Jeez, if you want to know how business is done in Australia, check out this doozy. Two weeks ago The Australian leaped to the defense of Leighton Holding’s Silcar subsidiary in its negotiations with the NBN:
Construction contractors on the National Broadband Network are pushing to be paid up to 40 per cent more to do further work, fuelling fears of a cost blowout on Labor’s flagship infrastructure project.
The Australian has been told that industry suppliers are looking for increases in the value of contracts of between 20 per cent and 40 per cent for further work and that high-level evaluations are circulating suggesting that the ultimate cost of the project could spiral out to between $60 billion and $70bn.
A slew of NBN Co’s current construction contracts are due to expire between this year and 2016 and will have to be renewed; NBN Co is also expected to take tenders for delivering fibre, fibre links and new developments this year. Some of NBN Co’s main contractors appear to have hit financial strife and some of their sub-contractors have downed tools in Victoria and Tasmania, claiming they are not being paid enough. “There’s a huge probability this thing will go completely through the ceiling,” said a senior industry source.
“You’ve got a situation where a 30 per cent increase would be in most cases probably a minimum. And they haven’t attacked any of the difficult work yet, as in downtown Melbourne and Sydney, where you have older apartment blocks.”
NBN Co spokesman Andrew Sholl yesterday denied suggestions of a cost blowout. “The NBN remains on course to be delivered on time, and on budget,” Mr Sholl said.
“Our prerogative in negotiating all our contracts is to deliver value for money for taxpayers.
Today we get this:
THE National Broadband Network could face a budget blowout of at least $5 billion after the company building Labor’s flagship infrastructure project re-signed one of its construction partners on the promise of labour wage increases.
The Australian can reveal that NBN Co re-signed Silcar, its main construction partner in NSW and Victoria, on Monday afternoon, shortly before caretaker conventions came into effect.
In rushing to put pen to paper, NBN Co had to accept demands from its construction partners to increase the value of its contract by about 20 per cent to cover rising labour costs and unanticipated cost increases in the work needed to lay fibre down streets.
Senior sources in the construction industry say those labour cost increases will lead to a $5bn blowout to NBN Co’s capital expenditure to connect 12.2 million homes to its fibre network by 2021.
NBN spokesman Andrew Sholl refused to answer detailed questions from The Australian, including whether Silcar had been re-signed to the NBN. However, he maintained the total capital cost of the project would remain $37.4bn.
Communications Minister Anthony Albanese told 2UE yesterday that Silcar had extended its contract with NBN Co on Monday. According to NBN Co’s 2012-15 corporate plan, about $28.48bn was allocated to roll out the fibre network to 93 per cent of the nation’s homes and businesses by 2021. High-level evaluations put together by expert estimators with advice from former NBN Co executives and senior construction sources show the capital expense allocated to fibre connections is likely to blow out to $33.3bn.
We don’t actually know that the NBN has rolled over although the swift resolution smells of it. If so then Labor’s jelly-back is partly to blame. However, the real lesson is in the “how to” rentier capitalism guide:
- step one: renegotiate contracts in an election phase;
- step two: leak all details to Australia’s vested interests friendly broadsheet (one of them anyway) using job losses for leverage;
- step three: sign up panicked government entity on any terms you like;
- step four: watch the same paper blame the government for cost blowouts.
Nice work if you can get it.
