House deal off

Main Stories, National

The National, Tuesday 21st August, 2012

THE dream is over. Prime Minister Peter O’Neill announced yesterday that the plug has been pulled on the ailing programme to build 200 houses for public servants in the capital.
The good news is that the contractor has agreed to repay the millions of kina it received for the project so far and the government will begin developing a revised scheme
“The cabinet has decided to terminate the Public Service Home Ownership Programme (PSHOP) contract after many months of negotiations between the Department of Personnel Management and the contractor, Australasia Pacific Panel Ltd,” he said in a statement.
The PSHOP was a bold effort to build houses at 8-Mile, near the western end of Jackson International Airport, that O’Neill initiated three years ago when he was Public Services Minister in the Somare government.
The project has been stalled for two years because of disagreements over the price of the houses with the developer, according to reports in March.

Only 10 houses had been built by the developer since the contract was signed in 2009 and ano­ther four were incomplete.
O’Neill yesterday said the simple fact was that significant increases in property development and building cost over the past five years had made it impossible for the contractor to deliver fully serviced land and 200 houses for the “fixed price” contract.
“The contractor, Australasia Pacific Panel Ltd, has offered to fully repay all monies it has received by way of progressive payments under the contract, a total of K31.52 million,” O’Neill said.
The prime minister said the repaid funds would go back to the PSHOP trust account and, with existing funds in the account, would be used to help develop a revised housing scheme for public servants.
“The government has directed the Department of Personnel Management to develop a revised scheme without delay,” O’Neill said.
The prime minister commended Australasia Pacific Panel Ltd, headed by Sir Frederick Reiher, for its offer to repay monies it had received from the state for the project.
“The vast majority of cancelled contracts with the state end up costing the state millions of kina.
“It is to the credit of contractor, and its executives and affiliates that the monies advanced by the state are being repaid in full.
“It is unfortunate the project was simply not able to proceed because costs had escalated beyond reason.
“But the government is strongly committed to developing an alternate scheme as soon as possible,” O’Neill said.
In March, Sir Frederick said the dispute with the government had been dragging on for the past two years.
He said the government had paid K28 million (out of K39 million contract sum) on the project that he claimed had a market value of between K35 million and K45 million.
“House price is the main contractual issue that has remained unresolved for more than a year between the contractor and the government.”
He also said there would be significant price variation to co­ver the significant costs escalation over five years from the public tender as a result mainly of the LNG project start-up.
The impact of the LNG project was not provided for in the contract, Sir Frederick said.
“Since the signing of the contract in August 2009, two years were lost as a result of a protracted regulatory (planning, building and land titles) approval process involving a number of government agencies, and a delay over the last 12 months because of the contractual dispute.”