A problem PFI waste contract that has led to millions of pounds of losses for Costain is to be terminated by the Greater Manchester Waste Disposal Authority.
GMWDA confirmed that it intended to terminate its 25-year PFI waste processing deal with Viridor Laing, of which Costain is a subcontractor.
In January 2007 the joint venture between Viridor and John Laing was named preferred bidder for the £3bn PFI contract to deliver long-term waste management for the city.
As part of the deal, Costain was handed a £397m subcontract in 2007 to design, construct and commission 46 waste facilities across Greater Manchester.
The works have been beset with problems, including rectification work on a number of facilities across the contract.
Construction News reported earlier this year that GMWDA had raised concerns over the speed and quality of repair works being carried out by Costain.
In its 2017 half-year results the contractor reported that it had incurred losses of £15.1m from the contract.
The decision follows a meeting last week in which GDWMA’s management decided to take steps to end the contract early.
A spokeswoman for GMWDA said: “The Greater Manchester Waste Disposal Authority can confirm that at the authority meeting held on Wednesday 26 April 2017 it agreed to terminate its waste and recycling contract with Viridor Laing.”
The client will now carry out discussions with Laing and Viridor to agree on a deal to end the contract.
Discussions are also taking place between Costain and Viridor Laing in relation to Costain’s future work.
The contractor confirmed it would continue to fulfil the obligations under the contract until a further announcement was made.
Both John Laing and Virdor’s parent company Pennon has confirmed that it would be seeking compensation from the client and that there were provisions within the contract for this to be paid.
A trading update by Costain stated: “Costain has not been party to any discussions between the authority and Viridor Laing, but can confirm that discussions are taking place with Viridor Laing to consider the options in relation to Costain’s subcontract.
“A further announcement will be made when appropriate.”
A trading update for John Laing said: “John Laing continues to believe there will be a satisfactory resolution with the GMWDA and is working with its co-investors and the project companies to protect the value of the equity in the VL project and also to minimise any impact on Manchester Waste TPS.”
A statement from Pennon said: “Discussions and negotiations are now expected to progress over the coming weeks as we work with GMWDA to ascertain the implications.
“There are provisions in the PFI contract for compensation to be paid to Viridor and John Laing on termination.”