Expert warns of rebuild blowout

Last updated 05:00 29/03/2014

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Big cost overruns are on the cards for the Christchurch rebuild's major projects, an overseas expert warns.

Accountancy and financial services firm Deloitte has expertise in large projects such as the Olympic Games facilities and other public infrastructure projects.

Michael Rouse, the national leader for Deloitte in Australia for "major capital projects", said cost overruns were a fact of life in large infrastructure projects.

He was in Christchurch yesterday to address the Seismics and the City 2014 Building Momentum conference.

The $40b Christchurch rebuild could be compared to many overseas major capital projects, particularly Olympics preparation work. At present he was consulting on eight multi-billion dollar projects.

"Typically more of the projects we have planned right now than less will go over budget by some 20 to 40 per cent," Rouse said.

A Danish and Oxford University professor Bent Flyvbjerg had put 3000 large infrastructure projects into a data base to map initial budgets versus final budgets to "statistically show that on average projects will go over", Rouse said.

Deloitte partner Steve Wakefield said Christchurch would be "no different unless we do something different."

The fact that the earthquake rebuild involved a good number of big anchor projects, including a convention centre, stadium, metro sports facility, a justice precinct and bus interchange could compound the risk, Rouse said.

That they were starting around the same time was another risk factor, he said.

Rouse is considering putting one or two of his team members in Christchurch.

In his career Rouse has helped lead a A$20 billion iron ore project in Brazil, the rollout of a A$30 billion high speed rail network in China, and the 2008 China Olympics. He was also involved in the 2000 Sydney Olympics.

Deloitte was suggesting that those heading the Christchurch rebuild should "deviate off usual practice" particularly in procurement and contracting procedures.

One idea was to parcel the design and build components for big anchor projects together to give bidding firms more surety around work. If the project was big enough these firms would be willing to help bring migrant labour into Christchurch, Rouse said.

During his attendance at the conference he had been told only 11 per cent of the NZ$40b rebuild had been completed, and there was full employment of "working age males" in Christchurch. Others would be needed to be broughtby project firms into the city do the extra work.

Labour could be sourced from overseas, including Australia where there had been 8,000 coal seam gas job losses."As you go into building mode there are a whole bunch of decisions that need to be made.

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"Compromises will need to be made, much harsher recognition of the ($40b) finite costs available."

- BusinessDay

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