East West tunnel Link project too risky for Leighton

The Age: East West tunnel Link project too risky for Leighton, July 29, 2014, Jenny Wiggins and Adam Carey

Construction giant Leighton abandoned the bidding race for the East West Link last month after it decided the project was too risky, the company says.

The geotechnical risks associated with building the tunnel were “not acceptable” to Leighton, given its experience in tunnelling, chief executive Marcelino Fernandez Verdes said on Monday.

“We decided to be consistent with our new culture in tendering and that’s why we didn’t go on in this tender process,” he said.

The Napthine government announced last month that the bidding race for its biggest project had been cut from three to two contenders, with Leighton pruned from the list. The company will be reimbursed up to $12 million for its fruitless bid.

A spokesman the Linking Melbourne Authority said: “The remaining consortia have vast experience delivering tunnel projects around the world and clearly do not share these concerns.”

News that one of Australia’s largest construction companies pulled out of the bidding follows the launch of legal action by two inner city councils this month seeking to have Planning Minister Matthew Guy’s approval of the project overturned.

Labor opposes the project but says it would honour contracts.

Drilling at more than 100 sites along the planned path of the East West Link found a mix of hard basalt rock and softer sandstone, siltstone and mudstone. An ancient river system, called a palaeochannel, was also found.

Unexpected complications during tunnelling could cause cost blowouts and delays.

Victorian Greens leader Greg Barber said there were serious financial risks involved in building major road tunnels.

“There are huge risks involved in this project but ultimately they will all fall back on the taxpayer,” Mr Barber said.

The construction of CityLink’s twin tunnels suffered major early problems when cracking caused serious leaks and forced the tunnel’s closure for a year soon after it opened.

Builder Transfield Obayashi eventually agreed to pay CityLink owner Transurban $153.6 million over delays and traffic problems caused by faulty construction. “The cracking is their [Transurban’s] problem now but it’ll be our problem later,” Mr Barber said.

The state is due to take ownership of CityLink in 2035.

Leighton’s new Spanish owner, Grupo ACS, is asserting a more rigorous risk management culture at the contractor as it battles to recover some $5.5 billion in owed payments on construction jobs.

The construction group on Monday reported a 20 per cent fall in first-half net profit to $291.3 million.

Stage one of the East West Link is a $6 billion to $8 billion road between the Eastern Freeway and CityLink, with a further connection to the Port of Melbourne.

The government plans to sign a contract with either the Lend Lease or Cintra consortium in October, weeks before November’s state election.

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