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Sinking earth under a maintenance centre for Sydney's Waratah passenger trains could force John Holland to fork out $70 million for repairs, adding to the contractor's woes as it continues to battle the Western Australian government over delays and defects at the Perth Children's Hospital.
Downer EDI, which built and operates the Waratah trains, disclosed last week in its interim results that "ground subsidence" at the trains' maintenance centre in Auburn has been identified. Downer sub-contracted the design and construction of the maintenance centre, which was completed in 2010, to John Holland.
Downer claims that the areas where subsidence has been found are part of "the sub-contractor's design and construct obligations" and that it is not liable for the repair costs. It has estimated it the remediation work will cost about $70 million.
John Holland is understood to have used a plastic product, Atlantis Drainage Cells, under the maintenance centre to drain water, but the cells have collapsed.
John Holland, which was owned by Leighton Holdings when it built the maintenance centre but was acquired by China Communications Construction Company in 2015, previously sued Atlantis and engineering group KBR (which was hired to design stormwater facilities) in 2014 over subsidence in the maintenance centre's carpark, claiming breaches of contract and negligence. The NSW Supreme Court referred the matter to arbitration.
The revelations of fresh engineering troubles come as John Holland's conflict with the WA government over delays at the $1.2 billion hospital project, which was due to open more than a year ago but has still not been completed, escalate.
John Holland has denied government claims that brass fittings installed by the construction group could be leaching lead into water pipes at the hospital, and has claimed that water is being contaminated with lead before it enters the hospital.
WA Premier Colin Barnett has disputed John Holland's view, arguing that independent public testing of water shows "the lead issue arises within the children's hospital".
WA's Treasury Department has confirmed that its 2011 contract with John Holland contains liquidated damages provision for delays caused by the contractor. Thousands of defects have been uncovered at the hospital site, including asbestos in roof panels.
Separately, construction industry executives have warned that the NSW government may be forced to pay out damages to John Holland, CIMIC and Hong Kong's MTR group if Sydney's $8.3 billion Metro Northwest rail track is not ready in time.
The companies are part of a consortium hired to design, build and operate trains for the new rail line, but buckling of concrete spans on a skytrain viaduct during construction, which is being managed by Italy's Salini Impregilo, could delay its handover.
Salini is likely to have to pay the NSW government damages if the viaduct is delivered later than scheduled, but some industry executives say these may not cover the damages the government will then need to pay the John Holland consortium.
The size of liquidated damages fees have been redacted from the project deeds signed between Transport for NSW and the contractors.
Transport for NSW said it had "refined" the skytrain delivery strategy to ensure "the operations contractor can get access as quickly as possible".
"Transport for NSW will continue to review and refine works on this mega-project to ensure the best outcomes," a spokesman said, adding the Metro Northwest project was "on budget" to open as planned in 2019. "We're disappointed a span of the skytrain was damaged and have worked with the skytrain builders to put in place steps to prevent it occurring again."
John Holland declined to comment.
This article first appeared on www.afr.com
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