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Waitangi Park costs: Value better than lowest cost

1 March, 2006 NEWS RELEASE

Waitangi Park cost merry go round:
Best value better aim than lowest cost in contract letting

A need for contracting procurement procedures to be focussed on obtaining “best value” rather than lowest cost outcomes is highlighted by Wellington’s Waitangi Park problems, says the Chairman of the Construction Industry Council, John Pfahlert.

“The contracting dispute on the park site is an excellent example of the need for companies and organisations involved in contract letting to follow best practice guidelines. These establish methods for avoiding traps inherent in an approach to obtain the lowest cost, come what may.”

The initial tender accepted for the development at Waitangi Park was $2.1 million less than the estimated cost of the project, and at least $2.6million below tenders from two other companies.

Mr Pfahlert said research carried out internationally on behalf of the CIC to establish its own guidelines of Principles of Best Practice for Procurement in the construction sector made it clear that the lowest cost approach is fraught with dangers to management, tenderers and end users of a project.”

He said the CIC document was available to all involved in project tendering. While the document is more applicable to major or complex projects, the guidelines present an approach to contract letting that could be of value across the board in competitive bidding situations. “We believe that the availability of these principles in document form can go a long way toward avoiding such instances as the Waitangi Park problem. Widely used they can help to significantly lift standards.”

The principles aim to eliminate
* Hidden maintenance costs and health and safety risks
* Compromising design quality and integrity, health and safety, training, the environment, and innovation
* Bidders pricing at unsustainable levels
* Risks being inappropriately allocated or transferred to suppliers/providers who are not always in a position to control, manage or minimise the cost of these risks
* Increased costs as suppliers/providers seek to cover the increased risks.

The CIC is convinced that a selection process aimed at minimising cost attracts long-term costs that erode value.” - ends


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