Fixed labour costs could be NBN saviour

Fixed labour costs could be NBN saviour

Summary: Chief executive of the National Broadband Network Company (NBN Co) Mike Quigley has said he may seek to get fixed labour costs for the build of the network, in order to prevent its cost exceeding the amount forecast by the government.

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Chief executive of the National Broadband Network Company (NBN Co) Mike Quigley has said he may seek to get fixed labour costs for the build of the network, in order to prevent its cost exceeding the amount forecast by the government.

Speaking on ABC1's 7:30 last night, Quigley said that to prevent labour costs from getting more expensive as the project rolls on over the next nine years, as the skills-shortage continues, the company may go down a fixed-cost path.

"We may look at how to get a commitment for some level of fixed costs," he said. "Labour costs are hard to predict, frankly. That's the one area which is most difficult to predict, and clearly the events that took place this year in Queensland with the cyclones and the floods and the amount of rebuilding that needs to happen is going to have an impact."

Quigley said that he wouldn't allow the costs to blow out.

"What we will be doing is balancing those as the project progresses. But what I can say is we clearly, as a company, will not just continue to build if we see costs increase," he said.

The executive told 7:30 that because the roll-out of the NBN is being done in stages, such as the First Release sites in Tasmania and on the mainland, the company will be able to track the costs and adjust things if it looks like the project is going over-budget.

"This is not one big bang one-off project. It's not like building a Sydney Harbour Bridge or a desalination plant or a hydroelectric scheme," he said. "We are repeating over and over and over again the same modules, which means it's not a big surprise at the end. We will be able to track costs as we go."

Last month, NBN Co stepped away from tender discussions with 14 construction companies over the construction of the network, citing that the prices the companies were offering were far in excess of what NBN Co was willing to pay. Quigley refused last night to go into detail over the actual prices that the companies were offering, but indicated that the company would be able find a single construction partner for the project.

"From the inquiries I have made, it's not unusual that you end up in a situation when you have a big public infrastructure activity such as this. I'm confident we will end up with a successful partner for building the network," he said, also denying suggestions that the business case had attempted to shift the risks of the construction onto the builders.

"We had a set of assumptions in our business case which we thought were perfectly reasonable and I'm still confident that we're gonna end up in the place where we need to be to get this network."

Quigley said that NBN Co has signed close to 80 tenders so far, and now that the company is moving into the larger tenders involved in the project, NBN Co is trying to ensure that the company gets value for money.

"We have not finished this process yet. And as I have said repeatedly, we are looking after the taxpayers' funds. It would be very easy for me by the way just to sign up a number of companies at costs above where I think they should be. I won't do that."

Topics: Broadband, NBN, IT Employment

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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Talkback

35 comments
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  • Which company in its right would commit to a labour fixed-cost path along a nine year project roll out.

    It seems Quigley has the exclusive right to prevent costs from rising but with labour costs during a skills shortage it's - Force Majeure.
    Vasso Massonic
  • You cannot attempt to pay people less than running and living costs specially when the fibre industry is so expensive to start in the first place.
    After all, who will work for nothing? I'll stay in bed and go broke rather than waste my years of experience. Looks like they will be importing labour and paying them much less than they should.
    fibretech
    • amen,
      bunch jackasses,who would work without the possibility of a wage rise to at least compensate for cost of living expenses,or run a business you know would go broke as overhead costs rise with inflation and your income CAN'T.
      surely their wouldn't be company or subbie that dumb?
      I know I'll be sitting this one out also,might even go the mines.
      pete196600
  • Theres no way that any company would have a fixed labor cost without a caveat for something that takes 9 years to construct, unless they put what they think it will cost multiplied by 10.
    Either way the cost will be many times higher than the price the government puts on it.
    Just look at every single other project the government works on. They always choose the "cheapest" that ends up having a caveat that costs them 2-5 times the amount planned.
    iduno-bba40
  • Has Mr. Quigley has any experience with Australian Union operations. Doesn't sound like it and I think he is in for a bit of a shock. The Unions will out-maneuver, surround and eat him for dinner. If he thinks these technicians will work for slave wages tell him he's dreaming.
    sydneyla
  • Nor should they work for slave wages... but nor should their corporate bosses expect to fleece NBNCo, pay their workforce SFA, to line their own and their shareholders pockets.

