Floating dock, arena final bids due

The state government will discover next week just how tight the Western Australian construction market has become when final bids are lodged for two major projects.

Bids are due on Monday for construction of a new floating dock at the Australian Marine Complex at Henderson, south of Perth, likely to cost close to $100 million.

The next day, final bids are due for the $320 million Perth Arena project.

In both cases, the number of interested bidders has progressively declined as costs have risen.

The impact of the tight construction market in Perth is being felt across many projects in the public and private sectors.

The most notable has been the Perth to Mandurah rail project, where the state government and Leighton are heading for the courts to try and resolve their dispute over cost increases.

Private property developer Saracen Properties is in the midst of negotiating a construction contract for the $450 million BankWest building on Raine Square, with reports that local builders have been inflating their prices.

The state government has adopted a hybrid contracting approach for the planned $1.1 billion Fiona Stanley Hospital, in Perth’s southern suburbs, to try and deal with the tight market.

The tender process for the floating dock has been running for nearly 15 months, with the state originally calling for expressions of interest in January last year.

It said the floating dock was a $35 million project, and was part of a $90 million upgrade of the AMC.

In June, four companies were named as short-listed bidders – Kwinana firm Ausclad Group, Leighton subsidiary John Holland, defence and engineering contractor Tenix, and NSW firm Forgacs Shipyard.

That was followed by a six-month pause, fuelling speculation the government had seriously miscalculated the scope and complexity of the task.

The silence was broken last December when Premier Alan Carpenter announced that the upgrade had ballooned to a $174 million project, with the higher budget due to a wider scope of work but also increased costs of construction, labour charges and materials.

The government called again for tenders for the floating dock in January, but two of the original bidders – John Holland and Forgacs – have told WA Business News they have dropped out of the bidding.

John Holland has separately been awarded a $17 million contract to extend the wharf at the AMC and is working on several bigger projects.

The original tender process highlighted 100 per cent Australian content as a key objective for the floating dock project, but it is understood the remaining bidders are likely to include offshore fabrication of some steel modules in order to bring costs down.

This was acknowledged by a spokesman for Industry and Enterprise Minister Francis Logan, who said: “the State Government will be working to maximise the local content, though some elements of the dock may have to come from overseas”.
Some industry players have expressed concerned about the future of the Australian Marine Complex, given the lower cost of construction and fabrication in Asia.

“If we can’t compete on building the floating dock, how are we supposed to compete for other projects that come up,” one source told WA Business News.

Meanwhile, speculation surrounds the number of bids likely to be lodged for Perth’s new indoor sport and entertainment venue.

Housing and Works Minister Michelle Roberts announced in January the selection of three short-listed bidders – Len Buckeridge’s BGC Construction, and Leighton subsidiaries John Holland and Broad Construction Services.

Broad’s WA general manager, Simon Amos, confirmed that his firm pulled out of the bidding earlier this year, preferring to focus on other construction opportunities.

A spokeswoman for John Holland said the company was still chasing the Perth Arena contract.

BGC Constructions has previously expressed concern about the proposed terms of the project but it is unknown if it will lodge a bid.

The Wellington Street project will provide up to 14,000 seats for concerts and 12,000 seats for sporting events, and includes a 680-bay car park.

The government is aiming to complete construction of the project by late 2009 in time for the Hopman Cup in January 2010.

The procurement strategy for the Fiona Stanley Hospital is designed to maximise competition, particularly among sub-contractors who represent 70 per cent of the project costs.

Under the first stage, consultants will be appointed to detail the health service needs, facility requirements and concept design.
The consultants will work in conjunction with a builder, who will provide advice on a fee for service basis on the design of the hospital and also design and package sub-contracts.

The first stage will conclude with agreement on a target price, and will be followed by the tendering of a detailed design and construct contract.