Fletcher not abusing role running Canterbury home repairs, EQC says

EQC chief executive Ian Simpson

Fletcher Building, the country's biggest listed company, is not abusing its position as the Earthquake Commission's go-to guy for home repairs in Canterbury and is providing "satisfactory value for money".

EQC chairman Michael Wintringham told parliament's finance and expenditure committee that Fletcher's role managing the repair programme has met the government-backed natural disaster insurer's criteria around cost, quality, timeliness and safety.

"On the basis of that assessment I have no reason to doubt that we are getting satisfactory value for money," Mr Wintringham said.

"The transaction and administration cost of running two project management offices (PMOs), as well as the fact that both would be seeking labour from the same labour pool, meant the advantages would probably be marginal."

Fletcher manages EQC's repair programme for homes with damage of between $15,000 and $100,000. Earlier this year the company was forced to defend its track record in Christchurch against labour union claims it was profiteering by cutting pay rates for painters and plasterers.

Its dominant position in the country's building sector is set to come under government officials' gaze as part of plans to investigate the industry's cost structure. The study is part of a wider response to getting a handle on the affordability of New Zealand homes.

EQC chief executive Ian Simpson says the cost of repair jobs may come under pressure when private insurers come to the market next year and start competing for the same labour pool of 70,000 tradespeople and driving up wages.

"Having two PMOs would fight over that same resource, and in our view would increase the costs rather than decrease. When the private insurance sector does kick off, and it will be early 2013, that's our next big risk."

The final repair cost for some 26,000 homes fixed so far has been about 15% above initial assessments, mainly because of the later quakes.

"There's only 1% difference between EQC's assessed cost of value and the actual final repair cost that's given by the contractor," Simpson says.

Fletcher shares fell 0.9% to $7.84 and have rallied 30% this year.

The stock is rated an average "outperform" based on 11 analyst recommendations compiled by Reuters, with a median target price of $8.275.

(BusinessDesk)

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11 Comments & Questions

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Any truly independent review of Christchurch will show Fletcher is ripping off the system. I have no doubt that Wintringham, Browlee and the Shonkey Jonkey are totally biased and self-protecting in what they say. Fletcher is so entwined in government work procurement that they have dug a hole that even forgetfulness can excuse. If EQC and the government are so sure of Fletcher's honesty, let's have an independent enquiry. It would only need to last a day to unearth enough evidence.

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Don't have an inquiry just get on and get our houses fixed.

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Cant believe a single word uttered by EQC. The country's taxpayers and policyholders deserve a totally independent auditing team of all those involved spending money, both public and private.

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Honest? The Fletcher's rep wanted me to agree to get my house repainted when it didn't need it, and replace my driveway because of very minor cracks.
A lot of unnecessary work being undertaken in ChCh...

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$27 000 to paint walls in open plan 150 sq m home minus 1 bed room NB didn't use wash and wear paint although that was specified as existing was this- throw some grout into the cracks of the concrete floor/bricks, re-tile 14 metres. Sorry just can't see where the costs come from - Contractors used to do the job weren't even the ones who had originally quoted to do the work. Routing the system Hell yeah!!

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I suspect there is more to your claim than you are letting on. Our painter would receive at most $24.50/m2 of gib board, to rake out cracked joints, retape and plaster and repaint. A 150m2 house would typically have about 350-400m2 of gib area so that would be no more than $9800 + GST for the painter. This sort of exaggeration from (and let's be fair) stressed-out feeling let-down clients does not help the situation.

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if the goverment sets out to keep everyone happy we will still be posting comments here in 10 years and nothing will have been acheived in Christchurch.

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The Fletcher snout is so deep into the government trough you can only see the hind legs.

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Let's hope that the Fletcher appetite for easy money means that the hind legs disappear along withthe snout. Johnny Boy will then have to find some new infrastructure project to give them at exorbedent cost.

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What a load of bulls*it.

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Fletcher Building IS the government. If you search the Companies Office register you will find that 50.2% of Fletcher Building shares are held by the Reserve Bank of NZ. Fletcher controls a number of major construction material supplies (eg, insulation) and could do a lot more to facilitate more affordable housing, but doesn't.

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