19/05/2021 - 15:25

State government reviews Pindan fallout

19/05/2021 - 15:25

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The state government is in the process of investigating the fallout from the collapse of construction giant Pindan Group after three group companies were placed in administration.

During a press conference this afternoon, Finance Minister Tony Buti said the state government was still in the process of determining the scope of the exposure and who had been affected. Photo: David Henry

The state government is in the process of investigating the fallout from the collapse of construction giant Pindan Group after three group companies were placed in administration and nine in liquidation yesterday.

Following confirmation that Sam Freeman, Vincent Smith and Colby O’Brien of EY had been appointed to take control of the companies, attention has turned to the hundreds of subcontractors and trade suppliers affected and the impact of the collapse on the company’s extensive project portfolio.

On Monday, Business News revealed that up to a dozen subcontractors had walked off the company's construction sites on Friday after being told Pindan could not pay them, including Rosewood Care Group’s $53 million Aged Care Facility in West Perth.

According to Pindan Group's website, the company has as many as 18 projects under construction in WA, including the $24 million Hilton Garden Inn Albany and Willing Property’s $6.9 million apartments in Mount Lawley.

Business News understands the company also holds a number of contracts for state government projects, including $10.9 million in upgrades to Hedland Senior High School and a $35 million per year contract with the Department of Communities to maintain social housing in the state's north-west.

During a press conference this afternoon, Finance Minister Tony Buti said the state government was still in the process of determining the scope of the exposure and who had been affected. He said the department was looking to liaise directly with subcontractors to continue the works.

Dr Buti said he had been advised that Pindan made all payments until the end of March, but that it was unclear what payments had been made during the month of April.

He confirmed that project bank accounts were in place for several construction projects and that subcontractors would be paid, but that the government was investigating why the collapse happened and the scale of its ramifications.

“It’s very disappointing and distressing for everyone that has worked for Pindan,” he said.

“We’re also looking at how we can assist subcontractors who have been contracted to provide services for Pindan.

“But if they have been working on one of the Department of Finance projects, they will be paid.

“We’re still in the process of working out the scope of the exposure and exactly who has been affected.”

A spokesperson from the Department of Finance said the total value of contracts across government was unlikely to be known for some time and that it was too early to speculate on the potential impact on subcontractors, suppliers and project timelines.  

“Every effort will be made to minimise delays and disruption to existing government services,” the spokesperson said.

The collapse has also seen the state government’s Security of Payment Reform design to shield contractors in the case of an insolvency placed back on the agenda following criticism from the state’s construction union, with talks of the legislation being reintroduced in as little as two weeks.

Momentum Wealth managing director Damian Collins told Business News the company was bracing for delays of between one and three months at its apartment developments in Highgate and East Victoria Park, but was working closely with the administrator, replacement builders and existing subcontractors to progress the projects.

He said the company hoped to re-engage with the existing subcontractors where possible. 

Earlier today, City of Fremantle business director Glen Dougall told Business News the city would be considering its legal position over the coming days and speaking with the administrator to ascertain exactly where its 90 per cent complete $41.3 million Walyalup Civic Centre project stood and what would need to be done to move the project forward.

Much like the Department of Finance, the local government authority had insisted on the inclusion of a project bank account in the construction contract and, as a result, participating subcontractors had been paid, and would continue to be paid, within one day of funds being deposited into the account.

Willing Property founder Tim Willing told Business News the construction of its $6.9 million Clifton and Central apartment in Mount Lawley would continue to charge forward, with the company having already worked to retain subcontractors this week and ensure the project could be delivered on schedule.

Rosewood was not in a position to provide comment to Business News this afternoon, but the company’s $53 million Aged Care Facility is understood to be on the verge of completion.

Information available at Pindan’s construction sites indicates a host of major companies are involved with those projects, including Stantec, technical and management support services AECOM, infrastructure and environmental services company Cardno, construction services company SRG Global, Scanlan Architects, Peritas Group and Sedgman.

However, it is unclear whether those companies are subcontracted directly and whether they are still involved with the projects.

A spokesperson from Fortescue Metals Group confirmed the company had two contracts with Pindan Group for the Iron Bridge magnetite project, for the construction of offices in Port Hedland and landside buildings for the airport, but that with practical completion on the Port Hedland works achieved in January and the airport works substantially completed, it do not anticipate any material impact. 

Rio Tinto, which had awarded a multimillion-dollar contract to Pindan, did not respond to Business News’ inquiries.

In an internal email released to staff late yesterday and obtained by Business News, Pindan Group managing director Scott Davison and executive director Tony Gerber told staff the administration decision was the toughest they had made, but they did not have confidence the companies could trade and meet their debts and obligations as they fell due.

According to the statement, the group had failed in its efforts to secure new investment, but remained hopeful that parts of the group would continue to operate and complete the projects and work in-hand.

Business News understands several subcontractors met to discuss the news yesterday morning, but remain tight-lipped about the outcome or any plan to take any action.

A subcontractor who spoke to Business News under the condition of anonymity claimed the construction giant had been struggling for some time.

He dismissed claims made by Pindan's owner, Singapore-based Oxley Holdings, that COVID was to blame for the failure, arguing that WA had been insulated from the worst of the effects of the pandemic.

He said the company had low tender pricing, exhibited a reliance on Oxley Holdings as a ‘cash cow’ and had a “blatant disregard” for subcontractors.

Questions were also raised about whether the state government should have identified the problem sooner, given it held multimillion-dollar contracts with Pindan.

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