Trouble hits Australia’s National Broadband Network
NBN Co has announced that it has indefinitely suspended its network construction tenders.
The announcement, made because “construction companies were unable to provide acceptable terms and prices,” was followed days later by the surprise resignation of Patrick Flannigan, NBN Co’s head of construction, who was overseeing the construction of the $36 billion National Broadband Network. A spokeswoman for the company said that, “NBN Co is disappointed Mr Flannigan has decided to resign,” but declined to comment on his reasons.
The tender process began 12 months ago, since when 14 companies have been shortlisted to undertake the construction process. However, after four rounds of negotiations, none of these companies have been able to reach an agreement with the government-owned NBN Co.
“We have said all along that we are building an NBN,” said Kevin Brown, NBN’s head of corporate services, “but not at any price. 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.”
In a speech made to the Melbourne Press Club in March, NBN Co’s CEO Mike Quigley commented: “While the focus is often on the construction programme, NBN Co is not a construction company. We are a telecommunications company responsible for the design and operation of a network, as well as construction.” He went on to comment on the challenges of installing a National Broadband Network in “a vast country with a sparse population.”
Quigley also commented on NBN Co’s negotiations with Telstra, which would “mean a sensible re-use of existing infrastructure, less disruption for the community and a reduction in our costs.” The company is still trying to secure a definitive agreement with the Australian incumbent.
"What we do have to realise is that NBN Co is in all reality still an upstart," commented Paul Budde of consultancy BuddeComm. "There are many highly qualified people within the organisation but at the same time there are several problems such as very few established processes and systems, no well established corporate structure, and that team spirit still has to be built and you can't force that." His overall assessment of the situation seems fairly sanguine, however: "It is in our opinion far better to have a CEO who is a realist rather than one that seems himself as a national hero. These decisions are not taken light-heartedly so when something like this happens it can be concluded that it was critical to do so."