Hawkins Construction appears to have been left carrying the can after its Australian building partner in a failing public private partnership prison joint venture in Victoria called in administrators.
Exactly what the cost to Auckland- based Hawkins and parent company McConnell Group is unclear, but the project is said to be A$150 million over budget and the contract makes Hawkins subsidiary Hawkins Ararat Ltd jointly and severally liable, meaning it could potentially have to make good on its own.
Auckland-based Hawkins Construction's chief executive officer, Chris Hunter, left the company last week after nearly a decade at the helm. The company announced his departure on its website saying "today is his final day".
David McConnell, who has taken over as Hawkins interim chief executive, said the troubled contract was unconnected with Hunter's departure.
"He's looking at the next 10 years and seeing what he wants to do," he said.
Hunter said it was just bad timing as his departure had been planned for a while.
The Ararat failure will be closely studied on this side of the Ditch.
In 2010, Infrastructure Minister Bill English and Corrections Minister Judith Collins announced the New Zealand Government would commission a new prison at Wiri, south of Auckland, to be designed, built and operated under a public-private partnership. Last week, Sunday Business reported a massive new police station in Auckland could be delivered under a similar structure.
The Ararat prison project was the first undertaken under new Victorian government guideliness for public private partnerships (PPPs).
The project is reportedly 18 months behind schedule and in need of $150m new capital after costs ballooned 75 per cent over budget.
That blowout has been ascribed to floods and design changes but reports from Melbourne paper The Age quote unions alleging mismanagement by builders and the government.
A major blow to the Ararat project, Victorian unions say, was that doors and windows imported from China to cut costs didn't fit.
"Having doors that fit may be considered critical for a prison,"quipped construction union Victorian secretary Bill Oliver.
McConnell reiterated that Hawkins, a subsidiary of McConnell Group, was still committed to the project after its partner, St Hilliers Construction, called in voluntary administrators.
McConnell was not prepared to discuss whether its project subsidiary, Hawkins Ararat Ltd, had provided performance cross guarantees with the wider Hawkins and possibly McConnell group.
It has been reported that St Hilliers did not have such cross guarantees allowing it effectively to leave the additional costs behind by putting its construction subsidiary into administration.
That prompted NSW Minister for Finance and Services Greg Pearce to say in Parliament that St Hilliers was run by "grubs". St Hilliers also has contracts with the New South Wales government to build 13 housing commission lots. NSW Public Works will now take over those projects, the Sydney Morning Herald reported.
What is clear is that a deed forming part of the contract specifies joint and several liability for the construction partners, even though St Hilliers Ararat is named as the principal contractor.
"A reference to the builder is a reference to each of those persons separately, so that [for example] a representation, warranty or undertaking is given by each of them separately," the deed says.
"Project Co or the State may proceed against any or all of them for any failure of the builder to comply with any obligation under this deed or otherwise."
McConnell was unwilling to comment on what the expected cost to Hawkins would be.
"In terms of Hawkins it is very, very manageable," he said.
"From time to time you get contracts that don't go the right way,"
The budget for 358-bed prison was close to A$400 million and was to be completed in the second half of 2012. It is needed after the Victorian government decided to get tough on crime.
The Aegis Correctional Partnership consortium, which won the PPP contract, is made up of Commonwealth Bank, Bilfinger Berger Project Investments, the builders St Hilliers Construction and Hawkins Construction and Programmed Facility Management.
In June last year, The Age highlighted concerns within state government about the project cost and the tendering process.
"This project was not value for money for taxpayers," a government insider told the paper.
The Age also reported that initial proposals by both tendering groups cost significantly more than the estimated cost of a traditional state project.
After callling in administrators, St Hilliers Construction successfully negotiated restarts on $250m of other projects.
- © Fairfax NZ News