Simple, cancelling the project it will never earn any revenue while you will continue to be paying the interest on the loans. Completing it you get revenue in which offsets the interest payments. Even though it will cost money to complete you will earn more in revenue than you spend.
Plus the council would have to no doubt pay hefty compensation to Bilfiger Berger for cancelling the contract. Most of the adjudications have gone the contractors way which suggests the council is sitting on large contractual liabilities.
The whole thing is a monumental cock up of the highest order. I was pro the trams but really you cannot defend what has happened.
We need an inquiry to find out what happened. The problem is as they are in arbitration its all smoke and mirrors at the moment. When things 1st started going wrong Carillion got the blame for service relocations overrunning, then Billfiger Berger got the blame for being a usual vicarious contractor. TIE cannot really hide behind that any more, it seems to be the lawyers who prepared the contract who are getting blamed now.
Trying to piece together the strands of info, including the audit Scotland report, my theory of what went wrong is as follows:
Firstly the audit scotland report said service relocations cost £65mill against a budget of £50mill so against the total cost of 540mill its not a big cost overun. It overan by year but I think its a red herring.
The audit commission report said that TIE claimed that when it signed a fixed price contract with the contractor it offloaded all risk away from the council. How i laughed at that. That only works when there is absolute certainty in scope. There is no such thing as a contract that delivers no risk to the client when there is lots of ambiguity or unfinished work at time of signing. Anyone within TIE who works in the industry should have known this. As an engineer who works for a private consultant, public sector clients think they can always push away risk but it always ends up biting them as they dont understand you need certainty in design and information for that to work, with uncertainty its best to have contigency and go target cost and share the risk. To many public sector bodies cannot write contracts or understand handling risk.
It said that detailed design of the civil and mechanical and electrical elements of work were not complete and neither was the service relocations when the contract was signed with Bilfiger Berger. Bingo i think, this is what went wrong. This is a monumentality stupid thing to do by TIE.
So Bilfiger Berger took on a job where the council thought they took all the risk yet they had no finished design for Bilfiger Berger price his tender accurately against and no idea of when he could start due to service relocations overunning. No contractor worth his salt would sign up to that without caveat-ing it to say that anything out of his control like service relocations or changes in design between contract signing and starting on site will be charged as extra.
To me it sounds as if the contract signing should have been delayed until the detailed design and service relocations were complete, or it should have been signed as a target cost contract if the council really couldn't wait, although that is still not a brilliant idea, as it is still risky.
I did overhear from another engineer suggest that one of the reasons the lines in princess street need rework is that the council leaned on the contractor to rush it in time to open for Hogmany, bearing in mind the service relocations finished a year late so Bilfiger Berger started later through no fault of their own. Any arbitrator would rule for the Contractor in a case like that as the client has changed the programme.
It appears that getting the works started at any cost overruled any common sense about leaving the council liable with such incomplete work at time of signing. Either Councillors leaned on TIE to sign it too quickly or TIE were plain incompetent. They should have waited till design and service relocations were finished and should have given the contractor the original length of time to complete the works, and therefore opened late but on cost. Instead its going to be years late and massively overcost.
It will be interesting to find out really what happened some time in the future.
Either way its a complete disaster for the city, the council and for people who support public transport investment.
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Seing as trams have been completed in Manchester, sheffield, Nottingham, Croydon etc does anyone know if TIE had recruited anyone who worked on these schemes? You would assume not
