Fletcher Building-run programme delivered value for money

Fletcher Building-run repair programme delivered value for money, EQC says

By Paul McBeth

Dec. 2 (BusinessDesk) - The Fletcher Building-managed home repair programme in Christchurch has delivered value for money in a project with no international comparisons, with work done cheaper than the cost of building new houses, the Earthquake Commission says.

Speaking before Parliament's finance and expenditure select committee, EQC chairman Maarten Wevers defended the programme, which was criticised in an Auditor-General report yesterday over the way EQC handled complaints related to the rebuild, saying it had kept a lid on costs, and was working to improve its processes, but that doesn't mean "we have reached Nirvana yet."

The Auditor-General's report said EQC received too many repeat or multiple complaints, and that repairs weren't completed fast enough. Still, the $2.7 billion spent on the programme, of which $340 million went to Fletcher, was below the Canterbury rate of inflation for new houses. EQC estimated the cost of a repair rose 14.2 percent between February 2011 and June 2014, less than half the 30.9 percent increase in the cost of building a new house in Canterbury over the same period.

"The purpose of the home repair programme was firstly to have some quality across Canterbury, to have some quality assurance processes in place for the repair, to get economies of scale, and to contain cost inflation," Wevers said. "As the Auditor-General's report says, one of the great successes of the home repair programme is that it's kept the cost of building and repairing 70,000 houses under very good control, at less than the cost of new builds and at less than the cost of building elsewhere."

The Auditor-General found the $399 million of project management costs were at the upper end of New Zealand indicators as a proportion of building costs, which were estimated to be about 12 percent of a repair in an earlier report. Of the $340 million paid to Fletcher, some $258 million was for direct costs including staff and facilities, with the rest making up the building company's margin.

When asked about Fletcher's position as the sole manager of the home repair programme, Wevers said EQC established "very clear rate cards" to contain costs and selected the building company in a competitive tender process.

"There's no perfect model to compare this with, and I suppose that's one of the things we'll have to look at in the learnings," he said.

Chief executive Ian Simpson told politicians EQC had subsequently asked Fletcher to put in additional checks and balances to improve quality assurance.

(BusinessDesk)

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