When the Bechtel boss told his people to do everything they could to disallow contractors’ costs, the contractors went to court. But was this the right move?
Construction work on the six new Eurostar International platforms at St Pancras Station has reached “that” stage.
As nicely as one can put it, relations have deteriorated between the contractor and the project manager. The problem, according to the contractor, is that the project manager has adopted a different and unreasonable approach to the assessment of sums payable. Apparently, it was noticed that the out-turn cost for the works was going to be exceeded by the target cost.
Ah yes, that stage. Familiar?
And then on 15 April, there was a really awful leak. Just up the road from St Pancras at the Novotel, the head of Bechtel’s rail operations in Europe had a private meeting with his staff. Call it a pep talk. Mr Fady Bassily told his colleagues that since “there was a gap between the target cost and the projected out-turn cost it was important to seek to reduce this gap by adopting a stricter attitude to the administration of the relationships between the employer and the trade contractors”. He added that it was the project manager’s job to apply trade contracts fully, including the provisions for disallowing unjustified costs. For good measure he reminded his Bechtel project managers that if the
St Pancras works were not a financial success, Bechtel would lose out because Bechtel and the project managers were on a pain/gain deal.
By the way, the contractors’ disallowed costs in interim certificate number 47 was £1.7m. In April’s certificate 48, it was £5.8m.
Bassily’s message was leaked to the contractors: Costain, O’Rourke Civil Engineering, Bachy Soletanche, Emcor Drake & Scull. That leak and the hike in disallowed costs led them to believe that Bassily was instructing Bechtel to disallow legitimate costs when making their assessments for payment certificates. Oh, and one other point. The contract is based on the NEC contract, which has at its heart the spirit of co-operation and partnering. Yes, of course.
The contractors lost their trust and could see their money being lost too. So they began an action on 6 May, not against the employer but against Bechtel and Bassily in person accusing them of the civil wrong – that is, the tort – of unlawfully procuring a breach contract by the employer. There is no contract between the contractors and the project manager of course. The project manager is supposed merely to administer the contractual machinery. So the High Court was asked for an injunction against Bechtel and Bassily because both “sought to encourage Bechtel’s employees to operate the assessment and certification provision of the contract in a partial manner and in bad faith”. The contractors wanted a court order telling Bechtel to stop this behaviour. Ignoring a court order means contempt of court.
Bassily had required staff to ‘aggressively disallow costs where we could’ and spoke of contractors in disparaging, indeed abusive, terms
Issue one at trial was: What did Bassily instruct Bechtel’s staff to do? There were witness statements from Bechtel’s people that Bassily had required them to “aggressively disallow costs where we could” and he had spoken of the contractors in disparaging, indeed abusive, terms. But, said Bechtel, the NEC contract did not require the project manager to act impartially.
Issue two was: What is the impartiality status of an NEC project manager? The judge decided impartiality was required for certifying under the NEC contract and that Bechtel and Bassily were “under a misapprehension as to the project manager’s duty”.
Issue three was: Did they breach that duty? There is, said the judge, a serious issue to be tried.
Issue four: Does such a breach put the employer in breach as well? Since the employer wasn’t brought into this action it was impossible to say.
Issue five: Have Bechtel and Bassily committed the tort of procuring a breach of contract? There are, said the judge, serious issues to be tried.
Issue six: Should an injunction be ordered? No, said the judge. The reason is that the contract contains provisions for dispute resolution. The dispute can immediately be brought to adjudication.
This project is now under a cloud, a miasma, that must be dispelled. How? Bring in a dispute resolution board. Three or four visitors will decide the disallowed costs and become an influence on fair play and morale. The job has reached that stage – nothing more.
Tony Bingham is a barrister and arbitrator
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