Fletcher out of running on another big-ticket build

7:42 am on 25 February 2018

Debt-crippled Fletcher Building is no longer in the running to build a large town centre in southeast Auckland.

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Photo: 123RF

"In recent months, Todd Property has held discussions with Fletcher Building over delivery of Ormiston Town Centre," Todd Property managing director Evan Davies said.

"Todd Property is now in discussions with other parties."

This comes shortly after RNZ reported Fletcher had pulled out of tendering to build the tunnels and stations for the Auckland city rail loop.

That tender has now been delayed by three months.

The Ormiston build remained on schedule to start later this year, Mr Davies said.

A Fletcher spokesperson said in the preceding months the firm has bid for a number of projects that it has not been awarded or dropped out of because the commercial terms were unacceptable, or the price the client was willing to pay was well below what it deemed to be viable.

Fletcher is moving to shut down its Building and Interiors unit entirely by mid-2019, after massive losses.

A Fletcher spokesperson said the unit expected to complete all but two of its 73 projects by the end of 2018, with the Auckland convention centre and Commercial Bay shopping-office project on Queen Street to carry on until mid-2019.

Fourteen of the 73 projects, worth $2.3 billion, are loss-making or on watch, and the firm is not taking on any new big projects.

The Institute of Quantity Surveyors said Fletcher's fate called into question the role the government played in procuring projects and sharing risk.

"Risk transfer has become an increasingly significant issue over the last two to three years and the situation has now reached a point where steps must be taken to address it, starting with government as a major purchaser of construction industry services," the institute said.

"Risk transfer away from the client and on to the contractor and consultants has reached inequitable levels and puts significant and totally unnecessary pressure on the contracting parties."

The now-delayed City Rail link tender appears to be part of Fletcher's infrastructure unit, which is still taking on work. It and Fletcher's road making unit, Higgins, together have $1.3 billion in projects on their books, compared to building and interiors unit's $926 million.

The rail link client, CRL, has not confirmed that Fletcher was the bidder that has pulled out.

CRL had an initial line-up of eight bidders, including China Machinery Engineering Corporation, a joint venture including a massive Chinese State-owned railway company.

The Chinese joint venture was "following proceedings", spokesperson John Dalzell said.

There is industry speculation that Fletcher's pullout from big commercial projects will open the way for Chinese or Australian companies to push into the New Zealand market.

Mr Dalzell said the firm has been actively bidding in New Zealand "all last year", and that would continue.

It had won a $200 million supply contract to a New Zealand-resident private developer, he said.

The consortium had also bid on the Central Interceptor wastewater tunnel between Western Springs and Māngere, and was looking at light rail and any regional rapid rail the government might pursue, he said.

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