The company charged with the construction of the National Broadband Network, NBN Co, has suspended its network construction tender. It failed to reach acceptable terms and prices with construction companies after four rounds of negotiations.
Last year, NBN Co lodged a request for tender process, which attracted 45 potential suppliers. This was narrowed down to 14 companies in the tender process.
“We have said all along that we are building an NBN, but not at any price,” NBN Co head of services, Kevin Brown, said. “We have thoroughly benchmarked our project against similar engineering and civil works projects in Australia and overseas and we will not proceed on the basis of prices we are currently being offered.”
Brown was disappointed that the request for proposals had not achieved a desired outcome, but was confident it was capable of securing better value for money by going through a different route.
“We have left the option open to continue negotiations at a later stage,” Brown said. “NBN Co has an obligation to our government shareholders, indeed to all tax payers, to ensure we carefully manage their investment in the network, and are serious about costs.”
Brown indicated the new approach entails taking into account current supply chain arrangements, volume certainty, a gain share for continuous improvement, and involve a national construction footprint. He reiterated the NBN Co’s solid track record of negotiating cost-effective deals for the goods and services it needs to build the network.
“The aim of these changes is to improve our capacity to accelerate the rollout in anticipation of a definitive agreement with Telstra,” he said.
Opposition broadband spokesman Malcolm Turnbull said NBN Co had no option but to suspend the tender process because putting optic fibre into every house in Australia was enormously expensive.
"I imagine they had no choice because the cost of this exercise appears to be well above even their high-end cost estimates," Mr Turnbull told ABC Radio.
That explanation was more likely than bidders trying to rip off the NBN Co, he said.
"It's easy to say price gouging, but what does that mean? 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."
Mr Turnbull said it wasn't necessary to run fibre into every home to ensure fast broadband access.
AAP contributed to this report.