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Costain sets aside £45m after losing Welsh roads job ruling

3 September 2020
A465 heads of the valleys road

Costain has been forced to include a charge of £45m in its half-year results to 30 June 2020, after it lost an arbitration decision over a troubled Welsh roads job.

Costain had previously won adjudication awards over the A465 Heads of the Valleys road for the Welsh government, having entered into the contract in 2015.

However, the Welsh government escalated a specific matter under the dispute resolution mechanism in the contract relating to the responsibility for design information for a specific retaining wall and whether it qualified as a “compensation event”.

The arbitrator’s decision found that responsibility for the design information rests with Costain and, consequently, the additional costs associated with the building of the retaining wall is not a compensation event under the contract.

In a statement, the company said: “Costain is disappointed by the arbitration award which reverses the ruling of previous adjudication awards. The arbitration award, which determines a matter of principle only, and not quantum, is non-appealable.

“Although the arbitration award relates to the liability for the additional costs associated with the building of a specific retaining wall under the contract, it has implications for the responsibility for design information under the whole contract and therefore Costain’s ability to recover these costs.”

Costain is still in discussions with the Welsh government in a bid to reach agreement on a final financial settlement for the roads job, and to seek recovery of costs under the contract.

But it said that in light of the new decision, it would include a £45m charge in its accounts.

The group will announce its half year results on 14 September 2020.

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