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Amey files compensation claim against council over state of Birmingham’s roads

Amey files compensation claim against council over state of Birmingham’s roads

🕔17.Mar 2015

The company responsible for improving and maintaining Birmingham’s roads and pavements is claiming a significant sum in compensation from the city council after alleging that the highways network was not handed over in an appropriate condition, writes Paul Dale.

Amey, which won a £2.7 billion 25-year contract to manage the roads in 2010, says the local authority cut back on maintenance in the months leading up to the deal being signed and also added work requirements into the tender document which were not clear at the time.

The firm’s stance is a counter-claim to the council which is alleging that Amey is not properly fulfilling its side of the contract by failing to maintain the roads to the required standard.

The amount of compensation being claimed by Amey has not been made public but is thought to run into millions of pounds.

In a final effort to solve the problem without recourse to costly court action, council leaders are seeking a commercial settlement with Amey where it is hoped the contractual differences can be resolved amicably.

Cllr Stewart Stacey, cabinet member for contracts and procurement, said he was determined “not to get the lawyers involved”.

When the Highways PFI deal was signed in 2010 it was described by the council’s then Tory-Liberal Democrat leadership as an achievement of which other local authorities would be envious.

The partnership between Amey and the council, the result of seven years of negotiations, was said to be the only way of securing the substantial amount of Government and private sector funding required to put the city’s roads into a decent state of repair.

Amey was given responsibility for improving, maintaining and managing Birmingham’s highway infrastructure, including 1,500 miles of road network, nearly 100,000 street lights, 76,000 trees and over 850 highway structures and bridges across the city.

But the relationship between Amey Birmingham Highways Ltd and city councillors has sometimes been strained. In 2013 it emerged the company was charging the council £2,000 for each sapling planted at the roadside.

In January this year the council said it was considering imposing financial penalty clauses on Amey after being “inundated” with complaints from residents about potholes and damaged surfaces.

Amey responded by insisting it was delivering the contract to the letter and had met all of the targets it had been set. Cllr Stacey admitted:

 There is a difference of opinion with Amey. It’s a difference in interpretation of what’s in the contract and the level of service delivery.

If we don’t challenge this we could get what we see as a lower level of service through the whole length of the contract to 2035. It is very important now to establish what the position is.

Amey are counter-claiming against us because we didn’t hand over the network in the state they would have expected it to be handed over. We had gone light on maintenance before the hand-over and we didn’t tell them all the bits we had added on since their tender came in.

If carried through this could cost us a considerable amount of money.

A cabinet report states that the council has raised “a number of matters” with Amey about the contract since September 2013. The report continues:

The council has sought to manage the performance and delivery of ABHL by engaging at the most senior level with ABHL over this period. Despite extensive dialogue ABHL did not agree an outcome on these matters acceptable to the council.

To accept ABHL’s position on these matters would:

Reduce the performance standards for the delivery of the services under the contract, by permitting ABHL to deliver to a lesser standard, and apply interpretations of the contract that would weaken the council’s commercial position.

These changes would apply for the whole of the contract term to 2035. This therefore placed the council in a position where it could either accept ABHL’s proposed position, dispute matters formally or engage in dialogue to reach an appropriate commercial settlement.

Amey is demanding compensation from the council dating back to the start of the contract in October 2010.

It’s claimed the council:

  • Did not carry out the contractually required programmed maintenance prior to the start of the contract
  • Did not advise details of all asset inventory added between the submission of its bid and the start of the contract
  • Carried out insufficient arboricultural maintenance prior to the start of the contract.

Details of a proposed settlement with Amey which would avoid the need for court action were discussed by the council cabinet in a private session.

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