Details Of New Roxburgh Contract Given To House

Press, Volume XC, Issue 27403, 16 July 1954, Page 12

Details Of New Roxburgh Contract Given To House

PARLIAMENT

(New Zealand Press Association)

WELLINGTON, July 15. The Minister of Works (Mr W. S. Gccsiran) said in the House of Representatives tonight that the new Roxburgh contract had been signed for a sum of £19.120,000 and other costs brought the total to £11.650,000. The estimat 1 cost of the project, including part of the lake control charges, was £2 4,5 GO. 000, he said.

Mr Goosman. who put before the House the original contract with the overseas contractors and the new contract. outlined the steps that led to a cancellation of the first contract and the signing of the second. The tender price of the original contract was £8.620,000.

Mr Goosman said the new contract was on a “firm basis.” with any losses to be borne by the contractors. This proposal, he said, was considered by the Government to be the best way of hastening the completion of the scheme. The Minister did not give a firm date for completion, but said it had always been realised that 1956 or 1957 would be the first possible date. Opening the debate, Mr Goosxnan said that when he assumed the portfolio a tour throughout the country showed the Works Department to be seriously overcommitted. There was a shortage of materials and a shortage of staff. There was evidence, he said, that the Question of letting overseas contracts had been under consideration by the previous Government. Before the war the department had been building two schemes at the same time. Lately it had been trying to build six. Mr Goosman then read to the House a letter signed by the former Minister of Works to the Commissioner of Works in which it was said the department was over-committed, and the possibility of letting contracts to private tender would have to be considered.

The Minister outlined the history of various power projects in the South Island, and said that by the most optimistic estimate the Roxburgh scheme would have come into operation in 1956 or in the winter of 1957. In the meantime there was the question of building coal-burning generating stations to help the South Island supply, or of installing additional generators in schemes already in progress. The latter was decided on, and a further 30,000 k.w. was now being added to the South Island grid. Mr Goosman said that he had inspected the Roxburgh project in its early stages, and was surprised at the very poor progress being made. The proposal to call overseas tenders had as an alternative the drawing away of staff from the Waikato schemes, which were of higher priority than Roxburgh. The time was inopportune for the calling of overseas tenders, because of power shortages in many countries and the engagement of firms capable of tendering in schemes all over the world at that time. No firm was then prepared to come to NewZealand with a firm tender, and although the department was instructed to call for tenders on a schedule rate basis it was found that those tenders were much higher than those of a target estimate basis. x Eight Tenders Received Jfcjwever, eight tenders were eventaggy received from a variety of Britis&Onri American firms, and from a cdafipination of firms. The two lowest tdSgers were tagged against all contmwtwies, and were virtually on a “cost plus” basis. The eight tenders received ranged from that of the British. firm in association with a Swiss firm of £8,620,000, followed by tenders of £9.259,000, £9.281,000, £9,986,000. £10,042.000. £10,327,000, £10,452,000, and £11,148,000. Every tender was tagged with a “no loss” clause, and before the lowest tender was accepted the British and Swiss firms’ credentials were thoroughly investigated, and both were found to be highly qualified. There was not one bit of evidence available to warrant turning down the lowest tender, continued Mr Goosman. In answer to an interjection from the Deputy Leader of the Opposition (Mr C. F. Skinner) the Minister said the Swiss partners in the firm were the technical advisers. After the contract was under way the department was concerned at lack of progress, and principals of the firm came to this country for consultation. They left an engineer in charge, but progress did not improve. Principals of two of the firms again came to New Zealand. They were formally advised that unless immediate steps were taken to put the contract on a satisfactory basis a recommendation would be made to terminate the contract. Though attempts were made at improvement the departmental engineer recommended that the contract should not be allowed to proceed on the target estimate basis. The contractors would lose all fees, and the Government was holding a sum of £200,000. Cabinet Decision Thjs cancellation would have meant throwing the work back on the department and progress could have been made only at the expense of other projects. The Cabinet decided therefore it was best to rearrange the contract and establish it on a firm basis, where any losses would have to be borne by the contractors. Fortunately, Mr Downer, the. New Zealand contractor,

