Wellington's white-hot construction market putting council projects under pressure

Inside of Wellington's Town Hall. Photo / Wellington City Council

Wellington's construction market is running "white hot", putting further pressure on the city council's already constrained budget.

The council's new Infrastructure Committee met for the first time today, to be told the Town Hall's budget could blowout yet again and costs could also escalate on a new sludge-treatment plant.

Councillors have recently signed off on their Long Term Plan, which Mayor Andy Foster said was a resilience and infrastructure budget.

But it's becoming increasingly apparent across the country that putting money in a budget line is just the beginning of the battle to build new infrastructure.

Committee meeting documents warned the Town Hall refurbishment and earthquake strengthening project could come in at up to 9 per cent over budget, which is the equivalent of about $10 million.

It was last estimated to cost $122m in 2019 after a string of previous cost blowouts.

Te Ngakau Civic Precinct programme director Danny McComb told councillors today the Town Hall was not a fixed-price contract and was therefore open to variation.

"The market is very very white hot and that feeds through into costs, if cost escalation carries on through the length of this project that's when we start seeing the cost pressures indicated."

The key risks remained in the auditorium, where there is still some piling work to be completed, and a significant amount of roof work, he said.

Covid-19 supply chain related issues have also affected the project.

McComb said the Town Hall was a big consumer of scaffolding.

"They're managing that by basically becoming hoarders. They're not allowing scaffolding to come off the site."

The same issues, a tight construction market and Covid-19 supply chain issues, are also forecast to impact the council's new sludge-treatment plan.

Preliminary estimates put the cost of the project at $208m, but Wellington Water has advised the same issues are likely to impact the cost.

Infrastructure Committee chairman Sean Rush said at the meeting he remained concerned about the cost and potential escalation.

"That's no one's fault, that's just the environment.

"We should be prepared that when further work is done the bill will be bigger, it certainly won't be smaller and that's just a function of the market."

Currently, sludge is disposed of at the landfill by mixing it with solid waste, which can be no less than a ratio of 4:1 solid waste to sludge.

The volume of sludge being produced is already close to exceeding that consented ratio, meaning the city council cannot meet its carbon and waste reduction targets as long as the landfill is needed for disposing sludge.

The new treatment being proposed would dry out the sludge using heat, creating an end product of stable granules.

Councillor Iona Pannett questioned Wellington Water's capacity to undertake the work, considering how much they have on their plate with the city's bursting pipes.

In a letter to Foster last week, Wellington Water chairman Geoff Dangerfield acknowledged the next three years of capital works added up to "the biggest programme by far in our history".

"We are mindful the sludge minimisation facility is in addition to that work," he said.

Without taking for granted that Wellington Water would be the agent for this project, Dangerfield said the company has established a board committee and steering group specifically for it.

A dedicated, independent and fully resourced team, led by an experienced project director, has also been set up to ensure the project could be delivered.