The disputed A465 Heads of the Valley road contract is expected to cost Costain £45m following an arbitration ruling
The A465 Heads of the Valley road contract has been under the scrutiny of an arbitration case and is anticipated to come in more than £100m over budget.
Costain moved its half-year results to 14 September while it waited for the arbitration ruling.
In a statement, Costain said: “As previously announced, the Welsh Government had escalated a specific matter under the dispute resolution mechanism in the contract relating to the responsibility for design information for a specific retaining wall and whether it qualified as a compensation event.
“This issue was decided in the company’s favour by way of previous adjudication awards. However, the arbitrator’s decision found that responsibility for the design information rests with Costain and, consequently, the additional costs associated with the building of the retaining wall is not a compensation event under the contract.
“Costain is disappointed by the arbitration award which reverses the ruling of previous adjudication awards. The arbitration award, which determines a matter of principle only, and not quantum, is non-appealable.”
It added: “Although the arbitration award relates to the liability for the additional costs associated with the building of a specific retaining wall under the contract, it has implications for the responsibility for design information under the whole contract and therefore Costain’s ability to recover these costs.
“Costain is in ongoing discussions with the Welsh Government to reach agreement on a final financial settlement and to seek recovery of costs under the contract.
“However, on the basis of the uncertainty of recovery of such costs following yesterday’s arbitration award, and subject to reaching a final settlement, the group’s half-year results for the period to 30 June 2020 will include a charge to the income statement of c.£45m to adjust the revenue recognised based on the level of cash received to date under the contract.
“Costain will continue to fulfil the company’s obligations under the contract, with completion scheduled in 2021.”
