A new row has emerged in Edinburgh after it was confirmed that the contracts signed for the construction of the Trams to Newhaven project were changed after initial signing – with the revised contracts now giving more risk to the City of Edinburgh Council. Now unsurprisingly this revelation has led to concerns amongst opposition parties on the Council.
The initial contract for the electrical works stated that if costs overran between 100% and 120% then the Council and main construction contractor would split the costs evenly, known as pain share. This meant that Siemens – as subcontractor – would be liable for 50% of these extra costs with the remaining 50% split equally between the main contractor (eventually awarded to SFN JV) and the Council.
That’s how it was to start with but after SFN JV were awarded the contract their risk was removed with the Council taking on the additional 25% to mean they were now liable for 50% if the costs overran by up to 20%.
Obviously, this isn’t a problem if the costs don’t overrun but if they do there is concern amongst some factions on the Council that this will be extra cash which the Council has to find. An article in the Edinburgh Evening News suggests the maximum this could be £2 million.
On top of the extra costs to there have been comments that if rival companies had known that this risk would be removed they could have submitted more competitive bids.
In a written statement given to the Council, Cllr Lesley Macinnes, Transport Convener, said: “The Early Contractor Involvement period employed by the council on this project allowed for a period of close, collaborative working with the contractors before construction commenced to test and confirm the assumptions around programme, cost and risk. This led to a number of contract changes to ensure that the construction contracts reflected the position tested and confirmed during the Early Contractor Involvement period. Using lessons learned from the previous tram project, the current project has ensured there is robust governance in place, with a project board, a finance and risk board, regular reporting to our Corporate Leadership Team and an ongoing agile audit which means that the project is audited on a regular basis. We also have an All Party Oversight Group (APOG) which, as a result of member requests, has recently been strengthened to include disclosure of commercial and risk positions.”
The Conservatives on the Council have called for greater transparency of the project although there has been no direct response to this from the ruling coalition.
They say history doesn’t repeat itself ? Well, as far as Edinburgh is concerned, the judicial inquiry into tram project phase 1 construction, Airport – York Place overspend come “foul up” has yet to report its findings. One thing that’s ccertain is notwithstanding Cllr Macinnes’ hyperbole “Using lessons learned from the previous tram project, the current project has ensured there is robust governance in place”. Well they didn’t before and she doesn’t inspire confidence and the “begging bowl” will more than likely be passed to Holyrood later in the construction project to bail the council out !
Bigalasdair