Did the government cut the bidders out of the action, or did they run?
A few weeks ago it was reported that “The race to build the $8 billion East West Link tunnel in Melbourne looks to be down to two bidders after the government cut a consortium led by the Bank of Tokyo-Mitsubishi UFJ and Leighton Holdings.”
In June, The Australian reported “The decision is a setback for Leighton’s John Holland business and comes after Leighton said earlier this month it was considering divesting some of its businesses as it focused on strengthening its balance sheet.”
Also in June, The Age reported ‘Leighton to be reimbursed up to $12m for failed East West Link bid’
In The Age today, a very different picture is painted in the story.
‘East West tunnel Link project too risky for Leighton’
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 geotechnical risks have been known since the drilling. So what’s changed? Leighton is in a bit of financial strife and so they want to concentrate on less risky projects.
The problem with the business case is that the costs are uncountable and the toll revenue will be low because the moderate traffic travelling east-west has a wide selection of alternate routes to avoid the tolls.
John Holland’s Collingwood office was picketed earlier this year. Perhaps this brought the risks home to them.
Perhaps the super funds and banks will be weighing up whether they want to be associated with a project that two out of three people think is a bad idea, and the independent planning panel removed any remaining credibility.
While not wishing to quibble over a mere 12 million, why are they being compensated when they voluntarily walked away? The real question is the misallocation of billions, that will be ripped out of the Victorian economy to prop up international consortia of construction giants and investment banks.