PPP’s Impose Onerous Costs on Construction Projects 1

Wednesday, August 26th, 2015
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Even those companies that have clinched major construction deals are questioning the tendering process when it comes to public private partnerships (PPP’s).

Members of the engineering and construction sector have expressed concern about the additional costs incurred by the demanding tendering processes for public private partnerships (PPP).

Western Australian construction contractor Badge is one such company, having experienced first-hand some of the difficulties involved in making bids as part of a public private partnership (PPP).

Badge is a member of the consortium that won a $370 million deal for the construction of a slew of education facilities in some of Perth’s most rapidly developing regions.

The deal involving Badge, Perkins Builders, Macquarie Capital and Spotless Facilities and the state government will see the creation of four primary schools by the end of 2016, and four secondary schools by 2022.

While the $370 million contract no doubt comes as major coup for members of the Badge Consortium, it also incurred exorbitant additional costs that have left senior executives wondering if it would be worth repeating the process.

According to Rob McLaughlin, Badge’s state manager of Western Australia, the bidding process has cost the construction contractor around $1.5 million since it first registered for the tender in October last year.

This extra cost has left Badge managing director Jim Whiting ambivalent about the process, telling Business News that in the case of failure the company would have chosen to refrain in future from undertaking similar bids.

“If we hadn’t won this one, I would have said we’d never bid on another one again, because the cost of bidding is disproportionate,” said Whiting.

Other members of the construction have previously voiced complaints about the tedious and costly nature of the bidding process for major projects in Australia as a result of government involvement.

Nicholas Wall, director of business development for Acciona’s Australian infrastructure business, said that government has a tendency to place onerous demands on bidding parties during the early phases of the tendering process.

“Historically governments have asked for multiple drawings, both cross and long sections, which are well above and beyond what is required.”

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  1. Bill

    The tendering process in general for government projects is just becoming ridiculous. Its concerning that its now moving to the private sector where they too are starting to think they can demand unreasonable tender conditions and essentially hold tenderers to ransom over often erroneous tender requirements and unrealistic expectations. No wonder the construction industry is struggling so much – its impossible to compete. It'd be interesting to hear from the unsuccessful PPP bidders in the case of this WA Schools rollout. I couldn't even begin to comprehend how sore their bank balances are just by trying to fairly compete for work – how many jobs has it cost for the sake of the WA Government removing risk for themselves by going PPP?