Probe into Reed's handling of $90m for BER

THE NSW government is investigating whether up to $90 million of BER money was diverted to expand contractor Reed Constructions.

THE NSW government is investigating whether up to $90 million of Building the Education Revolution money was diverted to expand a division of troubled contractor Reed Constructions.

Forensic accountants have been sent in to pore over the books of the cash-strapped company, which is confident it will satisfy the government it has been acting appropriately.

It emerged last week that a number of sub-contractors to Reed Constructions had not been paid for work done on a range of projects, with up to $80m of bills outstanding.

Managing director Geoffrey Reed said the company was in discussions with the government to "resolve an issue relating to payments for works carried out by Reed for Roads and Maritime Services and the Building the Education Revolution program".

The government denied it had been tardy in paying its bills to Reed, which was allocated $383.3m under the $16.2 billion BER scheme.

Further talks took place late last week and one issue that emerged was Reed's expansion last year into the mining equipment and plant hire business. Construction Forestry Mining and Energy Union NSW secretary Brian Parker said yesterday Reed was confident its books would withhold scrutiny and that the government would release further funds to the company to assist in paying its sub-contractors.

While the company may be hopeful funds will be forthcoming from the government, the office of Finance Minister Greg Pearce said it had not made any promises of financial relief to Reed.

"The government is in ongoing discussions with Reed over disputed contracts it has with the government," a spokesperson for Mr Pearce said yesterday. "It has not made any commitments beyond that."

Separately, Reed Constructions Australia is embroiled in an $8m court case with a sub-contractor, excavation company Codmah in the Federal Court. Codmah filed a lawsuit against Reed in December, claiming it had not been properly paid for work done on the NSW North-West Growth Centre, which is set to accommodate about 70,000 new homes over the next 30 years.

According to court documents, in 2009 Reed sub-contracted pipe work construction out to Codmah for an agreed figure of $1.7m. But Codmah says, according to its statement of claim, the work could not be completed as planned because of deficiencies in the drawings provided by Reed. Codmah says these drawings were included in the tender bundle, which it relied on when quoting for the job.

After a redesign process Codmah carried out additional works, which cost it $5m, believing Reed would reimburse the company.

Reed has refused to pay for the variations, and its defence documents, also filed in court, says that "geotechnical information" does not form part of the contract.

Reed, which denies misleading or deceptive conduct, says the contract included a clause for Codmah to make its own inquiries about the site. Reed launched a cross-claim against Codmah last month, saying the excavation company should pay it $8m. Reed says Codmah was 330 days late in completing the project, and owes it $22,000 for each day. It further claims some $748,860 in overpayments. The case will be in court on April 5.