Perth Airport expansion problems leave sub-contractors unpaid


May 05, 2016 21:32:46

A multi-million-dollar legal battle is brewing over delays and cost blowouts on the Perth Airport expansion.

The billion-dollar transformation to turn Perth Airport into a world-class gateway has been marred by problems, including an 18-month delay and significant cost blowouts.

More than a dozen companies working on the construction of the Terminal 1 domestic pier have folded as a result, leaving dozens of sub-contractors hundreds of thousands of dollars out of pocket.

Head builder Built Environs and the Perth Airport Authority are now suing each other over who is to blame.

While that plays out in court, sub-contractor John Pirie is struggling to keep his business afloat.

“They had a ‘finish the project at all costs’ mentality towards the end and they were prepared to do whatever it took to get the building opened and they’re not worried about anybody else,” he said.

Mr Pirie’s company installed $350,000 worth of cameras and a CCTV control room at the upgraded Terminal 1, which opened in November last year, 18 months behind schedule.

The equipment is used by Customs and Border Protection and is vital to airport operations — the airport could not legally open without it — but Mr Pirie is yet to see a cent for work completed.

“The likelihood of recovering any money is zero,” he said.

Terminal 2 problems

Disputes over payments have extended to Terminal 2, which was the first part of the airport to be upgraded.

Dave Holding’s rigging company lost more than $300,000 when a contractor called TSG folded.

TSG’s liquidators are now chasing a further $600,000 that was paid out before the company folded.

“They’re saying that we should have known that they were trading while insolvent,” Mr Holding said.

He has already spent $150,000 fighting the move in court, and the battle is not yet over.

“Worst case, we could be paying around the million dollars if we lose. If that’s the case there will be huge ramifications in our company — so machinery sold, cranes sold, there could be quite a few lay offs,” Mr Holding said.

TSG blames Broad, the head builder on that part of the project.

Broad has refused to comment.

“Broad blames TSG, TSG blames Broad, we’re just caught at the bottom of it so there’s not much we can do about that. We can’t investigate it unless we have funding,” Mr Holding said.

Perth Airport Authority denies the airport job was mismanaged, and the question of who is to blame for delays and overspending may now be decided in court.

Construction law review

Since the State Government introduced legislation a decade ago to streamline dispute resolution in construction, the number of reported disputes has steadily increased.

In 2005 there were just 29 payment disputes with claims totalling $10.5 million.

Last year, claims reached their highest level since the laws were introduced — 235 claims worth more than $580 million.

Over the past decade that adds up to more than 1,400 claims, totalling more than $2 billion.

Notre Dame University law professor Phil Evans, who conducted a review of the Construction Contracts Act and the process of dispute resolution for the State Government, said the number of disputes will continue to rise.

“There is nothing to stop a large organisation from writing its own contracts and there is nothing to stop them from putting in terms which are probably more favourable to them,” Dr Evans said.

“If I’m looking for a word I would say they were unfair, but nevertheless there are many unfair contracts that are still enforceable.”

Dr Evans said many subcontractors were not aware of their rights under the current laws, which could have devastating results.

“Between one fifth and one quarter of all bankruptcies and insolvencies in Australia occur in the construction industry,” he said.

“At any one time there’s an amount of nearly $1.6 billion–$1.7 billion of liabilities over assets, so it is serious when it’s reflected in those statistics.”

Dr Evans’ review of the Construction Contracts Act has been finalised but the Government is yet to release it publicly.

Year Reported disputes Total cost of claims
2005-06 29 $10.5 million
2010-11 197 $308.5 million
2014-15 235 $580.6 million
Total 2005-15 1421 $2 billion





First posted

May 05, 2016 18:54:13

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