Blacktop Construction has been awarded a $5.5 million contract by the Southland District Council for road resealing in the district - thought to be one of the largest resealing contracts in New Zealand this year.
Councillors agreed to award the contract, covering about 1.1 million square metres of seal on both urban and rural roads, at the activities performance audit committee meeting last week.
SDC roading manager Michael Voss said tenderers were asked to submit two prices - one fixed price and the other with a cost fluctuation option.
"The volatility of prices for bitumen is difficult for the council to forecast, so having a standard rate gives us some certainty. At the moment we are seeing sharper prices for bitumen coming in, but we don't know how long that will last," he said.
As an oil industry product, bitumen was affected by price volatility. It was also significantly price-sensitive to construction growth, particularly in Asia.
Blacktop, which is based in the North Island, carried out the Southland council's 2010-11 resealing contract and when it was initially appointed, the council came under scrutiny for awarding the contract to a company located outside the region.
"Blacktop's performance in last year's contract was very good and a similar outcome is expected from this contract," Mr Voss said.
