Friday, 25 January 2013

Busway debt

There is a very useful and informative analysis of the busway debt in this week's Huntingdon & St Ives News & Crier (24 January, page 6). It's a letter written by a Fenstanton resident ( Trevor Lee) who attended a public meeting about the finances of the busway construction that was held in Impington on 29 November.

In answer to a question at that meeting he was told that the excess of £64m paid by the Council to BAM Nuttall was due to 'interim payments being made to the contractor based on their costs plus a percentage for overheads and profit that was in accordance with  the form of contract being used'.

Later Mr Lee discovered that the contract used conformed to New Engineering Contract (NEC) Option 'C' which is used when 'the extent of the works cannot be fully defined and anticipated risks are greater'. The contractor submits 'target prices for work based on estimated costs plus a percentage for overheads and profit'. The contractor is paid in instalments, and at the end there is a final adjustment which can go either way depending on how the project costs have worked out in detail.

In the case of the busway, Cambridgeshire County Council believes it is owed £64 by BAM Nuttall, which BAM Nuttall disputes. Interest is now accruing on that £64m.

Mr Lee believes that the risk to council taxpayers would have been less if Cambridgeshire County Council had used a different form of contract, the NEC Option 'A' by which the contractor has to submit firm prices for each stage of the work.  Under this scenario, it is possible that BAM Nuttall might have submitted higher estimates for the work, but the County Council would have known what they were getting for their money, and would not have ended up in this dispute.

Finally Mr Lee suggest that the Council made an 'erroneous decision'  with regard to the style of contract and should be brought to account.

The letter can be viewed by going to the online version of the paper here.




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