Axed Huawei Metronet contract to cost WA taxpayers $6.6 million

The West Australian government will pay Chinese telecommunications giant Huawei and engineering firm UGL $6.6 million two years after it axed a controversial $206 million contract to rebuild Metronet’s communications network.

Transport Minister Rita Saffioti revealed in parliament on Tuesday the government had also entered into a $327 million contract with Finnish telecommunications giant Nokia and Networks Australia—$121 million more than the Huawei deal.

The WA government will pay a Huawei led consortium $6.6 million over a failed Metronet contract.Credit: Bloomberg

“After significant negotiation, both parties agreed that Huawei could not fulfil its contractual obligations and the contract was terminated in September 2020,” she said.

“The Public Transport Authority has recently reached a termination settlement of $6.6 million with the Huawei–UGL consortium.”

The revelations have prompted accusations of incompetence from the opposition over the government’s handling of the contract that the public ultimately had to pay for.

The PTA cancelled the contract because trade restrictions imposed by the United States created a force majeure event, meaning both parties could walk away with minimal costs.

The deal was to build 80 mobile towers along Perth’s railway corridors in a consortium with UGL to upgrade Metronet’s ageing analogue communications system, with work estimated to have been completed by the end of last year.

The network would be used for communications between train drivers and Metronet’s headquarters, but could also be used to support body-worn cameras, CCTV and live tracking of personnel and assets.

The US introduced restrictions in 2019 over concerns Huawei breached trade sanctions with Iran.

However, the WA deal faced further scrutiny after Huawei technology was banned from Australia’s 5G network over security concerns.

In 2020, the company faced allegations it could covertly access mobile networks around the world through backdoors designed for use by law enforcement agencies.

Later that year, a UK parliamentary inquiry found there was evidence of collusion between Huawei and the Chinese Communist Party. Huawei has maintained it is not influenced by the CCP.

Saffioti said it was “extremely unfortunate” the project was caught up in a China-US trade dispute.

“We still need to procure a new digital radio network for our rail system, particularly as it is required to enable the rollout of the train control and signalling project, with that project currently under procurement,” she said.

“The high-capacity signalling program of works will replace the existing Transperth rail network signalling system with one that allows for increased service frequencies to meet the rail demand that is forecast under long-term transport planning.”

A closed tender process started in September 2020 between Nokia and Telstra–Ericsson, with Nokia the successful bidder.

Saffioti said the new system was expected to enter service in phases during 2025.

A spokeswoman for Saffioti attributed the $121 million jump in price for the work under the Nokia contract to less competition in the global market for such expertise as well as price and material escalations.

“The project requires specialist technical expertise, with the market of suitable technology providers restricted over the past few years, as a result there is less competition and little downward pressure on prices,” she said.

“Additional factors that have impacted the overall cost of the contract include extending the duration of the contract, and price and material escalations over time.”

Shadow minister for Metronet Tjorn Sibma accused Saffioti of “incompetence” when it came to Huawei contract.

“True to form, the minister has not offered an apology nor accepted any responsibility for this inevitable blunder,” he said.

“Minister Saffioti was warned about potential problems the Huawei-UGL consortium might face in delivering the contract by the opposition, the then coalition and industry experts. Those prescient warnings were ignored and the obvious problems were denied, until reality bit.

“The procurement was shrouded in an exceptional level of secrecy which has become a hallmark of the McGowan Government. It was never formally announced, it apparently never went to cabinet, but access to the relevant documents was denied on the basis of cabinet confidentiality.”

Sibma said ultimately the WA taxpayer was footing the bill for a botched procurement process.

Huawei was contacted for comment.

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