Conciliation saves council €4m

Clare County Council made a €4 million saving after engaging in a conciliation process with the company hired to construct sewerage treatment plants and networks in Feakle, Scariff and Quilty after an over-run in costs of €5.3m on the initial contract price.

 

Contractors P&D Lydon of Cong in Mayo had submitted a tender price of €6.143 million excluding VAT but, by the time the projects were completed, the final bill tendered was for €11.429m.

The prices were disputed and the council and the contractors entered into a conciliation process. The end result of the process, which cost over €65,000, was that Clare County Council agreed to pay the company an extra €1.35 million, excluding VAT.

The outcome was revealed at this week’s local authority meeting and prompted some elected members to express their disbelief at the amount of the over-run. Calls were also made for more stringent checks on work being carried out by council appointed contractors before major projects are completed.

However, the contractors, P&D Lydon, have defended their position. They emphasised that they have carried other contracts subsequent to this contract for the council for the agreed contract sums without any additional expenditure.

The Feakle, Scariff, Quilty Schemes comprised of the construction of new wastewater treatment plants in the three villages, new sewerage networks in Feakle, Quilty and Mullagh and the upgrade of networks in Scariff and Tuamgraney.

Works commenced in January 2008 and were completed in September 2009. In a statement to The Clare Champion the company said the works detailed in the contract documents were all carried out, but during the project the contractor was instructed to carry out substantial additional works.

“The settlement reached between both parties was based on all records from both parties stretching over a period of three years having to be gone through in detail.

“The ground conditions encountered on the project were not as identified on the site investigation report on which the original tender was based. This, along with substantial additional works, resulted in substantial over-runs on the project.

“The agreed sum (June 2012) is for works carried out, paid and financed by the contractor during the construction phase between January 2008 to September 2009, some three to four years later,” a spokesman stated

The contractor further noted that in order to reach a compromise that they had to forgo substantial interest charges because they had to wait almost three years to get paid in full.

According to a Clare County Council report, the contract for civil engineering works was carried out by P&D Lydon for the sum of €6.143 million excluding VAT. During the course of the contract, P&D Lydon made a number of claims for additional payment, the majority of which were not conceded.

P & D Lydon’s final account submitted in 2011 was for €11.429 million excluding VAT and a major dispute arose, which resulted in the invoking of the resolution procedure after the engineer’s assessment for the value of the work done was €6.506 million excluding VAT.

Both parties agreed to the appointment of a conciliator and an initial conciliation meeting was held in Ennis in December 2011, followed by six days of conciliation in Dublin in February and April.

Arising from further discussions between both parties, a meeting chaired by the conciliator was held in Dublin on June 6 last, at which a settlement of €1.35 million excluding VAT was agreed and supported by a conciliator report.

During the conciliation process there was ongoing consultation with the Department of the Environment, according to the council. The settlement amount is endorsed by a risk assessment prepared by the department and by an independent legal review of the risk assessment.

Director of services, Anne Haugh insists the final settlement figure was the best outcome for the council.

“Resolution of this dispute has been a complex and protracted process but the council is satisfied that the settlement as agreed represents the best possible outcome.

“Having vigorously contested the sum in dispute of over €4.9 million, the council have succeeded in reducing this potential liability by over two thirds to the agreed figure of €1.35 million excluding VAT and the council is satisfied that this agreed sum was necessarily incurred in the delivery of the scheme.

“Proceeding to arbitration would almost certainly result in a much greater exposure for the council in terms of the value of the settlement figure and the significant legal costs associated with arbitration,” she stated.

The final bill of €1.649 million includes the settlement figure of €1.35 million, €153,225 VAT, €65,775 in fees for the engineer and conciliator and €80,000 for the permanent road re-instatement in Feakle and Scariff.

Former Mayor of Clare, Councillor Pat Hayes expressed grave concern about the fact the contractor looked for an extra €5.3 million for work on the scheme and couldn’t understand how any contractor could ask for almost double an original contract.

Councillor Hayes was also concerned the council ended up with a settlement figure of €1.35 million, despite six days of conciliation. He requested a review of contracts outsourced to outside contractors.

Councillor Cathal Crowe admitted he was shocked at the over-run on the scheme and questioned the expenditure of €65,775 for an engineer and conciliator.

“It is a sad day if we rubber stamp this report,” he said.

The need for a review of contracts was supported by Councillor Joe Cooney who praised the council for reducing the bill to €1.35 million but stressed this should not happen in the future.

Acknowledging extra work had to be done, Councillor Patricia McCarthy asked if all of it was necessary and stressed councillors didn’t really know. She praised the management team for not accepting the final figure, but argued the figure for any conciliation procedure should be based on the number of hours worked and not a percentage of the overall contract price.

Councillor Joe Arkins asked if the same contractor submitted a tender for another project, would the council be obliged to consider it. He complimented the council for saving the council €4 million and felt the €65,775 on conciliation was money well spent.

Councillor PJ Kelly asked who drew up the contract in the council. Ms Haugh replied it was a “standard form contract” prior to the introduction of a fixed price contract.

The Lissycasey Councillor stressed there should be a different process instead of a standard form.

“If a contractor makes a mistake, he should be responsible. Serious lessons will have to be learned,” he said.

Councillor Oliver Garry said he didn’t think that any contractor could submit a bill for almost double the agreed contract price.

Ms Haugh explained under the old procedure the bill came in by way of final account in the end and a disputes procedure was invoked in the event of a disagreement.

“Over 42 separate claims were assessed by council staff and engineer. I would like to compliment our staff for going through the claims with a fine tooth comb, which succeeded in reducing the amount by over two thirds,” she said.

She pointed out the €65,775 included about €20,000 for conciliation.