NBN costing turning into Achilles heel of Government

Stan Beer
Wednesday, 06 April 2011 14:36

Opinion and Analysis

The remarkable cancellation of the National Broadband Network building tender, followed by the dramatic resignation of the head of network construction at NBN Co, Patrick Flannigan, shows that all is not well with the costing of Australia's biggest ever infrastructure project.

The latest NBN building fiasco has thrown the whole politically sensitive costing issue of the purported $36 billion project under a glaring spotlight. And now, opponents have some serious ammunition to attack the Government's figures.

On the one hand, the Government, through NBN Co, is saying that the prices tendered by the 14 competing building companies were too high.

On the other hand, union bosses such as NBN project coordinator for the Communications Electrical and Plumbing Union, Allen Hicks, are saying that hourly labour costs tendered for the NBN were in line with what workers doing similar jobs on other Australian projects are being paid.

Thus, if NBN Co has ditched the tender process and started negotiating one-on-one with Silcar (Siemens and Leighton) or Telstra, NBN Co (read the Government) may well find itself in an untenable position.

First, having cancelled a bona fide open tender, NBN Co will have to compensate the building companies for the millions they spent on their submissions. NBN Co may deny this but it's hard to see how the builders would not win if it went to court.

Second, if NBN Co does a deal with Silcar, Telstra or someone else to pay workers less than the rates similar workers are already getting on other projects, then it will almost certainly find itself facing a problem with unions.

The problem for the Government of course is the rigid politically sensitive cost figure it has imposed on the NBN. Having essentially said that by hook or by crook the NBN will be delivered for $36 billion, it has painted itself into a corner.

Thus, when reality bites and in a fair and open tendering process building companies say: 'we simply can't do this as cheaply as you want and still pay our workers market rates,' the only response left for the Government is to lash out and accuse the companies of price gouging.

As a result, the Government is now easy prey for its political adversaries who from the start had expressed skepticism over the NBN cost estimates.

'What is the real cost of the NBN?' the political skeptics ask. 'Is it really $50 billion or even $100 billion? Upon what parameters is the $36 billion figure based?'

Unless there's a change of government, they're not likely to get any straight up answers. And as for us - well we're only taxpayers.