25/02/2020 - 17:56

Decmil’s NZ problems deepen

25/02/2020 - 17:56

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Perth-based contractor Decmil has disclosed that its $185 million contract with New Zealand’s prisons department has ended early, with the client halting payments and seeking to apply liquidated damages.

Decmil’s NZ problems deepen
Decmil managing director Scott Criddle. Photo: Attila Csaszar

Perth-based contractor Decmil has disclosed that its $185 million contract with New Zealand’s prisons department has ended early, with the client halting payments and seeking to apply liquidated damages.

The project with the Department of Corrections was one of Decmil’s largest contracts.

The contractor announced on 23 December that attempts to ‘reset’ the contract, given multiple variations, had broken down and acknowledged this would adversely affect its cash position.

In a detailed update released late on Tuesday, Decmil disclosed it has not been paid for any work on the project for more than four months.

The company said it would pursue its payment entitlements, on the basis the department has not acted consistently with the agreed process for collaboration on the project.

Decmil also said a report by the department to an NZ committee was self-serving and inaccurate “inasmuch as it completely fails to consider the department’s contribution to the delay in delivery of the contracted works”.

Despite releasing a detailed update, Decmil shares remain in a trading halt while it assesses the impact of correspondence from the department.

Chief executive Scott Criddle said the ending of the contract was a disappointment for the company and an unfair reflection on the people involved.

“This project has been difficult from the outset for multiple reasons, including its unique nature, being technically untested and/or due to delivery constraints,” he said.

He added that Decmil would seek to resolve the outstanding issues by agreement, mediation or arbitration.

The project dates back to 2017, when Decmil was selected to deliver modular prison cells at two sites in NZ.

The original $NZ60 million contract was expanded to $NZ185 million in June 2018.

Decmil and the department agreed on a collaborative process to determine the final specifications of the modules, but with the department being free throughout to change any of its requirements.

Decmil said today that final delivery of the project in accordance with the department’s amended requirements is not possible.

Since March 2019, Decmil has been trying to negotiate contractual adjustments.

“Notwithstanding the above, since October 2019, the department has progressively and unilaterally determined to abandon commercial reset negotiations and then, in Decmil’s view, wrongfully imposed liquidated damages without making any delay adjustments,” Decmil said.

“The department also failed to make any payments in respect of Decmil’s variation payment claims.”

The NZ project is the second major contract where Decmil is facing problems.

On December 12, it announced it was facing a delay in payment of about $14 million from its work on the Sunraysia solar project in New South Wales.

Decmil entered an EPC contract with the developer of the 255 megawatt solar farm in October 2018.

It said all physical works on the project had been achieved on time and in accordance with the requirements of the contract, however the contract could only be fully satisfied once the developer obtained R1 registration of the project from the Australian Energy Market Operator, which it has yet to do.

Sunraysia Solar Farm, controlled by Maoneng Australia and infrastructure developer John Laing, has refused to award Decmil with an extension of time and an associated adjustment to the contract date for substantial completion.

Decmil has escalated this under the dispute mechanism of the contract.

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