Minister puts taxpayers first on Southern Suburbs Railway

28/1/06
Planning and Infrastructure Minister Alannah MacTiernan said today she would not cave in to threats of legal action over construction of the Southern Suburbs Railway.
"The State Government had a duty to look after taxpayers' interests and would not spend one cent it was not liable for," Ms MacTiernan said.
Leighton Holdings chief Wal King tried the same tactic with the Victorian Government when it lost $110million on Melbourne's Spencer Street Railway Station.
However, the Western Australian Government would not be paying 'hush money' to Mr King.
"The Leighton-Kumagai Joint Venture partners (LKJV) have found it tough going on the city tunnel project, but this does not entitle them to demand that the contract be changed," the Minister said.
"We have a contract which sets out risk allocation with an agreed process for resolving disputes and we have no intention of departing from that.
"Notwithstanding this, the Public Transport Authority (PTA) has gone well beyond the contract to facilitate access and approvals."

Ms MacTiernan said Leighton knew the engineering and commercial risks of the New MetroRail project when it signed up for the project.

"Leighton boss Wal King went into this with his eyes open and knows that LKJV is responsible for all design and construct risk other than for a small number of specified cases where risk is shared by the State," she said.

"I am advised that unexpected ground conditions, industrial action, delays in building demolition and the complexity of retaining heritage buildings are examples of the series of events that has resulted in LKJV being delayed by more than three months."

Ms MacTiernan said LKJV had sought to accelerate work to make up time, significantly increasing its project costs.

"It is not surprising that under these circumstances, LKJV has tried to recover costs by claiming for extension of time and additional cost at every opportunity," she said.

"A similar pattern of aggressively pursuing claims has been evident on other Southern Suburbs Rail contracts involving Leighton Holdings subsidiaries.

"However, despite the large number of claims received, the PTA has only a limited liability under the city project contract."

A number of the PTA's determinations have been disputed by LKJV and the company's claims are subject to the formal dispute resolution process prescribed under the contract.

"Negotiation is the first step, followed by mandatory mediation with litigation as the last resort," Ms MacTiernan said.

"Ultimately, if mediation does not resolve the issue, the courts may have to decide. The PTA has expert engineering and legal advice supporting its position."

As for progress on the city project, Ms MacTiernan said the first tunnel was nearing the William Street underground station box with breakthrough expected soon.

The Minister confirmed that LKJV had submitted a program update indicating completion of the city project construction by April 2007, with tunnelling to be finished by December 2006.

"That submission was rejected by the PTA, and the State Government was still waiting for an updated timetable from LKJV," she said.

"The PTA is closely monitoring these issues and working to develop contingency plans to minimise any delay to the commencement of train services beyond the target date of April 2007."
Ms MacTiernan said all contracts associated with the Southern Suburban Railway were being closely monitored by the PTA and funding of the project was being reviewed in the lead up to the State Budget.
Minister's office: 9213 6400