Downer wins $540m Hamilton road contract

Contract signed: Hamilton City Council CEO Lance Vervoort, Downer's Craig West and council infrastructure chief Eeva-Liisa Wright. Photo / Downer EDI

NZX and ASX-listed infrastructure business Downer EDI has won a $540 million road maintenance contract with the Hamilton City Council.

Sydney-based chief executive Peter Tompkins announced a new contract after the first deal was struck between the two parties a decade ago.

The contract is for a broad scope of works including asset management, surfacing and renewals for road corridors, footpaths, bridges, culverts, lighting and on-road cycle lanes.

Craig West, New Zealand country lead for Downer based at Wiri, said more than 200 people would work on the contract at any one time, “fluctuating due to seasonal elements”.

The contract was signed last week, he said.

“This is for roads, culverts, footpaths, bridges, drains, signs, street lights and all of the assets that are associated with Hamiton’s transport corridor including for pedestrians for cyclists as well as motorists,” he said.

“We do know it well but it’s a growing network due to population growth. Traffic volumes continue to increase and maintaining the network to provide the best value for money for the council is an ongoing challenge. So the number of street lights, signs, etc is also growing. That means there are more assets for our teams to maintain and to install via upgrading to new,” he said.

Downer manages the work from its Manchester Pl, Te Rapa base where it has an asphalt plant. Its bitumen comes from Tauranga where Downer’s Road Science is based at Mount Maunganui and the product is brought in via the port.

“Some days we’d make up to 500 tonnes of asphalt, which could seal half a kilometre of road, depending on depth and width,” West said.

Bitumen for the roading contracts Downer carries out comes in via the Port of Tauranga. Photo / Alex Cairns

The company brings bitumen in via the port after the Marsden Point Oil Refinery stopped producing that product, West said.

“All New Zealand bitumen now comes from overseas, predominantly Asia but also big international markets like Spain,” he said.

Downer will carry out the Hamilton work with a number of external supply partners including civil and engineering construction businesses, West said.

“A big part of this is the planning that goes into the physical works but we also have interaction with people in the community, managing the work. That creates challenges at times. We try to minimise the time we disrupt communities and keep people well-informed about what’s happening,” he said.

The new contract has been approved for five years initially, with the option of two further extensions: three years and then two years to a maximum of 10 years, based on performance.

Downer first struck a contract with the council for this work in 2013 but West said last week’s signing was not an extension of that but a new contract.

“That alliance agreement was one of the first of its kind for local authorities in New Zealand in 2013 and has since provided a model for other councils,” West said.

In 2015, the alliance won an excellence award from Civil Contractors New Zealand in the maintenance and management of assets category.

Three executives from Downer and three from the council will lead the governance group in charge of the work, West said.

“That sets leadership and monitors performance to ensure we deliver,” he said.

The agreement between the council and Downer aims to achieve the best value for money, innovation and best practice asset management for the city.

It also supports sub-contracting parts of the work like traffic signal maintenance and signs to medium and small businesses, using local staff and materials.

Although Downer is listed on the NZX, it doesn’t trade here because it’s a sub-list. The major listing is on the ASX and the group head office is in Sydney. Downer has a A$2.8b market capitalisation.

Anne Gibson has been the Herald’s property editor for 23 years, having won many awards, written books and covered property extensively here and overseas.