WA scraps $136m Huawei rail deal over US trade restrictions

WA’s Public Transport Authority has been forced to abandon its $136 million digital radio system deal with Huawei and UGL due to ever-tightening US trade restrictions.

The state’s transport minister Rita Saffioti revealed the government’s decision not to proceed with the contract on Friday, following mutual agreement by the PTA and Huawei Australia.

The Chinese telecoms giant scored the deal to deliver a new digital radio system across Perth’s rail network as part of a joint venture with UGL in July 2018.

The system, which was to be delivered by next year, would have provided both voice and data services across Perth's 180km electrified rail network and the Forrestfield Airport Link.

While the consortium had provided earlier assurances that the project could continue despite the US trade restrictions, new controls imposed in August 2019 sealed the project’s fate.

The government said the trade restrictions imposed on Huawei had created a “force majeure event under the contract, which the parties have been unable to overcome”.

“The PTA and the HUGL [Huawei and UGL] Consortium have worked hard together to try to overcome this force majeure event,” it said.

“However, the state government has decided that if the current relationship with the HUGL Consortium is maintained the measures required to try to overcome the force majeure event would result in unacceptable uncertainty around the total cost of the project, final completion time and no guarantee that the proposed solution would be effective. 

“This decision will also ensure the State complies with US trade restrictions.

“The PTA and Huawei Australia have therefore mutually agreed to not continue the current arrangement.”

The project will now be “delivered through a new arrangement”, with PTA currently working with the consortium to “allow delivery of the project without breaching US trade restrictions”.

“This could include a range of outcomes, from withdrawal of Huawei Australia from the contract to termination,” the government said.

The changes are expected to delay the completion of the project by several years. The analogue radio spectrum that the rail network currently uses has already been extended to beyond 2021.

“It is extremely unfortunate that the State Government's project - which is limited to a radio network for train drivers and transit guards - has been caught up in the ongoing trade dispute between the US and China,” Saffioti said. 

“Given the trade dispute, and the current economic and health crisis facing the world, the PTA has recommended a fresh approach for the radio replacement project.

“We'll continue to work towards the delivery of a high quality radio system at the best possible price for taxpayers.”