NZ government seeks to save money on building materials as annual spending set to double

New Zealand's government is looking for ways to save money on building materials as its annual spend is predicted to more than double for the next five to eight years, driven by the Canterbury rebuild and leaky building remediation.

Government agencies are forecast to increase their annual spending on building supplies to $3.3 billion from a previous base of $1.5 billion a year, the Ministry of Business, Innovation and Employment said in a discussion document. Canterbury is expected to account for 54 percent.

As part of a procurement reform programme started in 2009, the government is trying to save money, improve productivity and boost competition by establishing 'all of government' contracts with suppliers. The government, which traditionally accounts for about 27 percent of the construction market, wants to expand the procurement programme to cover building materials as its spending ramps up.

"Since 2007, there has been an upward price trend on a variety of building materials despite reduced demand associated with the global financial crisis," the ministry said. "Our current forecasts indicate that increases in prices arising from renewed international demand, exchange rate movement, a reduction in raw material availability and rising transport costs will maintain or increase this trend.

"Given both the scale and potential increases in agency spend, government is keen to ensure that it takes a more collaborative, coordinated and strategic approach as to how it procures and pays for building materials," the ministry said.

The ministry is seeking input on the discussion document from manufacturers and distributors of building materials, tradespeople and construction companies, and professional organisations or construction professionals involved in the specification of building materials.

Responses must be returned by Nov. 8 and the ministry plans to publish a summary detailing its findings by Nov. 29.

(BusinessDesk)

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3 Comments & Questions

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What about regulating the construction cartel, to a level of gross margin that would otherwise be acceptable if there was competition.

The biggest thing that is slowing this countrys economy down is the profit gauging by companies who products have no substitute. Whats worse, these companies are mainly overseas owned.

I thought the government was employed to work for its citizens. Think again. Free market my ass. It doesnt exist.

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Yeah, 'cos things are so much better under Government regulation. Works well for all those Socialist countries, eh !

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It would do well to look at the durability of the products / materials not just price. The leaky building debacle was the result of seeking to build homes faster. The process of impregnating timber with chemicals to help resist water and the subsequent time to dry the timber led to huge pressure to change the rules on boric treatment. The rest is history. The use of pvc without ultraviolet light protection suitable to NZs hash UV incidence is another area where imported products will fail. Home builders who source all materials and appliances from Malaysia and other Asian markets via Merchants have little regard for the home owner once the property is sold, cheap and shoddy dwellings that will not last and will cost more in the end.

Government should do Total Cost of Ownership models and ensure Builders / Project developers take insurance to cover failures. We get better service (and product) from the Motor Industry but they supply cars worth a fraction of a house, and when they fail the industry has to get in and repair the fault, and where bad enough go back and repair all previously sold items with the faulty part.

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