Crunch time NorthLink builder on brink Mar­kets Full-blown cor­rec­tion on the way?

The West Australian - - INSIDE COVER - He­len Shield Com­mer­cial Prop­erty Ed­i­tor

A storm is brew­ing over the WA regime that has failed to pro­tect sub­con­trac­tor pay­ments af­ter a builder work­ing on the NorthLink project re­vealed it had been forced to lay off staff and ex­pected to go into ad­min­is­tra­tion.

The BGC Con­tract­ing-Laing O’Rourke joint ven­ture that is build­ing the $417 mil­lion sec­ond stage of the road link, Great North­ern Con­nect, ter­mi­nated its con­tract with Omega Con­struc­tions on Thurs­day.

Omega Con­struc­tions had a $3.4 mil­lion con­tract to sup­ply labour and plant for the con­crete com­po­nent of 10 bridges in the sec­ond stage of NorthLink.

Yes­ter­day Omega Con­struc­tions direc­tor Ivan Ivandich told WestBusi­ness he was work­ing through op­tions, with ad­min­is­tra­tion a likely out­come, af­ter run­ning into fi­nan­cial dif­fi­cul­ties on the “loss-mak­ing” NorthLink bridge con­tract.

Omega Con­struc­tions had sub­con­tracted work to four other sub­bies and had 40 peo­ple work­ing on the bridge.

On Wed­nes­day, Mr Ivandich said, he was forced to lay off all of his 18 em­ploy­ees, in­clud­ing some who had worked with him for more than 25 years. Three ap­pren­tices also lost their jobs. “My main con­cern at this stage is pay­ing out our sub­con­trac­tors and cred­i­tors — they are peo­ple I have dealt with for 20 years,” Mr Ivandich said.

It is un­der­stood Omega was about two-thirds of the way through its con­tract, with four bridges 90 per cent com­plete and six about two-thirds com­plete.

Omega Con­struc­tions told head con­trac­tors BGC Con­tract­ing and Laing O’Rourke it had en­coun­tered is­sues on the project that were not ap­par­ent at the time it ten­dered.

As a re­sult, Mr Ivandich said he could not sign a statu­tory dec­la­ra­tion that he would make 100 per cent pay­ments to his sub­con­trac­tors for Septem­ber. Be­cause he could not sign, the joint ven­ture did not pay Omega Con­struc­tions.

“The Septem­ber in­voice has not been paid,” Mr Ivandich told WestBusi­ness. That meant Omega Con­struc­tions could not pay

its sub­con­trac­tors. It is un­clear how much or even whether the four Omega Con­struc­tions sub­con­trac­tors will be paid. Some are be­lieved to be owed hun­dreds of thou­sands of dol­lars.

When ap­proached for a com­ment from Great North­ern Con­nect, a Laing O’Rourke spokes­woman re­ferred WestBusi­ness to “the client”, Main Roads WA.

Main Roads spokesman Dean Roberts asked for ques­tions in writ­ing but did not an­swer any of them.

How­ever, he did say Main Roads would be “ur­gently en­gag­ing with all in­volved par­ties to en­sure the best pos­si­ble out­come is achieved”.

Great North­ern Con­nect had al­ready en­gaged a re­place­ment sub­con­trac­tor, Mr Roberts said, adding there would be “no neg­a­tive im­pact” on NorthLink.

Sub­con­trac­tors WA’s Louise Ste­wart said Omega Con­struc­tions’ fail­ure was ev­i­dence the McGowan Govern­ment needed to act now to en­shrine pro­tec­tions for sub­con­trac­tors’ pay that it promised at the last elec­tion.

“It is com­pletely within the State Govern­ment’s con­trol to en­act leg­is­la­tion in WA to pro­tect sub­con­trac­tor pay­ments,” Ms Ste­wart said.

She said she ex­pected deemed statu­tory trusts, de­signed to pro­tect money in­tended to pay for sub­con­tracted work, would be rolled out across the coun­try and that WA would adopt leg­is­la­tion like NSW for “fairer treat­ment for sub­con­trac­tors”.

Trans­port Min­is­ter Rita Saf­fi­oti and Com­merce Min­is­ter Bill John­ston were not avail­able for com­ment. How­ever, a State Govern­ment spokesman said the NorthLink con­tract did not con­tain pro­tec­tions for sub­bies that were in the rene­go­ti­ated Mata­garup Bridge con­tract, in­clud­ing a project bank ac­count.

“The re­view into bet­ter se­cu­rity of pay­ment pro­tec­tions for sub­con­trac­tors . . . is ex­pected to be handed to the Govern­ment by the end of the month,” the spokesman said.

“We are com­mit­ted to de­liv­er­ing a reg­u­la­tory frame­work that pro­vides fairer con­tract­ing prac­tices.”

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