2 Jun 2016

Steel buyers were told price 'too low'

6:52 am on 2 June 2016

The contractors who imported 1600 tonnes of substandard steel for new highway bridges were warned the deal was too good to be true.

One of the bridges being built in the Huntly section of the Waikato Expressway (May 2016).

One of the bridges being built in the Huntly section of the Waikato Expressway (May 2016). Photo: Facebook / NZTA

Fulton Hogan and HEB Construction took a low price and have ended up with a product too unsafe to use for what it was bought for.

Two of the four bridges on the new $450 million Huntly Bypass have used the weak steel, now reinforced with concrete, and the contractors have asked the importer, Steel & Tube, for replacement tube piles for the two others.

One source spoken to by RNZ News yesterday said the joint-venture contractors were "warned by other reputable and highly experienced tenderers that [they] were likely on very shaky ground" with the Steel & Tube bid, and that "the price was too low to be of compliant standard".

There were other competing bids, including from within New Zealand, to supply the 900 or so steel tubes, up to 900mm in diameter and 40 tonnes each.

Another source had already said the winning bid was 30 to 40 percent below average market prices of about $1.5m for 1600 tonnes - which also happens to be the ballpark bill to take remedial measures. A third said the bid was well shy of any others and that this should have "set off serious alarm bells at Fulton Hogan".

The contractors have not responded to questions about being warned against taking the low price.

An update provided by NZTA on 1 June 2016 shows work under way on the Huntly Bypass.

An update provided by NZTA on 1 June 2016 shows work under way on the Huntly Bypass. Photo: NZTA

Steel & Tube said in a statement last night that it provided Fulton Hogan and HEB with "several options to ... meet their specifications, from which they made their selection".

The contractors are now asking Steel & Tube to find them the replacement steel tubes for the two bridges not yet built.

They have not said how they would ensure a similar mistake is not made again, or whether they would be going back to the same steel mill and factory in China.

Steel & Tube chief executive Dave Taylor listed what the substandard steel went through:

He did not clarify whether such an inspection was less rigorous than a test.

Mr Taylor would not say who the factory or the mill in China were, and neither would the contractors, meaning it is not yet possible to check their certification or accreditation by the Chinese government.

Commenting on the case, an Australian procurement company operating in China for 15 years, Goldhawk International, said that "reputable companies with experience outsourcing to China should fully understand that the onus is on themselves to conduct testing, not just accept a piece of paper from the supplier, whether that supplier is properly accredited or not".

A highly placed source within the New Zealand industry told RNZ News that New Zealand Transport Agency projects like the Huntly Bypass were the gold standard for big construction contracts in this country.

"If this is happening at this level, then it only gets much worse the further down you go."

NZTA unsure where steel from

The New Zealand Transport Agency's Waikato highway manager Kaye Clarke said the agency was not asking where the steel was from.

"That's not really what I'm interested in. My job is to make sure that the infrastructure we build is fit for purpose, is safe."

Ms Clarke did not know whether the replacement steel would come from the same Chinese manufacturer.

She said it was a free market and suppliers made their own commercial arrangements.

"If they choose to source material that doesn't meet the standard, they then deal with it and that's what happening in this situation," she said.

When asked, Ms Clarke did not know how the problem steel was detected, but said "our systems have done what they are designed to do".

"The important thing is, it has been detected and we are making steps to make sure that what they build meets our standard," she said.

The agency has said there is no safety issue with the four bridges.

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