It is understood the 358-bed complex being built at Ararat is in financial trouble.VICTORIA’S stressed jails face added pressure with construction of the state’s newest prison falling more than a year behind schedule as the Baillieu government presses ahead with its tough-on-crime agenda.
Documents obtained by The Saturday Age reveal the 358-bed complex being built at Ararat in western Victoria is in financial trouble, with builders unable to pay contractors this week.
The Saturday Age understands the $400 million project, a public-private partnership, may be more than $100 million short of capital and, without government intervention, in danger of collapse.
The jail, commissioned by the Brumby government in 2010, is scheduled for completion in the second half of 2012.
The project was a Labor response to rising imprisonment rates, an increase that is set to accelerate under Coalition policies to crack down on crime.
Building and maintaining the prison will cost Victorians more than $1.1 billion over 25 years.
A memo to contractors reveals the Aegis consortium, which includes project manager Bilfinger Berger, the Commonwealth Bank and builders St Hilliers and Hawkins, is in negotiations with the government over a rescue strategy for the project, which unions believe will now not be completed until Christmas 2014.
”The complexities around finalising the negotiation of the long-term solution have meant expected payment has been delayed,” the project’s commercial manager, Kelvin North, says in a memo to contractors.
”We have been advised Aegis are in discussion with the banks and the state agencies to urgently address the pending payments.”
Workers on site have told The Saturday Age that a key problem with the project has been the poor management by a joint venture between Sydney-based St Hilliers and New Zealand firm Hawkins.
When contacted yesterday, building industry unions said they were concerned that members would be out of pocket as a result of what they saw as mismanagement of the scheme by its builders and the government.
They confirmed that a major blow to the project was that doors and windows imported from China did not fit.
”Having doors which fit may be considered critical for a prison,” quipped construction union Victorian secretary Bill Oliver.
”The mismanagement stems from ignoring highly professional Victorian suppliers of components to the prison – for instance, glass and doors which have been sourced from China in an attempt to cut costs.”
Electrical Trades Union assistant secretary Troy Gray said the project was at least 18 months behind schedule and at risk.
He said unions had ”rolled their eyes” two years ago when it became clear that a ”second tier” Sydney-based builder, St Hilliers, would play a leading role in the project. ”A second-tier builder doing a major Victorian project is a recipe for disaster.”
A senior government insider last night confirmed the government had been asked to help bail out the scheme. But Corrections Minister Andrew McIntosh, the Justice Department, and the main builder, Bilfinger Berger, all refused to comment last night.
The Coalition’s silence is in contrast to its strident condemnation of the beleaguered desalination project at Wonthaggi, another Brumby-era public-private partnership.
The Coalition’s vow to crack down on crime makes new prisons vital.
This week the government confirmed it will build a new $500 million-plus men’s prison at Ravenhall in Melbourne’s west, a plan originally revealed by The Age last year.
But that prison will not be ready until 2017 at the earliest, and Ararat is viewed as a crucial addition to the corrections system.
It is unclear how the government will ensure delivery of the Ararat project if the builders fail to secure the funds to complete it.
But The Saturday Age understands a rival builder, Multiplex, has already been consulted about the possibility of taking over construction.
Last night a senior government source would only acknowledge that a ”contingency” plan was in place.
In June last year, The Age highlighted concerns within the state bureaucracy about the Ararat project’s cost and the fairness of the tendering. ”This project was not value for money for taxpayers,” a government insider said.
Despite the comparatively high cost of the Ararat scheme, the Aegis bid was considerably lower than the losing bid by the Plenary group.
In November 2009, two consortiums, the Aegis and Plenary groups, submitted proposals for the project under the Partnerships Victoria program. Assessment of tenders was overseen by Corrections Victoria within the Justice Department.
Although the department denies it, The Saturday Age believes the initial proposals by both groups cost substantially more than the estimated cost of the project done as a traditional state project.
Confidential documents obtained by The Saturday Age showed the Plenary Group last year sought compensation from the government over unfair treatment and, in particular, late changes to the tendering process. Plenary believed the changes favoured competing bidder Aegis.
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