@dean, more on the Build Partners saga...
Subcontractor complains of money owed by Build Partners on state housing projects, boss defends
A subcontractor from a troubled
Build Partnersβ state housing site claims he is owed βhundreds of thousands of dollarsβ but the company chief executive said the business had tried to be as supportive of subcontractors and suppliers as possible when price escalations caused problems.
Crown agency KΔinga Ora has taken control of four residential projects for 91 new state apartments previously being constructed by housing construction specialist Build Partners after the state agency said it was contacted by several Build Partnersβ subcontractors claiming they had not been paid for their work.
The subcontractor said he hoped KΔinga Ora would pay his bills and those of many others on the project also claiming to be owed money.
He expressed great dissatisfaction with the project his business worked on and said he was left disillusioned.
Mounting bills went weekly without payment.
Patrick Dougherty, Kainga Ora construction and innovation general manager, said: βKΔinga Ora has contacted all known subcontractors and we are meeting with as many as we can this week and next to verify the information provided to us by Build Partners on the amount they are owed.
βWe want to assure all subcontractors impacted that we are working with urgency to ensure they get paid, and we are establishing a plan so work continues on all four social housing developments.β
The subcontractor claimed other subcontractors had not been paid since the end of last year, and that he knew of several struggling as a result.
The man did not want his identity known saying he still hoped KΔinga Ora would pay him for work completed but if he speaks out, he fears the money could be at risk.
Steve Mikkelsen, a director of Build Partners and chief executive of its owner Property Partners, said today he anticipated KΔinga Ora would pay the subcontractors.
βWhen youβve got 100 subcontractors calling you every day ... we are not a rogue contractor but a trusted partner with the Government that came unstuck because of the current situation,β Mikkelsen said.
The business had built nearly 700 new state homes, he added.
βMy understanding is KΔinga Ora are going to make payments for all subcontractors and suppliers. Itβs been a really, really tough market. These projects were priced a long time ago and thereβs been a lot of cost escalations.
βWe got to a position where we had completion problems with cash flow on these projects. This is pretty standard. Itβs nothing new,β he said.
Projects were priced three or more years ago βand you can imagine in the construction business, the build process is 18 months to two and a half yearsβ.
That created a big gap between the contract price and what it was costing to complete, he said.
βWe are doing everything we can. We are supportive of the subcontractors and suppliers.β
Problems were not related to modular construction, Mikkelsen said.
The four projects which KΔinga Ora have taken control of are;
- Corner Great North Rd/Cadman Ave, Waterview: 40 units and a community room;
- Hindmarsh St, Johnsonville: 29 units and a community room;
- Fowlds Ave, Sandringham: 15 units;
- Corner Hendon Ave/Hargest Tce, Εwairaka: nine units.
KΔinga Oraβs move comes amid the Government-ordered, Bill English-led
inquiry into the state agency.
The biggest project is Build Partnersβ Waterview site for a five-level project.
The 40 units are to have 38 car parks and the company expected a Homestar 6 rating on completion which had been set down for early 2025.
Build Partnersβ website described the Johnsonville plot as βa classic tricky Wellington site with challenging access and multiple building platform levels required so this project will provide a combination of both modular and traditional delivery.
βWe successfully won this project due to our well-considered approach to the site, community, and environmental approach and our capability in delivering a complete modular three-storey apartment building,β the business said.
The modular apartments would be βtotally built and finished in our Auckland factory and transported to Wellington by roadβ.
βDue to the width of each module, these can be transported on a standard flat deck container truck. With a crane positioned on the road below the site, we will work with the local council and transport authority to minimise site and neighbour access issues,β Build Partners said.
Mikkelsen acknowledged the Johnsonville project βwas a hybrid of modular and traditional [construction]. However, the modular component did not contribute to the financial issues on that siteβ.
Construction costs 25 per cent higher than pre-Covid
Residential construction costs spiked during 2022 due to Covid-affected supply chain issues, as well as a boom in construction activity. CoreLogicβs Cordell Construction Cost Index (CCCI) recorded a rise of 10.4 per cent that year, higher than overall inflation which was 7.2 per cent.
But the rate of construction cost inflation has fallen since then. In 2023 the index recorded an annual rise of 2.4 per cent while overall inflation was 4.7 per cent.
CoreLogic chief property economist Kelvin Davidson said this week that supply chains had normalised while house-building activity had pulled back, easing the pressure on capacity and therefore cost growth.
βMost costs have stayed relatively stable since the end of 2023 and the CCCI has recorded no significant movement across any particular product or labour rates, which can account for up to half the cost of a new build, excluding land.β
Davidson said the return to more normal construction growth rates would benefit both builders and consumers following unprecedented industry volatility, resulting in construction costs being 25 per cent higher than pre-Covid levels.
βThe industry is facing less pressure on workloads and the decline in new dwelling consents suggests this softer phase of construction activity may remain in place for a reasonable period.β
Anne Gibson has been the Heraldβs property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.
'Not a rogue contractor but a trusted partner with the Government that came unstuck.'
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