Aberdeen road builders chasing ‘hundreds of millions’ in compensation after bypass doubles to £1bn

The chief executive of Balfour Beatty has said his firm is chasing the client on the Aberdeen road scheme in Scotland for “hundreds of millions” of pounds in compensation after revealing the job cost more than £1bn to build.

The eye-watering amount comes after the 58km long bypass was finally fully opened in February – more than a year late.

It was mired in a series of problems caused by issues such as bad weather and the cost of carrying out utility diversions.

Balfour Beatty signed the deal in December 2014 – just a few weeks before then new chief executive Leo Quinn arrived at the business – along with joint venture partners Carillion and Galliford Try.

Quinn (pictured) said the firm had until the end of the year to come to a negotiated agreement with Transport Scotland – or formally begin legal action.

He said the joint venture was due “hundreds of millions” and added: “The job was sold for £530m but has cost over £1bn to deliver.” He said the joint venture had been forced to shoulder around £500m in extra costs.

In its interim results yesterday, Balfour Beatty said the “final financial out-turn of this contract remains dependent upon the result of ongoing claims discussions”.

The job has caused huge financial damage to the firms involved with Carillion going bust last year, in part blaming problems on the road for its demise, while the costs of completing it and another problem job, the Queensferry Crossing, saw Galliford Try launch a rights issue last March to raise close to £160m.

The firm has since embarked on a cost-cutting drive which saw 350 jobs go earlier this year after disclosing more losses on the Aberdeen and Queensferry jobs.

But commenting on the Galliford Try job cuts, a Scottish government spokesperson told Building in May: “We are not prepared for the public purse to pick up cost overruns incurred by contractors.”

Quinn said the Aberdeen job was just one of a handful of problem schemes left after inheriting close to 90 when he took over at the beginning of 2015. “I can now count the number on the fingers of one hand,” he added.

Yesterday, Balfour Beatty moved further away from the problems Quinn faced four years ago when it posted an improved set of interim results.

But the firm voiced concerns over the future of HS2, where it is in line for £1.7bn worth of work, and Quinn admitted: “I do have some doubts [it will go ahead but] on balance, yes it will. The unfortunate thing is I think it will be delayed further. It would be a real disappointment if they cancelled it.”

He said a no-deal Brexit would mean the government would need to accelerate shovel-ready schemes such as HS2 but warned against the UK leaving the EU without a deal at the end of October.

“In an ideal world, we would have a consensual divorce. We need certainty by the end of the year.”

Balfour Beatty’s group revenue in the half year to June was flat at £3.8bn but pre-tax profit was up 28% to £63m.

The client Balfour Beatty and Galliford Try say owes them “hundreds of millions” of pounds for work on a problem road job in Aberdeen has said the pair have done nothing to prove it owes the two that sort of figure.

The scheme, known as the Aberdeen Western Peripheral Route, was finally fully opened in February – over a year late.

Last week Balfour Beatty chief executive Leo Quinn said the joint venture, known as Aberdeen Roads Limited, was owed “hundreds of millions” and added: “The job was sold for £530m but has cost over £1bn to deliver.” He said the joint venture had been forced to shoulder around £500m in extra costs.

Quinn said the firm had until the end of the year to come to a negotiated agreement with Transport Scotland – or formally begin legal action.

But a spokesperson for Transport Scotland, the Scottish government’s transport agency, said: “While it is not appropriate to comment in detail on the contractor’s claim due to the commercially confidential nature of the discussions regarding it, we can confirm that, to date, Aberdeen Roads Limited has yet to provide sufficient evidence to substantiate its claim.”

He also disputed Quinn’s claim the scheme had cost more than £1bn to build, adding the cost “remains at £745m”.

The was mired in a series of problems caused by issues such as bad weather and the cost of carrying out utility diversions.

The 58 km-long job has caused huge financial damage to the firms involved with Carillion going bust last year, in part blaming problems on the road for its demise, while the costs of completing it and another problem job, the Queensferry Crossing, saw Galliford Try launch a rights issue last March to raise close to £160m.

The firm has since embarked on a cost-cutting drive which saw 350 jobs go earlier this year after disclosing more losses on the Aberdeen and Queensferry jobs.