Material costs and labour market shortages are expected to impact Auckland Council’s capital spending over the next financial year.
At a Finance and Performance Committee meeting last month, councillors received a quarterly performance report with a snapshot of how Covid-19 and global pressures would continue to impact Council programmes.
Procurement general manager Jazz Singh said that the cost impact in the next financial year was expected to be around 17 per cent.
Singh said steel prices were volatile and impacted by supply chain delays, pointing to the pandemic and the Ukraine-Russia war creating large cost spikes.
“We have also seen sharp price increases in concrete and quarrying costs since the Covid pandemic started, even though this is all local,” Singh said.
Singh said there was also a large increase in construction labour costs.
Community facilities general manager Taryn Crewe said they were using certain strategies to mitigate the rising construction costs such as the ‘early contractor involvement model’.
“We are working closely with our designers through that detailed design phase, which means we are able to adjust where we see increases in supply markets,” Crewe said.
“It gives us the opportunity to pre-order and get the materials at a much lower cost.”
The model was implemented for both Te Whau Pathway and the Avondale Community Centre.
Crewe said that the model had worked well for Te Whau Pathway, which had allowed Council pre-order steel last December before a spike in the cost.
Council’s capital spend in the nine months to March 31 was $200 million, which was 59 per cent of the budget. This was mainly due to global and local supply chain delays, increased construction costs, labour shortages, higher inflation, increased interest rates and a softening in the property sector.