The Victorian government has left itself exposed to a large damages claim from big builder Lend Lease from its handling of the $630 million Bendigo Hospital tender.
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The senior public servant in charge of the tender, Anthony Lubofsky, in an email to another public servant, has warned that possible breaches of legal process by the government in the tender risked a claim from builder Lend Lease for loss of profits.
Internal government documents, obtained by The Age, point to the tender process being in a state of disarray after the state government banned Lend Lease from bidding for new government work late last year.
The ban, revealed by The Age, came after Lend Lease signed a union-friendly deal, in September 2012, with the CFMEU, the type of deal forbidden under tough state government rules that took effect in July 2012.
The public servant’s warning comes as Health Minister David Davis, in a December 24 letter to then Premier Ted Baillieu, marked cabinet-in-confidence, warned of delays already of at least two months on Victoria’s biggest ever regional hospital project.
The ban on Lend Lease occurred towards the end of a tender for Bendigo Hospital where Lend Lease was ranked ‘‘materially ahead’’ of its rival, the Federal Court heard last week.
The government responded by extending the tender for a number of months. Mr Davis, in his letter, said the government’s decision to extend the bidding process may “jeopardise” finishing the project on time.
Any further delays “will likely result in the 2016 completion date not being achieved”, Mr Davis wrote.
Mr Davis noted that a bid by the consortium Exemplar – which has Lend Lease as its builder – had been “generally rated ahead” of its rival on “most of the evaluation criteria” but that it did not comply with the government’s crackdown on union-friendly deals.
The documents emerged from a Federal Court case where the CFMEU has taken legal action against the government, arguing it is breaching the federal Fair Work Act by either threatening to or banning Lend Lease from the tender.
The trial finished last Wednesday but Justice Mordy Bromberg flagged he may need longer than two weeks to make a decision – further delaying the tender – due to the dense constitutional and legal arguments in the case.
Mr Lubofsky, in a December 19 email to the assistant director of the government’s Construction Code Compliance Unit, Cathy Cato, warned of possible legal action, including Lend Lease suing for loss of profits. Mr Lubofsky noted that adherence with the government’s industrial relations rules was just one sub-criteria out of 27 and did not allow it to automatically ban Lend Lease for scoring poorly against it.
Lend Lease’s agreement with the CFMEU fell foul of the government’s rules as it placed restrictions on the use of outside labour, required the flying of union flags and tried to set the pay of employees of sub-contractors.
Industry sources said it was similar to most agreements struck in the Victorian construction industry – but fell foul of the government’s rules as it was struck after July 2012.