The National Broadband Network Company (NBN Co) has signed a two-year agreement with Silcar to construct the network in Queensland, New South Wales and the ACT in a deal worth up to $1.1 billion, following months of controversy due to the suspension of its original construction tender in April.
"I'm pleased to announced that after eight weeks of intense negotiations with highly respected construction company Silcar, we've reached agreement to be rolling out our fibre-optic cable across Queensland, New South Wales and the ACT," NBN Co's head of services Kevin Brown told journalists in Sydney this afternoon.
"This represents about 40 per cent of all of our construction activity across Australia for the next two years."
Brown said that he was "delighted" that the price reached was in line with NBN Co's corporate plan, but said that the negotiations were not just about price but also about quality, risk allocation and the balance of payment terms. He said that prices were reduced for installing a pit and digging a kilometre of duct.
He said that the deal also clarified the use of existing Telstra infrastructure, and the access to power poles. The deal assumes that the $11 billion deal with Telstra to lease pits and ducts will be signed, according to Brown, and said that he expected the Telstra agreement to be finalised in the coming weeks.
The joint Siemens-Thiess company was originally one of the 14 companies bidding for the full construction contract that was suspended at the beginning of April. Brown said that none of the other contractors would receive compensation for NBN Co's decision to halt the tender process, but said that NBN Co is in discussions with a further five construction companies that have agreed to participate in a "concentrated bidding process" for the rest of the roll-out in Australia. This is expected to be finalised in August.
The Silcar portion of the roll-out will cover around 130 fibre serving areas and approximately 400,000 of the one million premises expected to be passed by fibre over the next two years. Silcar will be tasked with construction down the streets, building pits and ducts and installing the fibre to premises. The company had already been involved in the construction at the NBN first release site in Armidale.
The decision to move to a two-year contract, as opposed to the full 10-year contract that was initially proposed, was to provide greater certainty to Silcar, Brown said. He would not speculate as to whether the contracts were in time to avoid liabilities should the Coalition win the next Federal election and halt the NBN roll-out.
Silcar CEO Peter Lamell said that his company has the skills and a 2500-strong workforce that is up to the task of the construction.
"This is something that we have been doing for many, many years," he said.
Thiess Services will partner with Silcar to employ subcontractors to meet labour demands, and Lamell said that he is confident that Silcar could work with the unions to ensure that wages do not blow out beyond expectations.
Design work for this portion of the roll-out is expected to begin in August, and construction will begin in November with a full deployment expected by mid 2012.