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Plans to offer Dunedin water maintenance contracts to two large companies - bypassing the Dunedin City Council’s usual tender process - were reviewed legally and the Commerce Commission does not intend to investigate.
The council’s decision to begin negotiations with Fulton Hogan and Downer for two new fixed-term contracts for pipe renewals went through a robust process, the council’s 3 Waters group manager Tom Dyer said.
That included a legal review and consideration by the full council.
The approach has caused nervousness among smaller contractors, though several have indicated willingness to give it the benefit of the doubt.
The council said last week the two six-year contracts - yet to be signed - would reduce competition between the two big firms.
A Commerce Commission spokeswoman said looking into the arrangement was not a priority.
No complaints had been laid by the end of last week, although the commission can investigate without any complaints being filed.
The commission would "expect" the council to take into account long-term impacts on competition in the market.
Mr Dyer said the council’s approach aligned with recent changes to government and industry procurement guidelines.
The two companies would receive a minimum amount of work for the duration of their contracts.
Smaller companies would be able to get work as subcontractors and the new contracts would include a 15% minimum subcontracting requirement, he said.
An independent quantity surveyor would review pricing to make sure they were consistent with market rates.
Mr Dyer signalled a third contract may be offered "in due course", because the amount of infrastructure that needed renewing in the next decade would continue to grow.
He said the approach promoted efficiency.
"Tendering on a project-by-project basis involves significant time and costs for the Dunedin City Council and contractors," he said.
"The new approach will direct that time and cost into renewing infrastructure, while also providing more certainty for the companies to invest in their workforce capacity and capability.
"This will help them to renew our infrastructure more efficiently, helping the Dunedin City Council deliver an ambitious capital works programme."
Mr Dyer said the two contracts, expected to have a combined worth of about $10 million a year, amounted to less than 10% of the council’s capital and renewals budget.
"There will continue to be a variety of opportunities available for smaller companies to work with the Dunedin City Council."