Tram firm faces £1m a month fines for late work

Published on Monday 15 March 2010 22:09

THE firms building Edinburgh's crisis-hit tram line will be fined £1 million for every month that it runs over schedule, The Scotsman has learned.

• Tram works in Haymarket. Picture: TSPL

Tram developer TIE has set a new deadline of June 2012 for the work to be completed – after which the penalties will be imposed.

The news came as TIE chief executive Richard Jeffrey launched an new attack on the construction consortium, accusing it of a work rate "way below" what was required.

However, that provoked a furious reaction from the consortium, with sources there condemning the TIE move as "pretty desperate stuff".

They added that legal advice showed TIE did not have "a hope in hell" of imposing the fines, because other delays had impeded the work.

TIE, which is owned by the city council, is believed to have raised concerns that Donald Anderson, a former leader of the local authority, has been drafted in by the consortium.

It also emerged that TIE has recruited a tough-talking construction expert to help fight its corner by assisting co-ordination of its "contractual strategy".

Tony Rush, who has worked at Balfour Beatty and Barr Construction, was quoted in trade magazine Construction News as saying: "I'm no soft touch. If you kick me in the balls, I'll head-butt you several times."

TIE's latest date for the trams to begin running is four months later than the previous official start, in February 2012.

Project sources said the deadline had allowed nine months for delays, due to the likes of utility work and design changes, which were not the consortium's fault.

The fines for non-completion, believed to be 1m a month, relate to the loss of revenue if the trams don't start running on time.

Building work on the street sections of the 11.5-mile tram line between Edinburgh airport and Newhaven has been on hold for nearly a year because of a dispute between TIE and the firms.

The row over late-running preliminary work to move underground pipes and cables, and changes to the design, has threatened to push up the cost of the 545m project by at least 100m.

The utility diversion work should have been completed in 2008, but it remains unfinished and may continue until the end of this year.

The consortium, led by German firm Bilfinger Berger, has told TIE the project cannot be finished until January 2014 – two years later than currently expected.

The dispute has been referred to an independent adjudicator, who is understood to have ruled in favour of the consortium in three of the four rounds decided so far.

Two rounds remain, with those adjudications thought to affect the result of many other disputed changes to the project.

The consortium, which also includes fellow German firm Siemens and Spanish tram builder CAF, is banned from speaking publicly under the terms of its contract with TIE.

Mr Jeffrey told The Scotsman: "We have had independent experts look at the current state of the project and believe that, even allowing for delays to the utility work, June 2012 is an achievable deadline.

"However, it will not be achieved at the current rate of progress, which is way below what is required.

"Until we find a mechanism to increase that rate of progress, any date will have to be taken with a pinch of salt."

Mr Jeffrey said some construction work on the off-street section of the route – west of Haymarket – was also be put on hold, but he declined to give details.

He went on: "We are disappointed that the consortium has adopted that approach."

However, he said track-laying work, along with the construction of several bridges and viaducts and the tram depot at Gogar, was not affected.

Consortium sources said the firms had taken legal advice from a QC that showed they had not been given adequate access to the site because of other delays to the project, such as utility diversions.

One said: "TIE has not got a hope in hell of being able to impose fines. It is highly likely to fail.

"The penalty clause in the contract is enforceable only if the contractors have been given full access to the site, which has not happened. It is pretty desperate stuff to build a case around a difficult-to-enforce clause, given the delays are largely a result of their poor management.

"If TIE would just get the utilities fixed and adhere to the recent adjudications, then we could start to make real progress.

"It is in their gift. If they spent less time head-butting contractors and focused on the job, then it would move forward."

Meanwhile, TIE has written to Mr Anderson seeking clarification of his role with the consortium, after he requested meetings with tram project board chairman David Mackay and council transport convener Gordon Mackenzie.

TIE is understood to be alarmed at the intervention of Mr Anderson – who is providing "strategic advice" – because both sides have agreed that communications between them during the official dispute process are made only by certain named individuals.

A source close to the project said: "That fact he has no remit in the process is what concerns us.

"We have formally written to him to ask what role he is fulfilling."

However, consortium sources said the former council leader had been employed by Bilfinger Berger and Siemens – not the consortium – to provide advice.

One said: "It is ridiculous that the firms cannot bring in resources to help find a solution to the dispute."