The National Broadband Network Company (NBN Co) has suspended the network construction tender process indefinitely, stating that vendors were overpricing their offers.
In a statement released this morning, NBN Co's head of corporate services said that after four rounds of pricing negotiations, the company was "disappointed" in the prices being offered by the 14 vendors involved, which it said did not match the costs for similar projects both at home and abroad. Brown said that the company would now take a different approach.
"NBN Co is confident it can secure better value for money by going a different route. We have left the option open to continue negotiations at a later stage," he said. "NBN Co does not regard current pricing reflects capacity constraints in the industry, and we are progressing a different approach that we think will produce a better result.
"The new approach will take into account recent supply chain arrangements, volume certainty, a gainshare for continuous improvement, and involve a national construction footprint," he said.
The network construction tendering process began 12 months ago, and attracted an initial 45 vendors. This number was then slimmed down to 14 at the request for proposal stage.
Brown told the ABC this morning that the company had begun negotiations with a provider that was not one of the five final bidders.
"Today we are commencing discussions with an alternative different party about how to get the job done," he said.
Brown said the figures being offered by the final bidders were "double-digit" above what the company was expecting.
"It is our view that having done extensive benchmarking about what a fair price is, we believe there is another way to get there."
However, shadow communication spokesman Malcolm Turnbull said it wasn't that the price wasn't fair; it was just that the project itself was expensive.
"I imagine they had no choice because the cost of this exercise appears to be well above even their high-end cost estimates," Turnbull told ABC Radio.
"It's a competitive market [and] there's a number of contractors that have been contacted," he said. "Normally competition gets you the best price."
Earlier this week NBN Co announced that it had signed up IBM as the prime systems integrator to build the company's operational and business support systems, in a deal worth $200 million.
Updated at 9:55am, 1 April 2011: comment added from NBN Co and Malcolm Turnbull.