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Shortlisted contractors walk out on 'neanderthal' Southern Water

CONTRACTORS THIS week accused Southern Water of adopting a 'neanderthal' approach to contracting leading to a mutiny of tenderers on a contract for almost £200M worth of work.

Six of the 10 consortia shortlisted to tender for the water company's latest tranche of work walked away from the bid process. They considered the contract conditions placed too much risk on the contractor.

The work is part of the Asset Management Programme 3 (AMP3) to bring water and sewerage infrastructure to 215 sites across Kent, East and West Sussex, Hampshire and the Isle of Wight up to European Union standards by 2005.

Ten firms were shortlisted at Christmas to tender on a maximum price lump sum basis, with no allowance for variations.

Costs incurred after following incorrect information in Southern Water's tender documents would have to be carried by the contractor.

The contract also provided for a £10,000 deduction from contractors making incorrect claims under the cost-reimbursable modified Institution of Chemical Engineers' Green Book form.

It also initially required a £5M on-demand bond, although this was later reduced to £1.5M. Contractors must also employ staff seconded from the client.

One furious contractor told NCE: 'They have adopted a neanderthal adversarial stoneage approach in drafting up this form of contract, which places all the risk on the contractor.

'We want to make a profit from the value which we provide and work in partnership but they don't seem to accept that. The contract totally discriminates against contractors, and we and others could never agree to it. It sparked a mutiny among the tenderers, ' he added.

'They (Southern Water) talk Egan but it's all a sham. This gives no-one value for money.

Tendering would have cost up to £0.5M, a total waste of money, ' he added.

Contractors' anger provoked a letter from the Civil Engineering Contractors' Association on 22 February criticising the contract approach.

'The contract for the documentation for the K3 contracts places scant regard to [Sir John Egan's Rethinking Construction] and in some respects is wholly inequitable, ' says the letter.

The four remaining consortia have four months to price the project, which has been divided into two contracts from an originally planned three.

One of the contractors to have dropped out said: 'We will be watching closely to see that the contracts are awarded along the terms we rejected and are not modified. Otherwise Southern will be in breach of EU procurement rules.'

A Southern Water spokesman defended the fixed price contract: 'We have a clear objective to get these 215 projects done and putting them together gives us the best ideas. There is no bottomless pit to get the work done - it is a heavily regulated environment and we are working within that framework.'

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