Contractor agrees out of court deal with Defra to avoid lengthy court case over unpaid bills

Contractor Carillion has reached an out of court settlement with the government over money the firm claimed working on the foot and mouth disease clear-up in 2001.

The settlement with the Department for Environment Food and Rural Affairs (Defra) is understood to have been for around £2m, a third of what Carillion was claiming. Sources claim it was struck late last month.

The move puts an end to a lengthy court case between the two parties that was due to be heard at the Technology and Construction Court early next year.

Carillion was paid £21.1m for site disposal following the outbreak in 2001, as well as operating and managing fixed facilities in the North East and Cumbria.

A source claimed Carillion had wanted over £6m but had settled for just over £2m. The source said: “It’s now been settled amicably.”

The source added that the evidence surrounding the dispute had been extremely complicated. He said: “There was a lot of information, masses of paper work. You could have filled a couple of rooms with the documents.”

A Carillion spokesperson declined to comment on the settlement, while Defra did not return calls as QS News went to press.

It’s very hard for commercial organisations to keep fighting on for so long

Consultant working on claims

Carillion was first appointed by the then Ministry of Agriculture, Fisheries and Food in February 2001 to dispose of thousands of slaughtered animals. The firm’s experience in coping with the last foot and mouth outbreak in 1967, when it was called Wimpey Construction, helped it secure the work.

The firm was one of 130 contractors whose bills totalling £700m on the clear-up operation, were challenged by the government. Defra complained of irregularities, including excessive charges for plant and labour, and use of sub-standard materials.

A report by the National Audit Office at the start of the year said that 73 settlements had been reached with contractors.

The report said that the remaining 60, for bills worth a total of £260m, remained outstanding. The NAO said that Defra was hopeful of clawing back £17m from settlements. The foot and mouth outbreak cost the UK a total of more than £3bn.

A consultant working on several of the outstanding claims said the experience had proved a difficult one for contractors. The consultant said: “We had to stop working on the case as it was stretched out for so long. It’s very hard for commercial organisations to keep fighting on for so long.”

Who was paid what?

Contractors paid out for foot and mouth work according to the National Audit Office report 2002 included;

  • Snowie, paid £38.4m for providing transport equipment in Scotland and constructing a burial pit in Northern England;

  • Barr, paid £14.3m for supervision, labour, plant and transportation in connection with burn sites in Scotland;
  • Midas Construction, paid £11.4m for disposal work and transportation in Devon, the Midlands and Wales;

  • Carillion, paid £21m for site disposal and operating facilities in Northern England.

The NAO report also found the government was guilty of poor financial control in its bid to deal with the disease as quickly as possible.

Source

QS News