Balfour in £40m funding wrangle with ODA

Sources close to the negotiations say the ODA is determined to keep the cost of the building down to between £160m and £170m, more than £40m lower than Balfour Beatty’s bid price, which is reported to be £213m.

A key element of the negotiations is over when the building is likely to be delivered. The ODA wants it to be completed by summer 2011 for a year of test events. However, finishing the project by this date could require more resources from Balfour Beatty than the reduced budget would allow, potentially jeopardising the completion date.

The negotiations are understood to have been further held up by the delivery of detailed, or Stage D, design proposals to Balfour Beatty only last week.

The designs will need to be worked up to final proposals, or Stage E, either by the design team or the contractor, before a revised cost estimate can be worked out.

A source said: “With the Stage D designs, a contractor should be able to work out what price a building can be built for, within 5-10%, but if a £40m gap has emerged, then something must be seriously wrong.”

An ODA spokesperson denied that Balfour Beatty was looking for up to £50m more than the ODA was prepared to pay. He said: “We expect to sign the contract very shortly. We remain on track to start construction in the summer with the venue completed well in time for test events in 2011. The budget for the venue will be in line with the overall budget for venues.”

The inflation of the aquatics centre budget to more than £200m from the bid price of £75m was revealed by Building in November. It had been driven up by VAT and inflation, as well as the costs of the signature Zaha Hadid designs.

Balfour Beatty has been the sole bidder on the aquatics centre since October last year.