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.

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