News · Money · Muswellbrook
The Denman to Sandy Hollow pipeline has gone up $641,361 since June, and the council is covering a federal funding shortfall
On 9 June Muswellbrook Shire Council accepted a directly negotiated submission from Eire Construction for the Denman to Sandy Hollow Pipeline and Water Treatment Plant, at a lump sum of $25,757,814.32 excluding GST. The business paper for 25 August asks councillors to replace that with $26,399,175.72, an increase of $641,361.40, or 2.49 per cent, in eleven weeks. The same June resolution already committed the council to covering a Federal National Water Grid funding shortfall through more grants, a state low-cost loan, or its own borrowings.
What was decided in June
Denman and Sandy Hollow are small villages in the Upper Hunter, west of Muswellbrook. The pipeline and treatment plant is the largest thing the shire is currently building, and the decision to award it was taken at an extraordinary meeting on 9 June 2026, in closed session.
The minutes record resolution 370, on the motion of Cr D. Marshall and Cr C. Bailey. Council
Accepts the Direct Negotiations submission submitted by Eire Construction for Contract
2025-2026-0693 Denman to Sandy Hollow Pipeline & Water Treatment Plant, for the lump sum of
$25,757,814.32, exclusive of GST
, and delegated to the General Manager the authority to
enter a contract subject to satisfactory conclusion of contract negotiations
.
Two words in that are worth pausing on. Direct Negotiations means this was not an open tender. That is a permitted procurement route for councils in defined circumstances, and the minutes do not record which circumstance applied, because the report behind them is confidential.
The funding gap the council has already agreed to wear
The third limb of resolution 370 is the one with the longest reach. Council
Commits to funding the shortfall through seeking additional grant funding, and/or through the
NSW Government Low Cost Loans Initiative or equivalent, and/or through Council borrowings to
substitute the Federal National Water Grid funding shortfall
.
Read that plainly. A federal water grant did not cover what the project costs, and rather than stop, the council resolved in advance to close the gap itself, with borrowing named as an acceptable option. The minutes do not state the size of the shortfall and neither will we, because the report is confidential and the number is not in any public document we have found.
The fourth limb ties the pipeline to housing. It authorises the General Manager to issue
conditional compliance certificates for West Denman developments at Almond Street, either through
Council building the 300 millimetre water pipeline itself or through developers doing it and
being paid by Council under a Works In-kind Agreement (WIKA)
. So the pipeline is not only
a water project; it is the thing standing between a release area and its certificates.
What the August paper asks
Item 16.1 on 25 August recommends that Council alter resolution 370 by replacing the
approved lump sum of $25,757,814.32, exclusive of GST, with the revised Contract Price of
$26,399,175.72, exclusive of GST
, and notes that the final price may be subject to further
adjustment during final contract negotiations, provided that the final Contract Price remains
within the approved project budget
. All other provisions of resolution 370 are unchanged.
| Stage | Amount |
|---|---|
| Accepted 9 June 2026, resolution 370 | $25,757,814.32 |
| Recommended 25 August 2026 | $26,399,175.72 |
| Increase | $641,361.40 (2.49%) |
Note the qualifier the recommendation carries: the price may move again in final negotiations,
bounded only by staying within the approved project budget
. The approved project budget is
a different and larger number than the contract price, and it is not stated in the public paper,
so how much further the contract can move is not something a reader can work out from what has
been published.
Confidential to discuss, published to read
Item 16.1 sits in closed council. The paper says it is CONFIDENTIAL under the provisions of
Section 10A(2)(c) of the Local Government Act 1993, as it relates to information that would, if
disclosed, confer a commercial advantage on a person with whom the council is conducting (or
proposes to conduct) business
, and that Council considers that discussion of the matter in
an open meeting would be, on balance, contrary to the public interest
. Two other items are
closed on 25 August: an operational personnel matter under 10A(2)(a), and Bulky Waste Services
Modernisation under the same commercial-advantage provision.
We want to be exact about what that does and does not mean, because it is easy to write this wrongly. Nothing here is leaked or confidential. The council published both dollar figures, the contractor's name and the resolution wording in documents on its own website. What is confidential is the underlying report and the discussion. That split is ordinary and lawful: the reasons a price moved can genuinely disclose a contractor's commercial position, while the amount the public is being asked to pay is not the sort of thing a ratepayer should have to infer.
The practical consequence is still real. A reader can see that the number went up by $641,361 and cannot see why, and the vehicle that would explain it is the one the council has resolved not to discuss in public.
Our view
A 2.49 per cent movement between award and final contract negotiation is not, on its own, alarming for a project of this size. Construction contracts move at this stage as design details and conditions settle, and the council flagged in June that the price was subject to satisfactory conclusion of negotiations. Treating this as a blowout would misread it.
What we would keep an eye on is the combination. This is a directly negotiated contract, on a project whose federal grant does not cover the cost, where the council has already resolved to borrow if the grants do not come, where the contract price has moved once and is expressly allowed to move again, and where the ceiling that bounds it is a budget figure the public has not been given. Each of those is defensible alone. Together they mean the shire has taken on the downside risk of a $26 million project with very little of the detail in public view.
What we would check next: whether the 25 August minutes record the revision as carried, what the National Water Grid shortfall actually is, and what the approved project budget is, since that is the number that determines how much further this can go without coming back to Council.
Sources
- Muswellbrook Shire Council, Extraordinary Council Meeting Minutes, 9 June 2026 (PDF, downloaded and read 30 August 2026): resolution 370 in full, being the acceptance of the Direct Negotiations submission from Eire Construction for Contract 2025-2026-0693 at the quoted lump sum of $25,757,814.32 excluding GST; the delegation to the General Manager subject to satisfactory conclusion of contract negotiations; the quoted commitment to fund the shortfall through additional grant funding, the NSW Government Low Cost Loans Initiative or Council borrowings to substitute the Federal National Water Grid funding shortfall; the quoted authorisation on conditional compliance certificates for West Denman (Almond Street) and the Works In-kind Agreement; that the resolution was on the motion of Cr D. Marshall and Cr C. Bailey; and the section 10A(2)(c) confidentiality wording applied to the item.
- Muswellbrook Shire Council, Ordinary Council Meeting Business Paper, 25 August 2026 (PDF, 290 pages, downloaded and read 30 August 2026): item 16.1 and its recommendation, being the quoted replacement of the approved lump sum with the revised Contract Price of $26,399,175.72 excluding GST, the quoted qualifier on further adjustment during final contract negotiations within the approved project budget, and that all other provisions of resolution 370 remain unchanged; the quoted section 10A(2)(c) confidentiality statement and public interest wording for item 16.1; and the confidentiality provisions applied to items 16.2 and 16.3.
- Muswellbrook Shire Council, 2026 Council Meetings (read 30 August 2026): the published meeting documents, which is the basis for our statement that the 25 August meeting has a business paper but no minutes as at 30 August.
Methodology. Both documents were downloaded from the council's own meetings page and read directly. Every dollar figure, name and quotation is from them. The arithmetic is ours and is simple subtraction: $26,399,175.72 less $25,757,814.32 is $641,361.40, which is 2.49 per cent of the June figure. All amounts exclude GST because that is how the council states them. Where a number is not in the public documents we have said so rather than estimated it: the National Water Grid shortfall, the approved project budget, and the reason for the increase are all absent, and the report explaining them is confidential. We have not contacted Muswellbrook Shire Council or Eire Construction, and we make no criticism of either the contractor or the procurement route, which is lawful.
Know this project, or read these resolutions differently? Request a correction and we will check it against the council's documents and log the outcome here.