I was willing to join with the contracj tors. It was possible to put the contract lon a firm basis because the supply of ■ materials and conditions had altered j considerably, he said. The contract was re-established l therefore, at the departmental estimate of £10,120,000, plus costs of spillway plant and escallations, which gave a total of £11,650,000. Mr Goosman said that this proposal was considered to be the best way of hastening the completion of the contract and the supply of power to the South Island. The original contractors, he said, had agreed to pay the Government £200,000 for losses suffered. They had also agreed to withdraw some claims they had made. Withou. is the Government might have be. faced with litigation that would go on for years. The Minister said it had been hoped that power would be available sooner, but it was always realised that 1956 or 1957 would be the first possible date. Replying to criticism of the quality of the work, Mr Goosman said that certificates from the engineer-in-chief and the Commissioner of Works said that the job was structurally excellent, though some faulty surface work had been replaced at the expense of the contractors. “I would say about this contract we had left nothing undone that should have been done,” he said. Every move had been taken to ensure that the contractors did a good job and as i quickly as possible. Unfortunately, the contractors had not been as good as the Government had thought they would be. Mr Goosman said that the total cost of the project would now be about £23,500,000, plus £1,000,000 as a proportion of lake control The cost a kilowatt, at £73 10s, or £76 10s, including lake control, would compare favourably with other outputs. Opposition Views The Deputy-Leader of the Opposition said he was far from satisfied with the explanation given by the Minister. That there had been something suspect about the position had been proved by subsequent events, he said. New Zealand had a larger proportion of skilled and experienced hydroelectric engineers and other workers than any other country. Had the Government approached the job differently there would not have been the subsequent trouble. The letter of the former Minister of Works had shown that he appreciated the difficulties facing the department, but had the present Government given the Roxburgh work to New Zealand contractors in the first place it would have avoided the recent troubles. Mr Goosman: Tell us who they were. Mr Skinner: Then the Government is making a mistake in handing over control to a New Zealand contractor who was one of the original tenderers but who had been turned down because of insufficient experience? Was the only merit in accepting the British tender the fact that it was the lowest? Mr Skinner said" that there was a combination of New Zealand contracting firms in three of the overseas tenderers, and one ■ of the New Zealand firms had now been placed in charge at Roxburgh. Not one of the tenders was greater than the price now being paid to do the Roxburgh job. Why did the Government not give greater consideration to the New Zealand contractors? he asked. Mr Goosman: To each one of those tenders has to be added £1,500,000. Mr Skinner There was no escalator clause in the original contracts. Mr Goosman: What nonsense. Mr Skinner said he had been told by one member of the contracting firm that if the price exceeded the contract it would have to pay a forfeit, but the contract was altered so that the Government would pay the final cost, which meant that the contracting firm would lose part of its bonus and other fees. Where was the escalator clause in that? The contracting firm had not done a good job, continued Mr Skinner, and the Government would have to admit that it made a mistake* in the first place. The British firm had lost prestige. Mr Skinner said the Government had acted in a most reprehensible manner in overlooking more suitable contractors in New Zealand, and must now feel very humble in having to go to one of them, cap in hand, to help with the job. The Government’s bundling had cost the taxpayers an additional £3.000.000, and the Minister’s explanation fell far short of what the Opposition and the country expected. The Leader of the Opposition (Mr Nash) said that it was grossly unfair to the rest of the tenderers that they had not been given the same opportunity to adjust their tenders. Mr Goosman: Nonsense. They were aiked to firm their tenders. Mr Nash said that the original estimate of the cost of Roxbrugh was £10,200,000, but now another £1,000,000 would be added to that because of the changes that had taken place. After the contractor had forfeited £200,000 the new contract was adjusted to a figure £2.500,000 more than the accepted tender. Who would not pay £200,000 to get another £2,500,000? he asked. The debate was interrupted by the adjournment.