When you are contemplating entering a complex contract, there are many factors which are important. Some would place the cheapest cost at the top of that list. Derek Firth is one of New Zealand's most experienced construction lawyers, and has been involved in many major infrastructure projects, acted as arbitrator and construction adjudicator on many occasions and has a depth of experience which makes it most important to consider what he may have to say on construction contracting. Recently in the New Zealand Herald at How to rebuild the Construction Industry, he shared his view on problems with recent large construction company failures. He comments that "there is an obsession with accepting the lowest price regardless of good reasons not to" and noted that Fletcher Construction was formerly known for trying to negotiate contracts rather than getting involved with a tender process. Derek Firth suggests that this reduces the risk but also ensured the employer ended up with a financially strong contractor. He also noted that Fletcher had a reputation for looking after subcontractors. But this changed with the move to those at the procurement end of the industry, and he suggests that they do not understand the need to pay a slightly higher price but have the security of a financially secure contractor who delivers a quality product. He suggests that this leads to owners imposing tough contract conditions where the margins are thin and a general anti-contractor approach. He recommends that all consultants should stand up to their clients and explain that "shortcuts, harsh causes and pennypinching are counter-productive in many ways".
His views are endorsed by another very senior construction lawyer, John Walton who has a similar depth of experience in the industry, How to Rebuild

While both of these are relatively brief, the significance of this statement cannot be ignored. But the approach must also extend beyond construction contracts to larger infrastructure contract problems. A very good example of this is the current debacle of the Wellington public transport system. Public transport is delivered in Wellington by the Greater Wellington Regional Council, a public body elected at the same time as city and regional councils. The GWRC has had a contracting model imposed on it called the PTOM, the Public Transport Operating Model which can be found at this link PTOM. This is a model imposed by the National Government, and intended to "grow the commerciality of public transport services and create incentives for services to become fully commercial" and also "to grow confidence that services are priced efficiently and that there is access to public transport markets for competitors"

The real emphasis is on reducing the cost but also enabling affordable services. Regrettably, the GWRC does not have the benefit of the experience of such leading thinkers as Derek Firth and John Walton and I speculate whether their approach would have been a much better model for delivering public transport services. There is also a philosophical difference. Is public transport a public service like delivery of health or policing or is it a service which should run at a profit? I suspect the thinking behind the model leans strongly towards the commercial delivery of such services rather than the bigger picture, of reducing the number of private cars, enabling people to travel to work, school and other places, and ensuring that those services are delivered at a cost which does not cause a strain on the finances of those particularly at the lower income end. It is no surprise that the Green Party are big supporters of public transport because they can see the environmental advantages of the ability to move away from fossil fuel driven private and public transport. But there is also a social function.

As a result, the GWRC has delivered a fundamentally flawed system based on a failure to consult with the users of the system, a misunderstanding of the nature of procurement contracting, and appears largely unwilling to acknowledge that some aspects of the model which they have introduced a fundamentally flawed, such as the hub concept. But there needs to be leadership at a higher political level for the Labour Government to carefully look at the PTOM model to see whether that in fact delivers the sort of public transport which is needed.