4 Dec 2018

City Rail Link pulls $500m contract off the table

4:44 pm on 4 December 2018

The country's largest transport infrastructure project, City Rail Link, has pulled a $500 million contract off the table after one of its contractors hit financial trouble.

City Rail Link work on Lower Queen St.

City Rail Link work on Lower Queen St. Photo: City Rail Link

The preferred bidder for the railway construction contract, Australian-based engineering firm RCR Tomlinson, went into administration last month.

RCR Infrastucture New Zealand, in a joint venture with WSP Opus, is still completing the $7.5m contract to design the railway.

The administrators, McGrathNicoll, are selling the rail infrastructure business, including its New Zealand operations, as it tries to salvage parts of the group to maximise returns to creditors.

However, City Rail Link chief executive Sean Sweeney said the preferential contract offer to RCR Infrastructure New Zealand had been withdrawn, but other international construction firms had been quick to signal their interest.

"There's no picture I have that RCR would be able to carry on and do the construction. So, we are planning other scenarios that don't involve them."

He said he was following the sale and was confident that RCR's viable businesses would be sold by early next year, despite losing the contract.

"I think the people looking to buy it are not looking at its order book, they're looking at the capability it would add to their own business."

Mr Sweeney would not name the companies that made informal email offers for the contract.

"We just said thanks for your kind offer."

He said there is no rush to find another contractor by the rough deadline of late 2019.

"We are very comfortable about our ability to have the market complete the construction. I can't stress that enough. I'm much more comfortable than I was two weeks ago."

Jobs on the block

A handful of RCR workers in Dannevirke will be made redundant before Christmas as the impact of RCR Tomlinson's administration in Australia hits home.

RCR has three companies in New Zealand - an energy business, an infrastructure business and a building products business.

The executive general manager of them all, Andrew Stevens, said they were all solvent, however its parent company's financial troubles had scared away some suppliers and customers.

Up to 20 staff within its energy business would lose their jobs as a result of the lost business, he said.

However, Mr Stevens reassured the remaining 400 staff that their jobs in its other companies were safe.

"By and large, in many parts of our business, our customers are standing by us, our suppliers are standing by us, and our staff. They should, we intend to emerge as strong as we can out of the far end of this difficult period.

"We are healthy and solvent within New Zealand. That's another priority of mine to keep it in that space."

Mr Stevens denied that the job cuts were a means to streamline the businesses to make it look more attractive to a buyer.

He said about six local companies had put in bids with the administrator to buy all or parts of its New Zealand entities, but he could not disclose who or the prices offered, citing commercial confidentiality.

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