All systems go as city tram scheme gets back on track

An agreement is due to be signed within weeks between the city council and its tram route contractors to draw a line under the two-year row which had threatened to derail the entire project. The breakthrough is expected to clear the way for councillors to confirm next month they will press ahead with the line as far east as St Andrew Square in the city centre - if more than 200 million of extra funding is found.

Councillors decided to pursue that option, rather than cancel the project or truncate the line at Haymarket, after a five-hour debate on Thursday.

The contractual dispute has led to the project costs rocketing and completion being delayed by three years to 2014.

However, the local authority could end up paying for the shortfall twice over if it opts to repay the amount at 14m a year over 30 years, or a total of 420m.

The peace deal will involve the council paying the consortium tens of millions of pounds for changes to the design of the line from Edinburgh airport.

It had claimed these were part of the construction contract, despite the consortium winning the majority of independent adjudications as part of the dispute resolution process.

Steve Cardownie, the SNP deputy leader of the council's ruling Liberal Democrat-SNP coalition, welcomed the impending deal as a "big step forward" and said the move made getting the trams finally running more likely.

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The agreement had been due to be signed yesterday but it was postponed until the end of the month for final details to be completed.

News of the pending agreement came as council chief executive Sue Bruce agreed the project had been damaged by local authority-owned tram developers Tie's (the former Transport Initiatives Edinburgh) attitude to the builders, who are led by German firm Bilfinger Berger.

Ms Bruce, who took over in January, said the "delinquent contractor approach" had been harmful, in a reference to a remark by former Tie chairman David Mackay, who also described Bilfinger Berger as a "modern-day Dick Turpin holding a pistol to our heads". He quit suddenly last November and was followed last month by Tie chief executive Richard Jeffrey, who he had appointed.

"Tie did take an aggressive approach to the contractor and the contractor responded accordingly," said Ms Bruce.

The agreement will be added to the construction contract as a "minute of variation" known as MoV5, and follows mediation talks between the two sides in March.

The cost of the extra payments to the contractors has been included in the latest 725-773m estimate for completing the 8.5 mile airport-St Andrew Square section of the line.

A source close the project said: "There isn't a dispute any more, really. Things are progressing on that front - it's not an issue."City council transport convener Gordon Mackenzie said yesterday: "Our relationship with the contractors is in a completely different place to what it was last year. Things are far more positive than they were. We are moving into the very latter stages of the agreement process."

Mr Cardownie, although opposing the project, said the deal augured well.

"The antagonists have been removed from the battlefield," he said.

"Bilfinger Berger won the majority of the adjudications and there has now been a softer and more conciliatory approach to the contractors, which has borne fruit. It augurs well for the future and can only be for the good of the city, because we do not want to see money thrown into a pit.

"We have a far better chance of completing the project with a more sympathetic partner, when before antagonism appeared to be the order of the day."

Mr Cardownie praised the council's new chief executive for her role in securing the deal.

He said: "Sue Bruce should be commended for her hands-on approach. She has rolled her sleeves up and managed to very quickly gain respect."

Four sets of lawyers are involved in drawing up the agreement, which would settle all current claims in the dispute.

It will formalise the progress made in the mediation talks, which were led by Ms Bruce and Tie chairman Vic Emery, along with consortium officials.

Mr Mackenzie said the latest cost estimate included a 50m contingency to cover further unexpected increases, such as archaeological remains or munitions being unearthed, or other obstacles.

Trams are not now expected to carry passengers until spring 2014, although they are due to start running on a test track beside the tram depot at Gogar by the end of this year.

Council officials will discuss funding options with the Scottish Government to bridge the gap with project's current 545m budget.

This comprises 500m from the Scottish Government and 45m from the council, 17.6m of which has been raised so far.

The council is planning to spread the extra cost of the project by repaying 14m a year over 30 years - a total of 420m.So far, 461m, or nearly 85 per cent of the original project budget, has been spent up to May.

This has included almost 200m on construction, 70m on moving underground pipes and cables from the tram route so future repairs do not interrupt services, and 48m for the fleet of 27 trams.

A further 80m has been spent on "project management", 33m on design and almost 5m on land.

The dispute with the consortium, which also comprises German firm Siemens and Spanish tram builder CAF, was triggered in February 2009 because of late-running work to move underground pipes and cables from Princes Street.

Agreement was later reached for the Princes Street work to progress, but no further construction on street sections of the route has ensued.

Princes Street will also have to be closed again between September and November, and between January and the summer of next year, for repairs to the track after damage was discovered.

Construction of off-street sections west of Haymarket has subsequently ground to a virtual standstill.

The only work currently continuing is in and around the tram depot, on the test track, the viaduct beside Haymarket station and the A8 underpass near the planned Gogar tram-train interchange.

Up to 3.4m will also have to be spent on repairs to roads and pavements on the shelved section of the tram route between the city centre and Newhaven.

Thursday's decision to continue the project to St Andrew Square, which is conditional on funding and assessment of the risks involved, was proposed by the Liberal Democrats.

Labour wanted the line to be truncated at Haymarket, while the Conservatives had called for more information about costs before a decision was taken.

The SNP called for a city referendum to decide the fate of the project and the Greens favoured building the line to St Andrew Square or Haymarket, but wanted more information.