Fixed price deal for Christchurch venue

Article posted by Coliseum, July 15^th, 2022

Image: Christchurch City Council

The Te Kaha Project Delivery Limited has advised the Christchurch City Council (New Zealand) that it has succeeded in negotiating a fixed price for the multiuse arena with its lead contractor BESIX Watpac (Australian construction and civil engineering company).

The Canterbury Multi-Use Arena is a Multi-Use Sports Arena to be built on land bordered by Hereford, Madras, Tuam, and Barbadoes streets. The Multi-Use Arena is designed as a replacement for Lancaster Park which was damaged in the 2011 Christchurch earthquake and subsequently demolished in 2019. The stadium was designed as part of the Christchurch Central Recovery Plan in 2012 by the then Fifth National Government of New Zealand.

The Canterbury Multi-Use Arena is scheduled to open by the end of 2024. From football World Cup qualifiers to big concerts and events, the facility will be able to host them all.

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‘Christchurch City Council’ quoted Barry Bragg, Te Kaha Project Delivery Limited Chair, as stating, “One of the major issues we had with the Design and Construction submission that we received from BESIX Watpac at the end of May was that they were unwilling to provide a fixed price for some of the materials needed for the project because of the volatility in the commodities market. We were concerned that would leave the Council and the ratepayers of Christchurch exposed to the risk of further cost escalations and that is not something we were willing to accept. The Board has been working through the risks with BESIX Watpac and they have now submitted a revised Design and Construction submission that provides a fixed price.”

Added Bragg, “The Board has thoroughly reviewed the new submission and obtained independent legal advice on it. It is now in a position to make a recommendation to the Council that it enter into a Design and Construct contract with BESIX Watpac. Based on the fixed price contract we have negotiated, we are confident the multi-use arena can be delivered for a total project cost of $683 million. That figure includes sufficient contingency to cover any issues that might emerge during the build.”

The Council will need to add $150 million to the budget for the arena if it decides to sign the Design and Construction contract. Consultation with the public shows 77 per cent of the 29,987* submitters support the Council doing that.

‘Christchurch City Council’ further stated that assuming the Council borrows the additional $150 million, rates will need to increase by a net 1.24 percent to service the debt.

For the average residential property, that means they will have to pay an extra $39 a year.

Overall, building the arena will cost the average residential property $144 a year between 2025 and 2027. After then, the amount they will need to pay will decrease slowly over 30 years as the debt is repaid.

The report says if the Council decides to stop the project, there will be $40 million in sunk costs that it will be unable to recover. The Council may also be liable for some further costs because of agreements it already has in place.

The report also looks at the implications of pausing and re-evaluating the project. It says with prices likely to continue to rise, delaying the project will not bring the cost down. The cost can only be reduced through making significant changes to the arena’s scope and size.

*The Council received about 30,500 submissions but some have since been removed from the count because they were invalid or duplicates. The revised number of submissions is 29,987. Seventy-seven percent of those submissions supported the Council increasing the budget, eight percent wanted the project paused and re-evaluated, and 15 percent wanted the project stopped.

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