Welsh Government sets aside £2m for A465 legal costs

24/02/2020
Rhodri Clark

The Welsh Government has budgeted £2m for legal fees in its wrangle with Costain over the A465 dualling between Gilwern and Brynmawr, the Wales Audit Office has revealed.

The WAO’s interim findings on the 8km scheme also reveal that despite going massively over budget, at least one bidder for the contract offered an even lower price than Costain.

Construction was forecast to cost £223.2m, including VAT and inflation, with scheme completion in September 2018. Now completion is expected in April 2021 and the government’s budget is £336.2m.

The WAO cautions: ‘With continued uncertainty about the liability for, and extent of, the cost increases, it is difficult for the Welsh Government to predict the final cost to the public purse. With the planned completion of the project extended, further cost increases may also arise.’

Its investigation received estimates of Costain’s additional costs but its report redacts the figures as commercially sensitive. Costain has already warned the market about the issue.

Both parties have taken specific aspects of the scheme to arbitration. ‘Despite the adjudication decisions made to date, the Welsh Government and Costain remain in dispute over who is liable for a significant portion of the cost increases,’ says the WAO.

‘It is impossible to say how long it will take to resolve the confidential dispute process. There are likely to be significant additional legal costs arising from the dispute resolution process, with both parties engaging barristers and technical experts. As at November 2019, the Welsh Government’s budget for legal fees related to the project was £2.07m and the amount spent on legal fees was £1.49m.’

At least one bidder for the contract in 2010 dodged the A465 bullet despite a cheaper offer than Costain’s because the government awarded 70% of marks for quality and 30% for price in an attempt to avoid ‘low and potentially unrealistic bids’.

The four bids ranged from £94.4m to £129.1m. Costain’s price was £102m. Costain achieved the highest quality mark.

The WAO lists key problem areas: a former factory site where asbestos was found; Costain’s acquisition of a former opencast mining site, where excavated materials are stored and processed; difficulties with most of the 89 retaining walls; and complications with statutory undertaker works.

Welsh transport secretary Ken Skates reassured Assembly Members that the final section of A465 dualling, Dowlais to Hirwaun, would use the Mutual Investment Model, placing the ‘risk of cost increase’ with the contractor.

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