NBN Co halts network construction tender

NBN Co halts network construction tender

Summary: The National Broadband Network Company (NBN Co) has suspended the network construction tender process indefinitely, stating that vendors were overpricing their offers.

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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.

Topics: NBN, Broadband, Telcos, Telstra

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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9 comments
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  • Turnbull has no idea that the scheduled of Rates that lies with all 14 Candidates has mysteriously doubled overnight. This simply reinstates that Tax Payers will be getting a better price for their buck. NBN Co Pty is no cash cow. Most current Carriers would laugh off some of the current pricing, NBN is no different.
    youbeuty25
  • Well for the past 10yrs while the rest of Australia and its workers got pay rises, we the communications sub-contractors got 10yrs of rate reductions forcing many to go bankrupt.It seems as if the final 5 may have actually listened to US when they benchmarked prices from us as to what real costs and overheads are. Australia is not a 3rd world country so what it cost in Asia is irrelevant,other countries also have different pay rates for employees and different working conditions standards,longer working days etc. therefore BENCHMARKING form overseas examples is also irrelevant.
    Real pay for effort and risk.after all its the subbies who have their homes on the line if something goes horribbly wrong(worst case),like a death onsite,as regrettably happens sometimes in the construction industry.
    As i have said before the GOVT. is going to build a 2nd rate 3rd world network,in a supposedly !st world counrty and try to pass it off as the best ever since slicedd bread as it were
    The LIBS offering is worse still,
    100% FTTH,the only way to go !!!!!!!!!!!!!!!!!!!
    pete196600
  • @pete - nice one. So when I move to the middle of the Simpson Desert, you think I should still have your 100% FTTP network rolled out to me there?
    gnome-8be8a
  • Absolutely
    pete196600
  • you see pete doesn't think that he has to pay for it.
    andrewdw
  • yeah I have to pay via taxes to, but get build it too.(self interest at heart).But that aside,Why,should rural Australians get a lesser service than urbanites?,Oh,that's right there aren't enough of us win an election outright,but,there are enough urbanites (nationally),to win an election for one party or another,with swings of course
    pete196600
  • IS IT POSSIBLE ?,that rather than NBN Co, suspending talks,The final 5,walked?,Because NBN Co had unrealistic requirements?,food for thought.
    pete196600
  • Well said pete196600 . As a subbie, I have absorbed every increase possible in a 4 year contract. Fuel was 90c and I'm now paying $1.40 to 50 a litre, public liability, workers comp have all gone up yet I still struggle to keep going at the old rates - why ? because I have been in this game for to long and no one else would employ me at my age.
    Good on these companies for sticking to their prices - gouging, I think not, just reality as they will not wish to subsidise NBN as I have to with telstra indirectly. If I could I would walk out tomorrow and so would many like me. In fact i wish everybody would as the industry would be in chaos given the state of half the network and yes I know it will be obsolete - but when???
    Moyboy-b1490
  • Moyboy,
    join the crusade for 100%ftth,maybe we can get to earnminimum wage from NBN Co to while we build a network that will be obselete in 20yrs to,unless the goes 100% fibre now
    pete196600