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Garden Bridge: Who picks up the bill if it doesn’t go ahead?

History suggests delays to such a high-profile project could prove hugely problematic.

London’s proposed Garden Bridge may never be built. Currently the project piggy bank needs another £56m and the project’s viability is in doubt.

It would, of course, not be the first major public project to hit trouble.

The Scottish Parliament was some £400m over budget and completed three-and-a-half years late, and even the construction of the Houses of Parliament, now in need of a scarily expensive regeneration, went three times over budget and was completed 24 years behind schedule.

Getting to the starting gate is only the first challenge for a project like the Garden Bridge.

What if a contract is signed with a contractor and the project is significantly delayed, like the parliament buildings? When Benjamin Franklin said “time is money” in his essay Advice to a Young Tradesman, he might have been talking about the construction industry, because delays on construction projects have consequences – usually including big bills.

Extra costs

The contractor has the extra costs of being longer on site through wages, hire costs, office overheads, financing costs, insurance and uneconomic working, plus lost profits in future work.

Subcontractors may have similar claims against the contractor and the client will so far have nothing to show for the money spent, except for a clause entitling it to deduct liquidated damages from the contractor. The big question then is: who is going to be responsible for all the bills?

“If the figures prove too great for the parties to do a deal they can justify, the scene is set for a dispute and a contractual postmortem involving a battle of the lawyers”

Was it variations to the works, the weather, faulty design or something else, or a combination of factors? What does the contract say about all this and who took the risk of the delaying events?

If the figures prove too great for the parties to do a deal they can justify, the scene is set for a dispute and a contractual postmortem involving a battle of the lawyers. Experts will be called in to review and discover when all the relevant programmed activities on the project were supposed to happen, when they were actually carried out and who was to blame.

But if, as so often, the records are not what they might be, it can be a painstaking, lengthy and expensive business. And in litigation or arbitration the loser usually pays a significant proportion of the winner’s legal costs.

Causes of disputes

There is, of course, adjudication, the statutory quick-fix interim dispute resolution machinery for use at any stage of the project. It is rough and ready but, unless the parties agree otherwise, ruthlessly quick: 35 days from kick-off to receiving an award that can be swiftly enforced by the court.

An unhappy party can still go off to court or arbitration to start again and get a final ruling but the majority of disputes seem to go no further. It can be unfair but it is cheaper, the parties usually bear their own costs and it seems to work.

And what are the most likely causes of disputes?

The Arcadis Global Construction Disputes Report 2016 identified the most common cause of disputes as failure to properly administer the contract, with the average length of a dispute at 15.5 months.

The 2015 report noted that “large programmes have a greater propensity to go wrong…. As the stakes get higher, so, too, does the associated risk”.

A 2009 article, Delusion and Deception in Large Infrastructure Projects by Bent Flyvbjerg, Massimo Garbuio and Dan Lovallo, described the record of private and public sectors in meeting large infrastructure cost and performance promises as dismal.

The BBC reports that an estimated £40m may be wasted if the Garden Bridge does not go ahead.

But if the £56m needed can be found to get the project to the starting gate, past experience warns us that great skill and care will be needed to bring the project safely home on budget, on time and up to specification.

Michael Regan is partner at Mayer Brown

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