Laing O’Rourke and Ferrovial Agroman had bonus written into contract for work on Heathrow terminal
A joint venture between contractor Laing O’Rourke and consultant Ferrovial Agroman is in line to get a bonus of up to £60m for its work on Heathrow’s Terminal 2 as a result of a new form of contract.
The £800m Terminal 2A was topped out last week by transport secretary Justine Greening.
HET Co, the name of the joint venture, has it written into its contract that it will take away 30-40% of any underspend from the project, which is currently running 8% under budget and has not touched its contingency fund. This could mean the bonus will be as high as £60m.
This is one of the first projects in the UK to structure such a bonus clause into the contract.
Steven Morgan, capital director at Heathrow, said: “It’s an award fee contract. Safety, schedule and quality, on any of those factors we give them a bonus.
“They are 8% under run [on the budget] and they also have not spent their contingency fund [which is 10%],” he added.
Morgan advocated the use of such contracts, which would also see contractors pay for any overruns in the project.
The news came as a group of 100 senior UK business figures urged the government to allow for more capital investment at Heathrow in the shape of a third runway.
The government is refusing to consider expansion at Heathrow as part of a wider consultation on how to maintain airport hub capacity and the policy framework for aviation in the UK due to be launched later this month.
Letters to Greening and chancellor George Osborne asking them to reconsider were signed by, among others: Tony Cottam, senior partner at consultant KPMG; Paul Westbury, chief executive of engineer Buro Happold; David Tonkin, regional managing director at engineer Atkins and Mark Reynolds, deputy chief executive of contractor Mace.
A report by consultant Oxford Economics this week calculated that the UK would lose £8.5bn a year from its GDP from 2021 if its hub capacity was not improved.