Latest Public Sector News

15.04.19

Amey tables £300m offer to escape 25-year Birmingham City Council contract

Outsourcing giant Amey has offered Birmingham City Council £300m to free itself from a troubled 25-year PFI contract after a bitter five-year legal battle.

Amey, owned by Spanish infrastructure firm Ferrovial, is understood to have made an informal offer to the city council to buy itself out of the £2.7bn contract, according to the Sunday Times.

This is the latest offer in an increasingly hostile row of the deal which earlier this month saw Amey fined nearly £50m for failing to replace two damaged sets of roadside bollards.

Amey said Birmingham City Council was “holding its own road network hostage” and said there had been a “total breakdown” in relations between the two.

A previous offer made by Amey in February, thought to be around £200m, was rejected and plans to upgrade roads and pavements across the city have been put on hold as a result of the dispute.

The £2.7bn contract was signed in 2010 for Amey to maintain Birmingham’s 1,600-mile road network, and grants the city council £50m a year in PFI credits from the Treasury.

The legal dispute ended last year when the Court of Appeal ruled in favour of Birmingham City Council after Lord Justice Jackson said Amey had applied “an ingenious new interpretation of the contract” which left some roads and paths unrepaired.

Following the fine earlier this month, a spokesperson for Amey said the contract had not worked for either party and that the dispute had reached a “critical point” as it extended an offer to meet with the council’s leadership.

The spokesperson said “Amey’s value has been written down” and said the authority is holding it hostage by not signing off on any upgrade schemes put forward or moving towards a resolution.

Birmingham City Council defended its £48.5m fine stating: “We take our responsibilities to manage our contractors seriously and where a contractor is found to be underperforming then we will not hesitate to take appropriate action in order to protect the public purse.”

Ferrovial, which co-owns Heathrow Airport, is also reportedly looking to cut its losses with Amey and has refused to provide a guarantee for the business.

Image credit - ChrisBaynham

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