NBN Contractor Dumped

Tuesday, August 6th, 2013
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A joint venture involving construction giant Lend Lease has effectively been dumped as a contractor in the massive rollout of the National Broadband Network in Australia.

On Monday, it was revealed contracts being held by Syntheo, a joint venture between Lend Lease and infrastructure services firm Service Stream which was a major construction partner with regard to the network build in South Australia and Western Australia, would not be renewed beyond their current terms.

In a statement, government owned NBN Co said a ‘mutual decision’ had been reached not to extend Syntheo’s contracts despite an urgent need to ramp up work on the rollout.

“NBN Co and the Syntheo Joint Venture have mutually agreed that contracts due to expire in September 2013 and November 2013 in South Australia and Western Australia will not be extended” NBN Co says, adding that Syntheo will also have to hand back previously given advance payments for overheads.

“Syntheo will complete construction work in progress, which is expected to conclude in early 2014.”

Over the past twelve months, ongoing problems associated with meeting rollout schedules have caused considerable embarrassment for Syntheo partners and especially for Service Stream, which has been responsible for managing the joint venture from an operational perspective.

In March, the JV was stripped of the part of its contract relating to the Northern Territory – a development which forced Service Stream to wipe $3m off its underlying earnings guidance and subsequently breach debt covenants relating to its banking facilities.

That the latest developments have occurred at a time when NBN Co is seeking to ramp up its construction schedule is particularly humiliating and will be seen by many as a barometer of the extent of the network builder’s lack of confidence in the ability of the JV to deliver upon its obligations – albeit with NBN Co specifying that Service Stream will retain contracts throughout several states it has entered into separately outside of the joint venture.

Moreover, in a further embarrassment for Service Stream, Lend Lease has announced it, rather than Service Stream, will now manage delivery of the joint venture’s remaining contractual obligations.

NBN Co Chief Executive Mike Quigley says the latest developments will not affect the overall cost of the project or the long-term completion of the build by 2021.

The network builder says SA Power Networks will become the prime NBN contractor in South Australia whilst Downer EDI has begun construction in Western Australia.

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