Stadium tenders, turf + future of Carisbrook

### ODT Online Fri, 23 Apr 2010
Stadium tenders over budget
By David Loughrey
Tenders for carpentry at the Forsyth Barr Stadium have come back “significantly over budget”, a new report on the project says. Carisbrook Stadium Trust chairman Malcolm Farry said last night that meant the trust would have to go back to the market to try to negotiate a more acceptable price, something he said had been done before, successfully, during the building process.
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The following reports will be discussed by the Dunedin City Council finance and strategy committee on Monday:

Report – FSC – 26/04/2010 (PDF, 1.0 mb, new window)
Stadium Stakeholders Group Report

Report – FSC – 26/10/2010 (PDF, 65.2 kb, new window)
Future of Carisbrook


### ODT Online Fri, 23 Apr 2010
Public say on Carisbrook
By David Loughrey
A thorough consultation process will soon begin on the future of Carisbrook, and the Dunedin City Council is looking to the public for “reasonably practicable” options for its future. The high level of public interest in the historic ground means public meetings will be held to help decide the matter, but a report to next Monday’s finance and strategy committee meeting said the council was keen to “avoid devoting a lot of time, energy and expense to the consideration of impractical, expensive or frivolous options”.
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Posted by Elizabeth Kerr


Filed under Architecture, Construction, Design, DVML, Economics, Politics, Project management, Site, Sport, Stadiums

13 responses to “Stadium tenders, turf + future of Carisbrook

  1. Elizabeth

    The future of Carisbrook: The council was keen to “avoid devoting a lot of time, energy and expense to the consideration of impractical, expensive or frivolous options”.

    It’s quite alright for council to devote ‘a lot of time, energy and expense to the consideration of the impractical, expensive and frivolous’ Forsyth Barr Stadium at University Plaza.

  2. Interesting that council are to put out information on the details of the Carisbrook portfolio, inviting the public to come forward with suggestions. This of course begs the question, why on earth didn’t they do this before purchasing? Because it is fairly obvious that there is no possibility of recovering $7million or anything like it. Let the public come up with the ideas and then claim that they are carrying out those wishes even though they might not necessarily be economic. Problem: time frame won’t allow any resolution before the election, so this “should” be one hot potato on the hustings.

  3. Elizabeth

    Mike Stk yesterday at Facebook: The DCC has lost the plot.

  4. Phil

    Having spent time on both sides of the client/contractor fence it really does irritate me when pressure gets applied to contractors to supply a price which fits inside a pre-determined budget figure. It always assumes that it is the contractor who is at fault, and not the person who ESTIMATED the value of work. It never seems to be possible that the budget could be insufficient, or that the the scope of work has been under measured when preparing the budget. It’s always the contractor who is at fault, with the overtone that they are charging an unreasonable fee. That really pisses me off. Sometimes things simply cost what they cost.

    Pressuring a contractor into a lower price can have a number of unwanted spin off effects. Three variables make up any item of work: Price, Quality and Time. All 3 are linked together, as a balanced triangle. If you alter any scale of one of the 3, at least one of the other 2 will alter by default. Reduce the time period, and the risk to quality or price increases. Likewise if you move the price out of balance. I have seen this happen too many times, and it invariably comes back to bite the client. Contractors are not out to rip their clients off, and it’s not reasonable to expect them to be the only party to move in order to compensate for a poorly prepared budget.

  5. Russell Garbutt

    Phil, really interesting observation you make regarding the difference between estimated costs for a job and actual costs.

    In your experience, what weight should be placed upon historical actual costs when arriving at an estimated cost for a project such as the new rugby stadium?

  6. Phil

    Well, new stadium or not, it’s a pretty simple structure. In my opinion. Aside from the roof component. The carpentry work should have been easy enough to quantify. Building timber framed offices and store rooms inside a concrete shell is nothing new. The use of the building is irrelevant. My real beef is the way that the issue was reported. Everyone was going to dive in and sort the money grabbing subcontractor out. Without a thought that, as the most knowledgeable person in the whole business, he might actually know how much it costs to build and line rooms. It’s just a really shitty way to start a working relationship. Good faith bargaining is essential to ensure the result that the clients wants. You screw a contractor at the start, you get the bare minimum as a result.

    I realise that a QS was engaged to prepare a budget estimate of costs for the client. I’m a registered QS myself, so I know the process involved. However, what I am not, is a builder. The difference between the two is that my estimate would need to be based on third hand historical information. That’s the prime tool for any QS, and how unit rates are usually determined. Unfortunately, it’s also far more likely to be inaccurate than the first hand experiences of a qualified tradesperson. I don’t like the way that the article immediately painted the right party and the wrong party.

  7. Phil

    And now we have this rubbish out of the Dominion Post regarding Terry Serepisos: “The investigation also revealed he owes money to subcontractors for work on his Tory St hotel and apartments including plumbing, joinery, window glazing and pool construction.”

