After a torrid six months Amey's fortunes may be taking a turn for the better. Ken Livingstone has dropped its High Court challenge to the Tube PPP which will mean the troubled firm will soon be able to recoup substantial bid costs
At last there is good news for support services group Amey. London mayor Ken Livingstone has finally dropped his High Court challenge to the Tube PPP. The delay in the deal, which was finalised last September, has been costing Amey about £1m a month. When it finally reaches financial close it should provide £20m for Amey's coffers and help alleviate its cashflow crisis.

Amey has recently announced that it intended to become more selective in its bidding for PFI and PPP projects. The firm's cash flow has been seriously affected by the high cost of winning contracts and the long delays in the contracts coming to a close, such as the Tube PPP.

Amey's rivals are also taking a more cautious approach and the government may soon find they have a shortage of bidders for PFI projects. This could have serious implications for the massive public sector building programme, which is relying on private partnerships for delivery. Smaller projects are thought to be at risk as construction firms such as Amey and Carillion focus on lucrative large-scale projects at the expense of low-value schemes.

WS Atkins has become the latest construction firm to feel the effects of high PFI bidding costs. On Thursday it announced that its profit for 2001/02 had fallen to £35.1m, 4% down on the previous year. As well as significantly increased bidding costs for PFI projects, the company blamed the new accounting standard UITF 34 for eroding its profit. The standard states that pre-contract bidding costs cannot be counted back as assets until the contract is secured. It effectively means that firms can no longer hide the large bidding costs involved in PFIs.

The new accountancy standard has hit Amey the hardest. In March it posted an £18.3m loss for 2001 when the City had been expecting a profit of more than £50m. As a result, Amey's shares nose-dived: Thursday's price of 94p was down 77% from its January peak of 413.5p, leading to speculation over the future of chief executive Brian Staples.

The uncertainty over Staples' future at Amey has not been helped by this week's announcement that board director Robert Osborne is leaving the firm, amid speculation that the company is undergoing major restructuring. City and industry sources say the moves are designed to reduce overlap between Amey divisions and lower costs. Building understands that Amey's business development and programme management divisions may be merged or even scrapped. This action would return the company to its original structure, which was changed by Staples only two years ago.