Fears were expressed last night that the council may have to pay Uniform Construction over €50 million - almost 80% of the council’s entire annual budget.
The chairman of the Public Accounts Committee, Limerick East TD Michael Noonan, said the Exchequer may have to step in to save the council and protect its services.
The arbitrator, whose findings are binding on both parties, found that Uniform had been wrongly fired from the €140m drainage scheme four years ago.
The arbitrator did not set out a compensation figure, but sources last night speculated Uniform is in for a huge payout given the loss of reputation and the fact it has since been banned from tendering for any publicly funded projects. Mr Noonan estimated the compensation bill could be €50m.
The principal of the company was also forced to sell off 50% of the company as a result of what happened.
Uniform Construction last night welcomed the arbitrator’s verdict. The company said if it had been given an extension by the council to finish the job, it would have done so by April 2002 at huge savings to the council.
Uniform maintained its tender was based on incomplete engineering information given by the council on rock types in the river bed.
Uniform put in a contract bid of e8m to carry out tunnelling and other works as part of the Limerick main drainage scheme. However, the company said it hit rock under the Shannon which it had not been advised of by the council reports.
Just one-third of the way into the contract, Limerick City Council fired Uniform because it was behind schedule and another company was brought in, but on a €20m contract to complete the work.
Last night the company said its professional competence had been vindicated.
Mr Noonan said: “I find it difficult to believe that Limerick City Council on their own, would have made a decision which could lead to such a large amount of money being paid out, without consultations with the Department of the Environment. This was very high-risk poker.”
Limerick city manager Tom Mackey last night indicated that the council may go to the High Court to have a case stated on the findings of the arbitrator.
He said the council had removed Uniform from the site because it was not satisfied with progress. About one-third of the projected work had been completed at that stage. He said the council had the responsibility to take action if the contract was not coming in on time and on budget.
“We feel we behaved reasonably,” said Mr Mackey.
He said the fact that another contractor has almost completed the job proved the work could be done.
The newly elected mayor of Limerick Diarmuid Scully said: “This is a big problem, a very severe one. We don’t know what money we are talking about, but it’s not good. But we still can appeal to the High Court and that is being examined as an option.”
The city council with an annual budget of around €65m has been in financial straits for some years.