By Jeremy Sole
CEO, NZ Contractors’ Federation
There was a time not so long ago when local Central Otago contractors were so busy working in the Queenstown property boom that no one had any time to do the Queenstown Lakes District Council (QLDC) work. The council’s response was to set up a closed panel of contractors who would be eligible to deliver around $125.5 million of capital works across Queenstown, Wanaka and the Lakes district.
The panel concept was a reasonable and sensible response to a particular set of conditions at that point in time, and was designed to give contractors enough certainty to cause them to reserve some of their capacity for local council work.
QLDC infrastructure service general manager Mark Kunath says that the panel arrangement had worked very well (in the market conditions that it was intended for).
However, market conditions are dynamic and the conditions that led to the establishment of the panel no longer exist. So opening up more of the work to the wider market will give the council the pricing and innovation benefits that stem from open competition. The decision has now been taken to enter into a one-year contract with the panel and reduce its allocation of work. About $10 million of the planned $20 million of capital work planned for the year will now be tendered.
According to media reports, it is also anticipated that the arrangement will enable local contractors to price more work and allow the council to take the best advantage of a quiet construction market with surplus capacity.
The move has also found favour with councillors – QLDC councillor Vanessa van Uden was quoted as saying that the panelists were all good quality contractors but the best way to ensure value for money for the local community was to compete on the open market.
The Contractors’ Federation has consistently campaigned for fair and open procurement strategies which provide competition in the supply stream and growth opportunities for contractors at all levels.
This is just one council, so it’s not time to put out the flags, but it is a very good sign that council officials and council officers are recognising the importance both of encouraging fair competition and nurturing the industry.
The federation fully recognises that there are circumstances where it is appropriate to package work into larger contracts and there is a sector of the contracting industry which needs that. But we represent the wider interests of the health of the whole industry and that ranges from one guy with an excavator right through to larger national and multinational contracting businesses.
Councils, and other infrastructure clients such as the power industry and rail, need to continue taking a strategic approach to this issue and look at the best ways they can allocate work so that they get value for money and in a way that ensures all tiers of the industry are supported, so that their interests as the client, as well as ratepayer and taxpayers best interests, are supported in the medium to long term.
Queensland Lakes has recognised the importance of competition – and healthy sustainable competition is only possible when you have a healthy industry with a range of businesses of different sizes.
Ultimately, the indicator of a healthy industry is the number of quality tenders coming to the tender box.
Such competition promotes innovative solutions and competition for all types and sizes of project. It provides growth opportunities for companies that are willing and able to grow and helps create an environment where businesses have the confidence to invest in personnel and resources.
The New Zealand Transport Agency has demonstrated that a robust prequalification system for contractors can work extremely well, allowing both for competition and confidence in the high professional standards of those tendering.
To avoid getting inundated with tenders, there is no reason why local authorities could not collectively adopt a similar approach to that taken by the NZTA. The federation would be very happy to talk to councils about the possibility of setting up such a system within the local government civil construction and maintenance purchasing environment.
This would have several benefits, including the opportunity to get a wider range of competitive tenders at the tender box, while at the same time indicating to contractors which projects they are qualified to tender for, and thus a subsequent reduction in the submission of untenable tenders. Both of these dimensions have the potential to save councils considerable amounts of money and time.
Contractor Vol.34 No.7 August 2010
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