would be an option to consider looking at the overall council portfolio, rather than just the capital works budget, and delaying less essential projects in other areas.
Tasman Mayor Richard Kempthorne said it would be best to stick with the current programme, even if things were delayed.
‘‘Carrying forward from the capital works programme is nothing new – we’ve been doing it for years,’’ he said. ‘‘The fact is we’re in a heated contract market, and this is just the way it is – I wouldn’t want to see us go through a process were needed to go to a Long Term Plan review.’’
‘‘Contractors are very, very busy at the moment, they are picking and choosing, and if they are going to do a job, they are putting market premiums in.’’ Richard Kirby, Tasman District Council engineering services manager