DEFENCE WORKS

Marlborough Express, Volume LXXVI, Issue 252, 26 October 1942, Page 2

DEFENCE WORKS

COST OF CONSTRUCTION. THE MASTER SCHEDULE SYSTEM. The cost of defence construction works under the master schedule system as compared with the competitive tender method was the subject of a statement in the House of Representatives this week by the Minister for Public Works, Mr Armstrong. He said that the master schedule had been adversely criticised from both sides of the House mainly on the ground that a considerable saving couid have been made had the tender system still been followed. He would have agreed with this in principle up till recently, but after having watched the operation of the schedule system he believed that this method, inaugurated as a war measure, had come to stay. There was no doubt in his mind, and those of his officers, that the tender system would have completely failed to meet the tremendous defence programme and that costs would have soared, continued Mr Armstrong. Serious competition between building firms for labour and increasing labour costs and the necessity for control of limited material resources had rendered the tender system inapplicable. He was satisfied that the schedule system was sound, though it must be and was subject to constant check as costs became available. It became eviaent long before final payments were made to building firms that the basis was too high for certain grades of work, though fairly right for others in which a higher standard of workmanship was demanded. After conferences between the Commissioner of Defence Construction, quantity surveyors, the Master Builders' Association, and the department, an agreement was reached whereby works were graded into four groups as follows: — (1) Permanent works requiring a superior finish, for example, hospitals, for which master schedule rates with certain approved additions would apply; (2) permanent works in which the schedule rates would apply in full; (3) works requiring a moderate'ly less standard of constructin in which schedule rates less 7 i per cent. on the labour content would apply; (4) temporary works in which a still lower constructional standard was required in which scheduled rates less 15 per cent. on tne labour content would apply. There were two sections of the master schedule, namely, rates for materials and for labour. The material rates were fixed on ruling prices and would be the same were the tender system used. The labour rates affected eomparative costs and the schedule was adjusted on this section. Over and above that arrangement, which was as near perfect as it could be made arbitrarily, there was a final check on the cost of the works after they had been completed. The purpose of this was to see that the various firms concerned did not realise more than 5 per cent. profit and 2% per cent. overhead on the cost of the work. This did not mean that the organisation of the building industry either suffered or was disorganised. Actually the incentive for greater efficiency was magnified. The margin of 71 per cent. to cover profit and administration costs showed a very satisfactory return to buiders, and a basis was provided whereby the Government was secured against an excessive profit on one contract and perhaps having representations made to it for recoupment of losses on another contract. The Minister said it must be realised, and the builders appreciated this fact, that the builders had a definite responsibility to divulge all information as to costs, and in the event of any building contractor having information which would prove that the rates should be adjusted such information was supplied and the matter taken up between the Builders' Association and the Public Works Department and the Commissioner of Defence Construction. It was by this close co-opera-tion between the association and the department that an accurate schedule of rates would be secured. There was no delay for the calli^ of tenders. All works were coordinated under the one head, the Commissioner oi Defence Construction, and the master builders themselves through executive committees in the different localities nominated firms to carry out the jobs ensuring that the firms nominated, both by reason of their plant and personnel and other works in hand, were able to carry out the work with the expedition required. A tremendous amount of time and expense was saved by allocating work on this principle as against the competitive tender system. v