Auckland Council and its five substantive council-controlled organisations (the Group) is offering advance payments to its key construction suppliers to assist the industry to retain its skilled workforce and rapidly return to delivering vital capital projects for Auckland once the COVID-19 lockdown ends.
COVID-19 lockdown restrictions have closed Auckland Council Group construction projects across the city with significant financial impacts on construction suppliers contracted to deliver crucial assets and infrastructure.
To prevent long-term disruption to the construction industry and to capital projects already underway across Auckland, an Advance Entitlement Payment (AEP) scheme has been put in place to cover the four-week COVID-19 lockdown period.
The Auckland Council Group’s AEP scheme is based on the one recently developed by the NZ Transport Agency and is backed by other government agencies.
Auckland Mayor Phil Goff says, “This scheme is not a handout or a subsidy, but rather provides payments in advance to suppliers on what may be payable under the contract during the four-week lockdown. All payments will be offset against the contractor’s actual entitled costs. It is similar to what the government is doing.
“The programme enables construction suppliers to keep their workforces and sub-contractors and ensures they can return to work as soon as possible, which will be critically important as we work to kickstart our economy after the COVID-19 crisis passes,” Phil Goff says.
Barry Potter, the council’s Director of Infrastructure and Environmental Services agrees.
“This is a pragmatic step to ensure the sustainability of an industry that’s crucial to the country’s economic recovery and to the future of Auckland.
“We want all construction sites to re-open as soon as possible after Alert Level four restrictions end so it’s necessary to put in place appropriate commercial, financial and contractual responses to address the impact of COVID-19.
“Across the whole Auckland Council Group, the prudent management of our finances is a top priority during this uncertain time. The AEP scheme is one way that we can try to avoid much higher costs to Aucklanders from potential lengthy delays to projects or uncompleted works, additional procurement, or the loss of construction suppliers instrumental in building the city’s infrastructure,” he says.
The AEP will cover associated direct labour costs, hired and site-based subcontractor labour and off-site overhead costs for the projects which have been closed.
Auckland Council is completing the criteria for assessing claims made by suppliers for Advance Entitlement Payments, which will include the contractor deducting any amounts it has received via the Government’s COVID-19 employee support package and also an ongoing commitment by the contractor to efficiently manage its costs.
The AEP is not an admission that the supplier will be able to claim the full AEP amounts in the supplier’s payment claim, as ultimately the supplier can only claim costs that it becomes entitled to under the contract.