Firms bidding for the £695m upgrade to Victoria Station in London may be asked to work without pay for a year, in effect subsidising the project for cash-strapped client Transport for London.
Building reported that the proposal, which is thought to be favoured by Tf L, would cost contractors about £20 million in 2012, the second year of the scheme which is due to begin next year. The contractors would have to absorb staff, subcontractor and materials costs in 2012, then the money would then be repaid by TfL to the contractors over the following six years.
A source close to the bid said: “It’s a loan, but TfL is essentially asking contractors to work for nothing for 12 months.”
Commentators warned Building that the move could be a sign of things to come, with one source saying: “It’s fairly unusual, but everyone knows TfL is short of cash and this is the only way it can get it off the ground.”
Tony Williams, director of consultancy Building Value, said: “It’s a client’s market. Work is scarce so contractors are in a situation where they can lump it or leave it. It’s a case of survival of the fittest and those with cash flow issues will be disadvantaged.”
TfL is considering bids from three teams: Balfour Beatty and Morgan Est; Vinci and BAM Nuttall and Costain, Laing O’Rourke and Bachy Soletanche. The bids were submitted in December and an announcement is expected in May.
The source said he believed bidders would accept TfL’s terms. “On such a high profile job and with the market the way it is, it really is the early bird that catches the worm,” he said.
The revamp for Victoria Station was advertised in January 2008 and was approved by the government last summer. A winner should have been appointed in August 2009 but cash flow problems saw TfL alter the phasing of the job.
TfL declined to comment to Building.
The North Ticket Hall of the station, which is one of the busiest in London, is due to be operational in 2016. The remainder of the works, including new escalators and lifts from an enlarged South Ticket Hall, should be completed in 2018.
