It will be an interesting week for CEO Mike Quigley and the senior management at NBN Co. The ACCC (Australian Competition and Consumer Commission) will release its long awaited decision on the NBN’s access arrangements, probably on Thursday or Friday. The ruling will determine if NBN Co’s plans for pricing and accessibility – the so-called ‘special access undertaking’ – will be allowed.
There is a good chance they will not, and will need to be substantially altered. Many in the industry have pointed out that 30 years is a very long time to be making any sort of projection, and that for that reason it will be impossible to determine a pricing model that will guarantee the rate of return on (7.1% a year) on its investment that NBN Co is forecasting.
iTWire will cover the ACCC’s ruling, and its ramifications, when it is brought down later this week. But meanwhile a bigger problem looms. The Australian Financial Review this morning published excerpts from confidential internal NBN Co documents it has acquired that show a poisonous relationship between NBN Co and many of its contractors.
NBN Co has been on the defensive regarding slippages in its rollout schedule all year. After first denying any serious problems, it was forced to admit to significant delays with its contractor Syntheo in Western Australia and the Northern Territory, to the extent that it took direct control of the NT rollout.
Then two weeks ago it “revised down” its rollout schedule, but put as good a light on it as possible, saying there was a just a three month delay in a ten year project, and that overall completion dates remain on track. “Some of NBN Co’s construction contractors have progressed work on the ground at a slower rate than forecast, but this delay will be recovered,” it said.
According to the documents released to the AFR, things are much worse than that. The revelations have the potential to shred the NBN CO’s credibility, and we can expect the Opposition and other critics of the project to have a field day with them. The documents are scathing about Syntheo, but also reveal that:
- NBN Co believes all its major contractors are providing incorrect rollout information.
- Many of the contractors are having trouble finding qualified staff – especially specialist fibre splicers – because they are paying poorly, but are then blaming the problems on others.
- Silcar will meet only 45% of its required targets for NSW and the ACT by June, and will need a “significant increase in resources” is required immediately if it is to hit its Queensland targets. “Silcar are struggling to both recruit and retain construction resources for the rates that they are offering.”
- Visionstream will miss its June targets for Tasmania, achieving barely half of what it had projected.
- Transfield will miss its June targets for Victoria, meeting only 75% of its target due to “Inconsistent utilisation of critical resources and poor project management” and a lack of ribbon splicing resources available.”
Despite these problems, NBN Co has continued to award large contracts to the same contractors it is so critical of. Just last week Transfield was awarded the lucrative contract to wire the Sydney metropolitan area ($170 million over two years plus two one year options to renew), and on 15 March Visionstream was awarded a $334 million contract (also over two years plus two one year options to renew) for Victoria, Queensland and southern NSW.
Quigley said in the revised rollout document tha NBN Co is accountable for the delay and is “disappointed it has occurred. We work closely with our suppliers across all parts of our network to build and monitor their progress to ensure each individual element is ready within the required timeframe.
“In the case of the volume fibre rollout, NBN Co’s public projections have been underpinned by commitments from our four construction contractors that they would meet the 30 June target. The problem is we are just not seeing the ramp up of construction workers on the ground that would be needed to deliver these targets.”
The leaked documents show one of the reasons why – the contractors are simply not prepared to pay market rates for the necessary skills. Yet it continues to employ the same contractors – it would seem it has no choice.
Things are getting ugly.