market and wanting to prove themselves. Another solution which can often require an enormous level of will-power is to complete the design before tenders are called or a contractor is asked to price the work. We are riddled with projects where owners are always trying to “beat the gun”. Neither they nor their advisors want to see the wisdom in having design finality before an effective price is determined. The alternative will always bring future difficulties. The fallacy with an obsession for always requiring tendering can be simply illustrated. Consider a project such as a hotel or a block of apartments which is likely to cost in the region of say $80m. That is not the amount which will avoid being tested in a negotiated contract. This is because usually about 80% of it is competitively bid anyway through the tendering for subcontract work. Only about 20% of that price is what is really being negotiated, being the margins and some builder’s work. Good quantity surveyors will have a very accurate knowledge of the going rate for the various margins (on-site and off-site overheads and profit) and they will know if a contractor is underpricing or over pricing those parts of the price. What on earth is there to be gained by shaving a little off one or more of those margins and ending up with a contractor which is not as financially sound or does not have as good a track record as a contractor which is trying to retain normal market margins. Absolutely nothing, so why do owners consistently try to do it? Obviously, if one decides to proceed with a negotiated contract it is essential to require agreement by a date which still leaves time to tender if agreement can’t be reached. All consultants (lawyers, architects, engineers, project managers and quantity surveyors) should stand up to their clients and explain to them why short cuts, harsh clauses and penny-pinching are counterproductive in many ways.
ABOUT THE AUTHOR
Derek Firth is an Auckland Barrister practicing as an arbitrator, mediator and adjudicator. He is a Fellow of AMINZ and a Fellow of the Chartered Institute, UK. Derek has had a number of party and Court appointments under the ICC Rules and is one of the leading dispute resolution practitioners in New Zealand, particularly in construction, property and commercial disputes.
Derek is the New Zealand Alternate Director of the ICC International Court of Arbitration (Paris) and has been appointed as Member of the New Zealand Order of Merit (MNZM).
He is Chairman of the Dilworth Trust Board, a Trustee of the Melanesian Trust Board; Chairman of BioDiesel Oils NZ Limited and a director of a number of companies in the InterTech Group in Australia.
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