Trams firm Bilfinger faces losing contract over talks stalemate

Published on Monday 22 February 2010 09:09

THE boss of Edinburgh's tram project has admitted there is "no sign of a breakthrough" in talks with contractor Bilfinger Berger, as reports today suggested the German firm could be booted off the contract.

Writing to businesses along the route of the works, Richard Jeffrey, chief executive of tram firm TIE, said it was "disappointing to say the least" that on-street works had not restarted after Christmas.

Work on crucial parts of the route, including Shandwick Place and Leith Walk, have been held up by a dispute resolution process between TIE and its German contractor.

There has been growing speculation about Bilfinger Berger's part in the project, with reports today suggesting that bosses could be ready to axe the firm.

It comes as sources close to the project revealed TIE was forced to pay out 2.5 million to Bilfinger following a dispute about retaining walls at Russell Road, not 4.5m as previously reported.

Acknowledging frustration over the lack of progress, Mr Jeffrey said: "There is still no sign of a breakthrough as a result of our sustained efforts to improve the relationship with the consortium, notably with regard to the works being undertaken by Bilfinger Berger.

"Given the range of ongoing disagreements with the consortium over the project, and the continued slow progress on site, the board have asked me to examine all the options available to us in the next few weeks. This information will, for obvious reasons, remain commercially confidential."

A crunch meeting between TIE and council officials is set to take place early next month, with Bilfinger's role in the consortium top of the agenda. It is understood there are still seven outstanding disputes due to be resolved by an independent adjudicator, which could yet hold up the work for several more months.

Council sources have drawn comparisons with a metro project in Vancouver, Canada, where Bilfinger was removed from the job due to a prolonged period of inactivity, and speculation is growing that a similar scenario could take place in Edinburgh.

Mr Jeffrey added: "The current rate of progress is far below that which we expect. I appreciate that the fact that the ongoing issues are causing uncertainty and, in some cases, anger amongst city businesses and the people of Edinburgh. The current state of affairs could not be further from how we would all wish to see this vital project delivered."

He said the contractor was looking for payments which TIE believed to be covered in the original price of the agreement.

Last week, Richard Walker, chief executive in the UK for Bilfinger Berger, said TIE appeared oblivious that workers could not lay tracks while underground utilities were still being moved.

"If the roadway is occupied by the utility contractor, I struggle to see how I can put rails down the middle of it," he said.

Meanwhile, both the council and TIE denied suggestions that next month's meeting will look at ways of saving money by cutting the route.