High-risk con­tracts on nose

Kalgoorlie Miner - - BUSINESS - Peter Milne

En­gi­neer­ing con­trac­tors were wary of lump-sum con­tracts well be­fore RCR Tom­lin­son col­lapsed last month after cost over­runs on so­lar pro­jects.

Shane Kimp­ton, chief ex­ec­u­tive of Sin­ga­pore-listed en­gi­neer AusGroup, said he could not ex­pose the busi­ness and its share­hold­ers to high-risk con­tracts.

“That means some­times we can’t reach agree­ment with the client around do­ing it on lump sum,” he said.

Mr Kimp­ton, who moved from United Group 18 months ago, said unit-rate con­tracts were be­com­ing com­mon as they shared the risk be­tween the client and the con­trac­tor.

He said he was not con­cerned about new en­trants cra­ter­ing the mar­ket as bad ex­pe­ri­ences over the past decade had made clients wary of less-ca­pa­ble low­est bid­ders.

“In WA there are a hand­ful of con­trac­tors that have got that ex­per­tise,” he said.

AusGroup’s main sub­sidiary, AGC, has a Kwinana fab­ri­ca­tion yard and con­struc­tion and main­te­nance con­tracts with ma­jors such as Chevron and In­pex.

Mr Kimp­ton said many WA fab­ri­ca­tion yards had shut down over the past 10 years as the pre­vi­ous re­sources boom pro­duced lit­tle work be­cause of the amount done over­seas.

AusGroup has con­tracts with lithium play­ers Tianqi and Tal­i­son, and Mr Kimp­ton said he ex­pected the sec­tor to pro­vide at least three years of fab­ri­ca­tion and five years of con­struc­tion work.

AusGroup had $567 mil­lion of rev­enue last fi­nan­cial year.

It has about 1300 em­ploy­ees, mainly on con­struc­tion sites or at op­er­at­ing plants.

He said at peak ac­tiv­ity the com­pany had 2800 work­ers on In­pex’s Ichthys project work­ing four- weeks-on, one-week-off ros­ters.

“That was a very chal­leng­ing ros­ter,” he said.

Mr Kimp­ton said three weeks on and one week off was prob­a­bly a max­i­mum for con­struc­tion work, with two weeks on and off for main­te­nance work be­ing a good bal­ance. He said good-qual­ity work­ers were avail­able but wage pres­sure was build­ing.

Re­gard­ing plans by RCR Tom­lin­son’s ad­min­is­tra­tor to sell its busi­nesses by Christ­mas, Mr Kimp­ton said: “We al­ways have a look.”

An AusGroup worker at the com­pany’s Kwinana fab­ri­ca­tion yard.

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