    Surely you'd agree as on who talking about "snouts in troughs only yesterday...!
    Rizz-cd230
  • I have long said to those who want to listen is that NBNCo should issue out a rates book and see who is willing to work for those rates.
    This way those who are willing to work for the rates will just get work orders instead of wasting time and money having to bid on tenders for a region. It speeds up the process.
    If NBNCo had unrealistic budgets and rates then they will soon know it when no one signs up for them.
    For those who do sign up you build into their contract a mechanism for the business to continue on the rates card yearly that they need to reduce some cost and show some savings to NBNCo.
    connected1963
  • connected1963,

    It's not a matter of "If NBNCo had unrealistic budgets and rates" It's obvious, the foolowing may interest you.


    "Doubt,

    The annual report is a mere bagatelle. We need to take the commitment of spending $50 billing tax payers' funds very seriously in our national interest, simply because the NBN supremo's ring of confidence was shot to pieces by Chris Uhlmann on 7.30 report last evening, culminating with repetitive nonsense.

    Here's a transcript:

    http://www.abc.net.au/7.30/content/2011/s3209105.htm

    Vasso Massonic
    1 day ago "
    Vasso Massonic
    • Correction: following
      Vasso Massonic
    • What an apt faux pas for you VasMas FOOLowing, anyway,...

      Imo, while ever you baselessly keep saying $50B VasMas your credibility is 0.

      Excerpts from your very own URL...

      CHRIS UHLMANN: ..."Mike Quigley leads the company charged with the ambitious plan of building a $36 billion optical fibre network...

      CHRIS UHLMANN: "But clearly now given what's happened, it's (the NBN) going to cost you more than you expected?

      MIKE QUIGLEY: "No, I wouldn't certainly agree with that. We have not finished this process yet. And as I have said repeatedly, we are looking after the taxpayers' funds. It would be very easy for me by the way just to sign up a number of companies at costs above where I think they should be. I won't do that. {END}..

      Hear hear Mr. Quigley...
      Rizz-cd230
  • Seeking fixed Labor costs and actually getting fixed Labor costs are as different as night and day.
    advocate-d95d7
  • If you fix the costs of one part of the project, then to make more money, you have to cut costs other parts of the project - there goes the whole project's quality program - right out the door and down the drain.
    Current suppliers can't live upto the quality requirements at the moment, this is just getting sillier everday.
    cantech-b58c4
    • It's not silly, it's screwy. even the project total cost is conveniently evaded. No doubt they start with a big frightening number of borrowings, discount interest to future earnings, pay Telstra $12.5 billion but use the after Tax figure of $11 billion!
      Vasso Massonic
      • Well, according to you the project cost is $50B and according to you Telstra amigo $100B+...dear oh dear!
        Rizz-cd230
  • Keep that Tel$tra $hareholder rubbi$h coming Va$$o..

    We all know why you hate the NBN and comment, dont we $$$$$$$$$$$$$$
    Rizz-cd230
  • As long a people the likes of Mike Kaiser (we remember him here in Queensland) gets over 400,000 dollars a year from the NBN Co how can Mr. Quigley expect the rank and file workers to tighten their belts and let their children go hungry????
    sydneyla
  • Oh look since Telstra last sacked a whole heap of "rank and file workers" and didn't care that "their children not only went hungry but starved (leaving them with no employment)"... Syd's grown a heart and now cares...pfft!

    Tell us about those Telstra sackings Syd?
    Rizz-cd230
  • Syd,

    Tokyo Rose at it again.
    Vasso Massonic
  • Wow, a senseless tirade. now for an encore
    Vasso Massonic
  • Sydney,

    What we collectively think and do will make no difference at all to the destiny of Telecommunications in this country.

    Whilst the Howard Government realised the inadequacy of its Government to fund the expansion needs for our telecommunications infrastructure, they did the right thing to privatise the sector and let economy of scale self fund the expansion needed but but failed miserably to continue with the process.

    Sadly, the current Government have taken over the baton and embarked on a costly and precarious journey to complete the job but, clearly lack the acumen, experience and funding to complete the job and all we can do is sit and watch.
    Vasso Massonic