Over budget, over time - the track record of the company building Christchurch's troubled Metro Sports facility
Saturday, 29 April 2023
The Australian company building Christchurch’s troubled Parakiore Metro Sports facility has been involved in six New Zealand projects which, combined, have gone nearly $700 million over budget and accumulated delays totalling 12 years.
CPB Contractors is overseeing the $317m post-quake anchor project, which is about three years behind schedule and at least $16m over budget. It has put in a claim for $212m in extra money for the project – a practice which also appears to be common for the company.
Analysis of six major New Zealand projects with CPB involvement, including roading projects, a convention centre and a new hospital building, shows that all but one were at least 18 months late and only one was not substantially over budget.
Combined, the six projects went $678m over budget, overspends that were paid for by taxpayers and ratepayers.
The company, which is part of a global conglomerate, also made substantial claims for extra public money on at least four of the six projects. Its combined claims come to at least $311m.
While CPB is not the only construction company to struggle with deadlines and overspends on major New Zealand infrastructure projects, the company has a reputation in the construction industry for aggressively pursuing claims for extra money through the courts or arbitration, according to one industry insider.
The six CPB projects were delivered during a period of Covid-19 delays, soaring prices for construction materials, and Government clients changing requirements for projects.
A report by The Infrastructure Commission published in December found New Zealand was a challenging place to build large infrastructure projects, partly because of its volcanic and seismic ground conditions.
The report found that, compared to other high income countries, New Zealand paid more for roading projects, but about the same for hospitals.
These challenging conditions can cause expensive surprises for contractors that expand the original scope of a project and can increase the cost for the client.
One dramatic example was in March when the company behind Auckland’s new City Rail Link was granted a request for an extra $1 billion for the $5.5b project.
But, despite this backdrop, CPB had a reputation for being “hardass business people”, according to one construction industry leader, who did not want to be named.
“The perception in the market is that they are very litigious and that they make lots of [claims for extra money] which are challenged by the contractor. It seems to be the way they operate.
“They put in claims and they go to court and arbitration. They deliver, but it ends up costing a lot of money.
“I am shocked they are still getting jobs.”
But ACT MP Simon Court, who worked for CPB from 2011 to 2015 when it traded under a different name, said every contractor made claims for extra money if a project expanded in scope.
“If you don’t record your extra costs then you will go broke,’’ he said.
“Every contractor I have ever worked for has, if they were diligent, recorded every change and presented them to the client either as part of a claim or negotiation.
“It is no surprise that CPB has made claims based on things they have identified as differences or variations. This is normal in contracting.”
Court said the hidden risks of a project should be shared more equally between a government client and the contractor.
Fiona Tyndall, executive general manager for corporate affairs and communications at CPB’s parent company CIMIC, declined to comment on allegations the company regularly took legal action and pursued claims for extra money.
She also declined to say why the projects were delayed and over budget and whether CPB’s track record in New Zealand reflected poorly on the company.
A review of six CPB projects in New Zealand shows the company commonly pursues claims for extra money:
Waipapa, Christchurch Hospital
The Waipapa Acute Services building on the Christchurch Hospital campus was originally budgeted at $445m with a completion date of December 2017. The building was delivered in July 2020 at a cost of $548m, about 23% over budget and two-and-a-half years late.
CPB made a claim of $13.8m for variations, time extensions and disruptions, which was accepted by the government to avoid court action and further delays.
But this project also shows that extra costs can emerge for reasons beyond the control of a contractor.
The hospital building was delayed by the client asking for more facilities, including an 8000m² increase in floor space, 64 extra beds and a 52-space car park. It was also delayed by the site shutting down after the March 2019 terror attack, and the Covid-19 pandemic.
CPB also had to replace faulty plumbing after the building flooded in June 2020.
Te Pae, the Christchurch convention centre
CPB designed and built the Te Pae convention centre in Christchurch. The building was originally budgeted at $450m and scheduled for completion in the first three months of 2020, with five more months scheduled to commission the building.
The convention centre opened in December 2021, about 18 months behind schedule.
The building was delayed by Covid lockdowns, distancing restrictions and supply chain disruptions, but was delivered on budget. CPB claimed an extra $40m on the project, increasing its pay from $240m to $280m. The extra money, for agreed variations and Covid-related costs, was covered by contingencies in the budget.
Transmission Gully motorway
Perhaps the largest and most controversial New Zealand project CPB has been involved with is the 27km Transmission Gully motorway north of Wellington. The project was two years late and $400m over budget, coming in at $1.25b and opening in April last year.
A joint venture including CPB was granted a compensation payment of $145.5m for the Covid-19 shutdown and an extra $45.5m payment for variations to the project.
Roading projects
The company also helped deliver two smaller roading projects in New Zealand. The $247m SH16 causeway upgrade in Auckland was on time but $27m over budget, while the $262m Baypark to Bayfair roading project in the Bay of Plenty is $142m over budget and will be three years late, if it is completed by December this year.
A spokesperson for Waka Kotahi NZ Transport Agency said questions about CPB making claims for extra money on those two projects would be treated as an Official Information Act request, which could take 20 working days to be fulfilled.
Parakiore Metro Sports
And then there is the claim for $212m in extra taxpayers’ money on the Metro Sports building, which is currently being litigated through private arbitration with the client, Crown rebuild agency Ōtākaro, now known as Rau Paenga, the national infrastructure delivery agency.
If successful, the claim would see the budget blow out from $317m to $529m. The project is currently on track to open three years late, although recent complications over a subcontractor going into liquidation could delay that opening yet further.
Given CPB’s record of delays and overspends, why did Ōtākaro employ the firm to build the Metro Sports building?
Ōtākaro declined to answer that question.