T-Systems beats 67 others to develop construction exchange

Deutsche Telekom subsidiary T-Systems has been successful in its bid to develop a trading exchange for a consortium of Australia's leading construction companies.

While all parties are remaining tight-lipped about the win as they undertake due diligence, sources close to the project confirmed that T-Systems beat the likes of Deloitte Consulting Consortium and IcFox Australia for the chance to build, own and operate the trading exchange.

The Construction Industry Trading Exchange (CITE) has been on the drawing board since August last year, when 11 of Australia's construction giants teamed up with Deutsche Bank to test the feasibility of the exchange.

Once satisfied that the exchange was viable, expressions of interest were called for, with 68 companies responding. A series of culls resulted in T-Systems, which is involved in a similar exchange for the construction industry in Germany, winning the bid.

The CITE contract will see T-Systems own the exchange as well as build and operate it. This was done largely because of the need to have an independent body at the reins, according to Mike Rollo, chairman of the CITE steering committee.

"The use of a 'build, own and operate' style of contract will place the responsibility associated with developing, operating and maintaining the technology with the appropriate experts," Rollo said.

"This will also further ensure that CITE is created as an open and neutral exchange based on a one-stop shop approach through which project delivery across all of the building and construction industry sectors can be achieved."

According to Dirk Clapham, project manager with the Walter Group and member of the CITE working committee, the exchange will succeed where others have failed because it is focused on improving processes rather than hinging on an aggregated buy model. In addition, Clapham believes that the exchange will generate revenues because it will be designed to incorporate a spectrum of industry groups.

"When you have a look at the spend of the construction industry, 80 per cent of that is through the contractors, sub-contractors and suppliers. You need to build something that suits [them] to get them on board, because that's where most of the revenue is generated," he said.

The consortium also has a guaranteed usage of the exchange, according to Clapham. Sources said that the figure for guaranteed expenditure through the exchange would be around $6 million, and although Clapham wouldn't confirm the exact figure, he said that the figure was "around that" over five years.

"The benefit in being selected by us is that they have 11 participants ready to go who are enthusiastic and prepared to guarantee they'll use the exchange," he said.

Clapham said that the parties are now getting together to iron out some final governance details, including pricing and how the consortium expects the exchange to work, based on the original feasibility study. Despite this, Clapham says that the group is hoping to sign a heads of agreement by the start of October, with the exchange due to launch in mid-2002.

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