KI Council hopeful of recovering runway expansion override costs

Kangaroo Island Council is hopeful of recovering some of the Kangaroo Island Airport runway expansion cost overrides by working collaboratively with the funding partners.

“We will be working with the key stakeholders to manage the delay issues created by the entry into voluntary liquidation of the materials crushing contractor,” chief executive officer Andrew Boardman said.

“We are committed to arrive at a solution to ensure the community is not left holding the total cost of the overspend.”

Mr Boardman was travelling to Adelaide on Monday, March 26 to meet with the principal contractor and technical management team to finalise the air-side elements of work so that the final sum was clearly understood and agreed.

He said this was a normal process at the end of a contract of work where specification, variation claims and defect rectification works identified over the last three months of use are all resolved to all parties satisfaction.

It was reasonably expected to have grown from the initial estimate of $1.5 million to the vicinity of $2.8 million, over and above the total $18 million airport budget, which was jointly funded half-and-half by State and Federal governments, he said.

The original crushing contractor for the runway expansion, NBS, went into voluntary administration in February 2017, causing project delays for the principal contractor and forcing the council to re-tender the work and install a new contractor, he said.

These delays involved the need for the principal contractor to manage workflow inefficiency, demobilise over winter and then return to complete works for the start of new services in December, he said.

The materials crushing contractor had achieved State Government pre-qualification, which involves financial, safety and work practice due diligence and was therefore expected to be able to complete the contract works.

With the project adopting State Government procurement and contract processes at the insistence of the State, it was disappointing to find that there was no additional processes ensuring continued qualification and no requirement for additional due diligence over and above the prescribed process, he said.

It is believed that the State Government had now learned from this experience and has put in place the necessary checks and balances to ensure that this does not happen again.

The council had learned from a previous State enterprise contract on the Island where a principal contractor went into liquidation owing local sub-contractors considerable sums of money and had implemented a contract process whereby payments are only made if sub-contractors have been declared paid, he said.

“The statutory declaration claim process we now insist in in major contracts places an additional level of personal responsibility on the principal contractors to ensure that any sub-contractors are paid prior to us making any payments,” Mr Boardman said.

“And in this particular case we were able to rely on this clause to ensure that the fuel, quarry and freight suppliers to NBS received full settlement of their debts – a very good outcome even if it took longer to achieve than we would have liked.”

The good news is that the other half of the project, the new terminal building being undertaken by Mossop Construction is on track to be ahead of schedule and under budget.

The new terminal, designed to provide screened and unscreened air services, enabling direct flights from the East Coast capital cities is due to be handed over on April 27, and cost savings on this element of the project would also help in mitigating the airside cost overrun.

Mr Boardman also said the council and the SA Tourism Commission continued to work with QantasLink to expand the number of flights, including making the Melbourne to Kangaroo Island flights year-round, but there was a national shortage of planes and pilots to work around.

“QantasLink have been very pleased with the performance of the new services from both Melbourne and Adelaide to the Island and have extended them again for 2018-19 season,” he said.

“We have a great collaborative relationship with them and are working to identify how we can get additional services over and above these in place.”

He said that QantasLink was fully committed to serving the State from Adelaide to the extent its available aircraft can reliably manage.

The expansion of the runway and new QantasLink services had already increased passenger numbers by 11.8 per cent for February to date and Mr Boardman said it was hoped that both air service providers would continue to take advantage of the growing demand from tourists for flights to the Island.