Lawyers predict flood of claims after government abandons 719 projects
More than £100m has been wasted in bidding costs on scrapped schools projects, it has been estimated.
Stephen Ratcliffe, chief executive of the UK Contractors Group, said he believed “well in excess of £100m” had been spent by consortiums bidding on the 719 school schemes cancelled this week by the government.
Education secretary Michael Gove announced £7.5bn of cuts to projects approved by the last government on Monday, at the same time abandoning future waves of the £55bn Building Schools for the Future programme.
A total of 14 schemes at close of dialogue stage - either preferred bidder or just before - hang in the balance, as do 123 academy projects. Further cuts in construction spending were also made or threatened this week in housing, rail and defence.
The scale of wasted bid costs emerged as lawyers predicted that construction firms would attempt to recoup the costs from the government to try to help mitigate the huge financial hit they will take from lost work.
Rupert Choat, partner in law firm Cameron McKenna, said: “A lot of people have invested good money in the bidding process, and I’d be surprised if there weren’t a number of disputes.” John Hart, infrastructure lawyer at Pinsent Masons, added: “The halt of the programme has created a mire of legal and contractual uncertainties.”
Choat said companies that had reached preferred bidder stage would be most likely to claim. There is no duty on procuring authorities to pay bid costs, he said, but there were still a “range of legal routes” that bidders could use to make a case for costs to be refunded.
Ratcliffe said: “Clearly there’s a bill to pick up here, which would normally have been picked up by the future work. Inevitably companies will be talking to their lawyers.”
Choat said the government might be storing up trouble for future PFI deals if it took a hard-line stance against refunding bid costs. “If it doesn’t look favourably on bid costs, it may be hard to attract the quality and number of bidders it wants for PFI deals in future,” he said.