Builders told to add 10pc for BER 'cost escalation'

BUILDERS tendering for work under the BER were told to include a "cost escalation" of up to 10pc to cover the inflationary impact of the scheme.

BUILDERS and architects tendering for work under Julia Gillard's school stimulus program were told to include a "cost escalation" of up to 10 per cent to cover the expected inflationary impact of the scheme.

The hidden cost of the Building the Education Revolution, revealed in documents submitted to a Victorian parliamentary inquiry, suggests that as much as $250 million of taxpayers' money could have been spent to cover a surge in building material and labour costs created by the state's $2.5 billion share of the stimulus program.

Contract details provided by an architecture firm reveal it was required by the Victorian Education Department to provide a 7 per cent "contingency fee" and a 10 per cent "cost escalation" in the tenders it submitted for work on four primary schools in Melbourne's east.

Government sources confirmed last night the department specifically included escalation costs in BER projects "because the stimulus was going to be a significant injection into the market/economy and prices could be expected to increase with greater levels of work being undertaken".

But they would not specify the percentage "escalation cost" for each project, saying it varied on a "range of factors" and more information would be available once the Brumby government finally released contract details and costings on all BER school projects.

The revelations of cost escalation in Victorian BER projects come after The Australian revealed that managing contractors in NSW were charging up to five times the federal government-mandated amount for fees, causing widespread cost blowouts.

Victorian principals, parents and the community have been left in the dark about contract information, with the government refusing to allow access to any financial details of projects.

Submissions to the education and training committee inquiry into the BER -- initiated by opposition parties in the upper house -- showed that many builders and architects believed prices were inflated for the construction projects for the program in Victoria.

Master Builders Association of Victoria executive director Brian Welch said the rush of building activity to meet tight BER deadlines had resulted in cost surges for building materials such as wooden floors and certain window frames, and created specialist labour shortages.

"It would be likely that some money was wasted," Mr Welch said. "The government obviously felt that the stimulus was more important than potentially wasting money."

Atelier Wagner architects head David Wagner told the inquiry it was no surprise building costs went up as a consequence of the fast roll-out. "A general observation of BER is that, whenever a large amount of work is created in the building industry, building costs will inevitably increase, particularly if demand has the potential to exceed supply," he wrote in his submission. "It therefore should not be surprising that BER work has been expensive when it was intended to be undertaken simultaneously."

GMF Architects told the inquiry that construction costs were "not in line with industry costs" and this was shown by a number of projects coming in over budget.

Another company, Architectus, complained that contracts set up by the Education Department constantly changed because of the addition of the "cost escalation".

The firm also included in its submission a table of four school projects, their original budgets and the final tenders which included "the DEECD (education department) requirement of 7 per cent contingency and 10 per cent cost escalation".

Opposition education spokesman Martin Dixon said the submissions revealed the government was making no effort to get best value for schools and was throwing money away without even trying. He called on Education Minister Bronwyn Pike to hand over control of projects to principals.

"These submissions confirm the Brumby government has grossly mismanaged BER projects and arrogantly refused to listen to principals," Mr Dixon said. Premier John Brumby conceded not every project was perfect.