Sharechat Logo

Fletcher not abusing its role running Canterbury home repairs, EQC says

Wednesday 5th December 2012

Text too small?

Fletcher Building, the country's biggest listed company, isn't 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," Wintringham said. "The transaction and administration cost of running two PMOs (project management offices), as well as the fact that both would be seeking labour from the same labour pool meant that 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 Fletcher was forced to defend its track record in Christchurch against labour union claims it was profiteering by cutting pay rates for painters and plasterers.

The construction company's 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 said 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," Simpson said. "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 percent above initial assessments, mainly due to the later quakes, he said.

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

Fletcher shares fell 0.9 percent to $7.84, and have rallied 30 percent 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.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Fletcher Building faces probe into plasterboard supply deals
Fletcher closes Christchurch plasterboard plant after finding asbestos
Fletcher Building names Charles Bolt as general counsel, replacing Farrell
Fletcher beats estimates with $326M FY profit as NZ revives, Australia stays flat
Fletcher executive Worley leaves as underperforming Crane unit brought in-house
Fletcher puts strategy under microscope seeking $70M annual gain, will shed jobs
Fletcher Building 1H profit edges up
Fletcher Building capital notes rollover at 5.4 percent from 8.9 percent
Fletcher Building offloads CSP Coating galvanised steel unit
Fletcher sees earnings growth of up to 22 percent in 2013