11/03/2009 - 22:00

Hospital contract a healthy move

11/03/2009 - 22:00

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THE awarding to Brookfield Multiplex of the $220 million stage one contract for the Fiona Stanley Hospital is noteworthy in a number of respects.

THE awarding to Brookfield Multiplex of the $220 million stage one contract for the Fiona Stanley Hospital is noteworthy in a number of respects.

Not only does it herald the start of work on the biggest building project ever undertaken by a state government in Western Australia, it could also pave the way for the use of a new, more flexible, contracting model.

Brookfield Multiplex was engaged last week under a relatively new form of contracting known as an early contractor involvement, or ECI, model.

In stage one of the contract, Brookfield Multiplex will progress the hospital design to the point where major subcontracts for the construction works would be tendered.

Those tender prices would establish a maximum sum for construction, which, if accepted by the government, would result in the company being awarded the stage-two contract.

Under the ECI model, the government is under no obligation to continue with the contract if the contractor doesn't meet the required budgets or benchmarks.

Brookfield Multiplex regional managing director constructions, John Flecker, said the Fiona Stanley stage-one contract was the first of its kind for WA.

"It's partly the scale of the project, and partly to get the builder involved early," Mr Flecker said.

"The government could've finished the design then given it to the builder, but if you get the contractor involved now you can work with the design team to make sure the design meets the brief and budget."

While the ECI model of contracting has been used in other states in recent years, the concept is relatively new in WA.

In October 2007, Main Roads WA awarded an ECI contract to Team Savannah, a consortium of BGC Contracting, Laing O'Rourke Australia and Maunsell Australia, for the Great Northern Highway Kimberley project.

Similarly, Macmahon participated in an ECI contract for the Tiger Brennan Drive extension project in the Northern Territory, and was awarded stage 2 of the project in November 2008.

Alternative contracting models could become more commonplace as the government looks to adopt a flexible approach to project delivery in a more cost-effective and timely manner in the current economic climate.

The Fiona Stanley contract was a major coup for Brookfield Multiplex, as construction of the 100 St Georges Terrace office building nears completion and its City Square office projects ramp up.

But the outlook is less bullish for the wider commercial construction sector.

In the latest Master Builders Association Grant Thornton quarterly survey of business conditions for the December quarter, almost three-quarters of the builders surveyed believed conditions had worsened since the previous quarter.

About 22 non-residential builders responded to the survey, which looked at three sectors - tendering, design and construct and project management.

Almost 30 per cent of respondents said activity had remained the same since last quarter, 5 per cent said it had improved, while the remainder said the situation had gotten worse.

And while many builders are busy working on their current projects, there are concerns about the lack of work in the pipeline once current work schedules are completed.

MBA WA director Gavan Forster said, generally speaking, the sentiment around the commercial building sector was reasonably pessimistic.

"It's mainly [a result of] the banks not lending; that drip feed of finance is stopping building projects in its tracks. Then the confidence factor compounds that," he said.

Builders that were tendering now were also cutting into their margins to win work, with anecdotal evidence of tender prices almost 15-20 per cent lower than they were at the peak of the boom.

Mr Forster said builders traditionally diversified their operations in downturns, with larger builders taking on smaller projects and looking at non-traditional markets

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