John Georgiou believes there would be benefits from keeping the next two Metronet rail projects separate. Photo: David Broadway

Contractors call for rethink on procurement

Monday, 26 February, 2018 - 15:47

Local contractors have expressed concern that work on the next two Metronet rail projects, worth about $1 billion, could be packaged together for tendering purposes.

The Butler-to-Yanchep extension and Cockburn-to-Thornlie line build are both at the project definition stage, with construction slated to start in 2019.

Business News understands the Public Transport Authority may amalgamate the two works to reduce contract management costs.

Construction business Georgiou Group chief executive, John Georgiou, said he had concerns that the two projects would be packaged together for tendering, despite having different requirements and being in different parts of Perth.

“The government should leave it as two contracts and should not allow one team to pick up both; they should have it delivered by seperate groups,” Mr Georgiou told Business News.

“What we as industry (are saying) is you should break it up and have more active companies working.”

A more competitive contracting environment should be part of the government’s procurement strategy in the longer term because it would mean more local jobs and industry development, he said.

Previous major projects, such as the building of the Mandurah rail line and Northlink road project, had been split into smaller works, Mr Georgiou said.

Bid costs were an additional concern, with the government less likely to pay back losing tenderers than counterparts on the east coast.

The Civil Contractors Federation wrote to the state government last year to argue that tendering the two railways together would not achieve the government’s objective of industry participation.

Federation chief executive Jeff Miller said the alliance model used on bigger projects tended to provide minimal opportunities for mid-tier contractors.

He said smaller and tier-two players prefered contracting directly to government, because subcontracting to tier ones brought a more onerous risk profile.

Mr Miller said CCF had recommended a delivery partner model for Metronet, after it had been successfully used interstate.

That would mean a head contractor looked after design and construction management, while all works were subcontracted.

The government would be the principal for all contracts and pay subcontractors directly.

Last week’s Langoulant special inquiry into major projects also gave a word of caution.

“Main Roads’ preference for alliance contracting arrangements on major road programs is arguably not always cost effective,” the review said.