    Geez, Terry doesn’t owe any money to subcontractors, the CONTRACTOR owes money to subcontractors. If Terry owed them money then they would be contracted directly to him and, therefore, wouldn’t be SUBcontractors. It’s not rocket science, is it.

    If Terry is withholding payment to the contractor for work carried out by one of the contractor’s subcontractors, then that’s for the subbie to sort out with his client, the contractor.

    If both the contractor and subcontractor feel they have been harshly treated, then both parties have the power of the Construction Contracts Act to fall back on. That’s set in stone and can’t be contracted out of.

    I think that Terry needs to pay his bills, and I think that the Dominion Post needs to understand what they are writing. They’re going to start giving the ODT some serious competition if they’re not careful.

    • Elizabeth

      Phil is likely referring to this:

      ### Last updated 05:00 26/04/2010
      Serepisos accused of bouncing cheques
      By Phil Kitchin – The Dominion Post
      Two businessmen have accused Terry Serepisos, the troubled Wellington tycoon who dishes out business advice on TVNZ’s The Apprentice, of bouncing cheques.
      Read more

  8. James

    Phil also touches on a useful point. The difference between the success and failure of the stadium is likely to revolve around the accuracy of the estimates (not just costs, but revenues as well), rather than some deviousness buried in the accounting.

  9. Russell Garbutt

    Phil, accepting your points totally regarding subcontractors and contractors and the client, if you, as a QS knew that the historical costs of building an unroofed stadium worked out at about $10,000 a seat once all the actual costs had come in, what would you think if the estimates – and I therefore assume the contracted prices – were a lot lower than that?

    It is another story completely on estimates of revenue, but long term probably more painful than the construction costs.

  10. Phil

    It’s quite interesting, piecing together the information in the latest press release. If it is as it reads, then this contract is using a condition that is not used very often. It’s quite dated, but that would fit with Arrow.

    If I’m right, then the contract has a maximum payable sum for everything within the agreed scope of work. Say $130 million. There will also be a target sum, say $110 million. The contractor will have an agreed target profit margin. Say 20%. Which is linked to the target price. If the work is completed for $110m, the contractor takes 20% of that $110m. For every dollar over $110m, the profit margin reduces. So if the final cost is $120m, the contractor’s profit margin is reduced to 12%, $125m nets 5%, and $130m will give the contractor a 2% margin. Every dollar spent over $130m will incur no extra cost to the client, and result in a zero profit margin.

    Additional or variation work sits outside the agreement and will have an agreed profit margin.

    The contractor has a huge incentive to bring the contract in for $110m, so as to maximise their profit margin. The motivation decreases once that target price has been passed. Effectively, they are being penalised for going over that amount. Should they complete the work for under the target price of $110m, they gain no more money. Any savings under $110m is completely the client’s. Cost savings between $110m and $130m are shared between the contractor and the client, on a sliding scale progressingly favouring the client more.

    It’s not used very often, but it does fit the picture painted in the newspaper report. Why it’s not used very often is that the number of claims for additional costs start climbing rapidly, once the target price barrier has been breached. It often negates the reduced profit margin incentive, and drowns the poor project manager in claims paperwork in the later stages of the contract.

  11. Phil

    You mean, Russell, if the expected cost had been $10,000 per seat but the actual cost was $5,000 per seat? Well, you’d have to make sure that you are comparing apples with apples. Did you get exactly the same product for your $5,000 that the other client got for their $10,000? If you did, then a job bloody well done. If not, then you possibly have an inferior product. Which may or may not make a difference to the end user.

    I guess that’s the point you’re making?

  12. Russell Garbutt

    Phil, thanks for that response.

    I guess that I feel very edgy if, over say a number of unroofed stadia of similar sizes and of similar quality – and as you say they are not exactly complicated in that they are largely spaces surrounded by seats – that the cost of such stadia works out to be about $10k per seat, that this one, ignoring the roof for a moment, works out a lot less depending on which report you read, or what spin you may be tempted to believe. What has been promised in this stadium is top quality, state of the art stuff, so at the very least, you would expect the average cost to be incurred.

    It is now apparent that the stadium here will be seating 17,242 in terms of permanent seats which, on the basis of those historic costings I mention above would mean that it could be built without a roof for about $172m.

    I’m not sure what the cost of the roof is actually going to be, but then there is the additional cost of any artificial turf reinforcement which is apparently now also necessary because of the roof.

    It seems to me that what you are saying is that if there is a substantive departure from the “norm” then the elements of quality and time must come into the equation. I have no idea whether there are penalties for late completion by the contractor, and that leaves quality.

    It also seems that the contractor is faced with the choices of ensuring that there are significant departures from the known detail of the contract so that additional costs over the GMP can be claimed as in the Wembley project, or that the product can be reduced in quality to ensure that the costs equate to something that he can still make a profit from.

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