London joint venture loses High Court battle with TfL

19/04/2018
Dominic Browne

A joint venture working under the London Highways Alliance Contract (LoHAC) has lost a High Court battle with Transport for London (TfL) over work rates.

Colas, VolkerHighways and AECOM (CVU) disagreed with TfL over payment rates in conjunction with the capital's permit scheme, which imposes charges for working on roads during peak hours.

The joint venture argued that strict working time constraints placed on it by TfL's highways permit scheme delayed and prolonged work, requiring extra shifts and added costs.

CVU said it had understood there would be a window for night-time noisy works between 7.30pm and midnight but in practice this was severely curtailed by permit conditions.

CVU argued that it was therefore entitled to claim for the cost impacts of the restriction with revised rates and prices. TfL maintained that agreed rates and uplifts in the existing deal covered all limitations or restrictions on working conditions.

Justice O’Farrell said: 'CVU makes a valid point that the framework agreement does not contain definitive hours and other conditions in which the works under task orders must be carried out.

'That introduces uncertainty as to the duration, scope and cost of work required. Any requirement by CVU to price such uncertainties would result in uncommercial high rates. There is a risk that contractors could include a premium for the risk of uncertain restrictions on working if forced to price them at the outset.'

The judge added: 'However, that is balanced by the competitive tendering that applied for the framework agreement, and the volume and spread of works, from those at high risk of imposed restrictions to those at low risk of imposed restrictions. The inbuilt uncertainty introduced risk for both parties that could be assessed and evaluated.

'The purpose for which the schedule of rates was required was to provide consistency and certainty in the pricing of the works. The use of a schedule of rates enabled TfL to evaluate the tenders on a fair and equal basis. The fixing of rates and prices for the framework agreement provides opportunity and risk for both parties.

'If CVU undertakes the work instructed in a shorter duration or at lower cost than anticipated, it will receive a "windfall" and TfL will have "overpaid". If CVU incurs greater costs than anticipated, it will have to bear the loss and TfL will have made a saving.

'It was a matter for each party to assess the risks associated with permits issued and to price those risks accordingly.'

CVU is in talks with TfL about removing itself from core work under the LoHAC framework; however this relates to cut backs in Transport for London's roads spend and has nothing to do with this court case.

A spokeswoman for CVU said: 'CVU would like to reiterate that they are in discussions with TfL to consider stepping down from core work in the central London area. This action was agreed prior to the result of the recent court case being announced, and is in response to the removal of the government operating subsidy.'

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