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Fixed price M25 too risky

The three consortia bidding for the massive M25 widening contract have been warned that the project is 'excessively risky' as they prepare to submit final tenders next week.

A major contractor that had already pulled out of the bidding process issued the warning this week.

He told NCE that a fixed price contract for the first seven years of the design build finance operate (DBFO) concession was far too risky given uncertainties about construction inflation.

"We felt the conditions of contract were excessively risky," he told NCE. "We struggled with the whole notion of trying to guess the level of prices in six or seven year's time. I can't see how anyone could sensibly accept that risk."

Bids for the 30 year DBFO contract are due in on Monday. Three consortia are expected to place their final bids. (see below)

But the contractor which had already withdrawn warned that uncertainties about funding had also added to the risk.

"There's a huge cost for bidding and then the government could quite easily say 'sorry we can't afford it' after the industry has spent tens of millions of pounds bidding for it."

But, former Highways Agency procurement director Steve Rowsell – the man behind the scheme design – disagreed and said the risks were well balanced.

"There is still scope for negotiation within the process," he said. "One of the big advantages of the M25 DBFO is that not all the scheme is designed at the outset."

This, he says, reduces the tendering costs, compared to previous DBFOs, and allows for lessons to be learned in the first phase of construction.

"The fact that the programme remains on schedule is a good sign that the process has gone really well," he said.

Other bidders for the project said they remained confident despite recent management changes at the Highways Agency's major projects division.

Major project director Keith Miller was replaced first by Jerry England and more recently by Ginny Clarke just months after he left the post.

Connect Plus (Balfour Beatty, Skanska, Atkins and Egis Projects)

Flow (Vinci, Autoroutes du Sud de la France, Laing Roads, Carillion, Costain, Ringway, Mouchel Parkman, Norwest Holst and Jacobs)

Amey, Laing O'Rourke, Ferrovial Agroman

M25 widening: Inflation could undermine fixed-price contract

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