Rebuild contractors working for Fletcher EQR have had their margins scrapped and now have to make a profit by paying subcontractors less than the recently lowered tradesmen rates.

Linked to other changes, including lowered square- metre rates for repairs, the measure appears to lower the cost of the rebuild significantly by cutting payments to tradesmen. Fletcher says the move is simply to standardise its processes with the Earthquake Commission (EQC).

Lead contractors on a home repair used to add 7.5 per cent to the total cost as their margin for profit and organising the subtrades.

However, in its first review of what it pays contractors, Fletcher canned the separated margin, which it says is included in the new rates.

That means contractors employing subtrades will have to make their margin between the rate ceiling enforced by Fletcher and what they pay subcontractors.

Square-metre painting rates were dropped 20 per cent from $25 to $19; other rates also fell but not by as much.

Rebuild contractors spoken to by The Press say, as far as they know, only one rate increased - and only slightly.

That, coupled with wiping the head contractors' margins, would mean the review has shaved at least 7.5 per cent off the cost of the multibillion-dollar Canterbury Home Repair Programme.

Canterbury Master Painters chairman Paul O'Donnell said repairs involved much more work - such as dealing with residents and the extra care needed when working in someone's home - than painting a large commercial wall.

The rate ceilings should be able to cover that kind of inefficient work, he said.

"I don't blame EQR, I think they are doing a fantastic job, but they're being squeezed by EQC," he said.

Contractors needed sufficient margins to pay for the increased administration and health-and-safety requirements of quake repair work, he said. They also needed to be able to make a profit while ensuring the homeowner was happy, rather than being encouraged to rush and do poor work.

Fletcher EQR spokesman Barry Akers said the change, along with the rest of the review, was about getting EQC and Fletcher working from the same page.

"A margin's always been accepted and will continue to be. What's changed is the way the margin is formed has been standardised across the operation. In other words, the margin is included in the pricing rather than being separated out."

Many repairs had been priced below where the ceiling was now set, he said. The new ceiling enabled the head contractor and the subcontractor to make a profit.

On Monday, a tender closed for the supply of millions of litres of paint for the rebuild to give EQC a premium deal on paint for the rebuild.

- © Fairfax NZ News

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