Editorial: Mainzeal's misery a hammer blow

Last updated 13:00 08/02/2013

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OPINION: As 2012 ended, Mainzeal chief executive Peter Gomm was predicting an upsurge in the construction industry by midway through this year. With the Christchurch earthquake rebuild lumbering towards the start line, that was not a difficult forecast to make. Unfortunately, his company appears out of the running.

After four decades in an industry said to contribute threefold to the national economy for every dollar spent, Mainzeal Property and Construction has been placed in the hands of receivers. The action, said to have taken the industry by surprise, leaves the future of more than 400 staff up in the air and subcontractors potentially out of pocket, although the receivers will be looking to throw lifelines to some from both groups.

The failure of such a high-profile company underlines the huge impact the "leaky buildings" fiasco has had on the industry and economy. At the time of its collapse, Mainzeal had been New Zealand's third largest construction company.

One of the company's large recent Nelson projects in 2011 won a national award. The $12 million upgrade of Air Nelson's engineering and maintenance hangar, designed and built by Aurecon and Mainzeal, won the New Zealand Engineering Excellence Award for Building and Construction. The company was also behind the Nelson Courthouse redevelopment, which won the regional Master Builders commercial project award the same year.

The Christchurch rebuild has been talked of for some time as the saviour of the building industry, and clearly Mainzeal would have expected a major role there. However, while it had picked up some significant contracts in the "deconstruction" stage, the rebuild itself has not come in time to save the company - although it might yet keep trading in receivership.

Last year, Mainzeal was talking of rebuilding itself in a corporate sense. The more difficult environment since the onset of the global financial crisis prompted the company to seek a new model for its business. It envisaged operating through five completely new companies, which it had already incorporated.

However, it appears that involvement in a number of seriously compromised "leaky" apartment buildings and other projects knocked the company over at the very time the construction industry was starting to find its feet. The high-profile Vector Arena alone is said to have cost the company $20 million.

Where smaller companies involved in some of these projects went to the wall, Mainzeal Construction returned to attempt to put the job right. Meanwhile, during the general building downturn, margins have been shaved in order to win contracts and keep staff working, leaving insufficient profits from other projects to carry the company.

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Builders - from sole-traders to the largest companies - tend to have worn most of the flak for leaky buildings. However, it is often the case that builders simply follow the plans of architects, engineers and designers, the specs of suppliers, and the instructions of building inspectors. The construction industry is a key economic indicator. With the full scale of the leaky buildings scandal perhaps yet to be realised, Mainzeal's woes are a worrying sign.

- © Fairfax NZ News

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