Consultant is threatening to sue Norfolk council over an abandoned waste facility that left a £400,000 hole in its balance sheet, in the latest dispute in the PFI market

The consultant was part of a consortium that included Land Securities Trillium and Norfolk Environmental Waste Services, which was named preferred bidder on the £500m waste treatment plant near Norwich in March 2007.

But in July this year, the project was ditched by the council because of rising project costs, forcing Cyril Sweett to write off an exceptional sum of £391,000 in its accounts.

Chris Goscomb, chief financial officer, said: “We are looking to see whether there is a means to a claim. It is one of those things that happens so rarely that the legal position is very much up in the air.” Norfolk council declined to comment.

The news comes a month after a consortium that included Laing O’Rourke and John Laing launched a legal battle to reclaim millions of pounds over the scrapped £711m Leicester hospital PFI. In September, waste firm Sita also began legal action after missing out on a £3.8bn Manchester waste PFI deal.

The PFI market is becoming an increasingly litigious environment

Neil Rutledge

Neil Rutledge, client service director at Grant Thornton, said: “It shows the PFI market is becoming an increasingly litigious environment. Firms treat preferred bidder status differently on accounts. If the scheme subsequently does not proceed, it’s a material issue.”

This week Cyril Sweett posted a half-year pre-tax profit of £1.3m, down 60% from £3.3m in 2008. Turnover was £32.7m, down from £41m last year. Dean Webster, its chief executive, said the firm had a “strong” balance sheet with minimal debt, an order book of £64m and had achieved a “very creditable” gross margin of 35%.

He said the business aimed to increase the proportion of work from overseas to 50% by 2012, up from about a third this year.