€9.5m sewage works that cost the taxpayer €83m

A SEWAGE works contract worth €9.5m has ended up costing the taxpayer €83m after a construction company was fired from the job.

The massive overrun in costs includes remedial works, compensation and legal fees after the row between Limerick City Council and Uniform Construction Ltd ended up in conciliation, arbitration and finally the High Court.

In a damning report, the state spending watchdog, the Comptroller and Auditor General, revealed yesterday the dispute could have been settled for as little as €12m but the city council’s decision to reject settlement terms and keep fighting drove the costs to escalate.

The dispute arose between the council and Uniform after the latter was contracted to lay underground sewage pipes on a section of the €188m Limerick main drainage scheme in 1999.

Uniform submitted the cheapest tender of eight firms that were competing for the work. Other firms quoted double its estimate of €9.5m, and ultimately it took a company with a tender of €20m to complete the work after Uniform was ordered off the job.

Uniform began work in June 2000 with an 18-month completion deadline, but reported in March 2001 that it was having tunnelling problems that would severely delay the project and attract significant additional costs.

The company blamed ground conditions but the council decided Uniform did not have the expertise for the job and notified the Department of the Environment that it wanted to terminate the contract.

Uniform made another attempt at tunnelling but immediately ran into further difficulties and in September 2001, with the department’s agreement, the company was fired.

At first the matter went to conciliation, with the conciliator concluding that any arbitrator would find Uniform was unfairly treated. Uniform’s claim for loss of earnings and compensation amounted to €22.8m but the company offered to settle for €12.4m if the offer was accepted overnight.

Limerick City Council rejected this and went to arbitration, again with the department’s agreement. As it became clear the arbitrator intended ruling in Uniform’s favour, the council went to the High Court to challenge him but the case was thrown out.

By then, Uniform had upped its claim to €77m although the arbitrator eventually awarded the company €32.3m. However, with legal costs and the costs of completing the unfinished works, the bill rose to €83m and it could rise further as the arbitrator has yet to rule on whether Uniform should have its legal costs paid.

Comptroller and Auditor General John Purcell questioned what dispute resolution guidelines were in place to help local authorities deal with contract rows in a cost-effective manner, but was told the department did not issue any. However, a new document, the Capital Management Works Framework, is being drawn up by the Department of Finance to address such issues.

The comptroller noted that disputes involving two companies that worked on the Cork main drainage scheme had also gone to arbitration but in one case the contractor involved got nothing and in the other, the company settled for less than a quarter the amount it originally claimed.

Two other state contracts are currently at arbitration: one involving a company seeking €40m in claims relating to the Dublin Bay submarine pipeline and the other involving a contractor seeking over €5m in relation to a social housing contract in Naas, Co Kildare.

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