HC Deb 22 May 1975 vol 892 cc525-7W
Mr. Ioan Evans

asked the Secretary of State for the Environment whether difficulties have arisen over the completion of his road contracts because of the fixed price nature of the contracts; and if he will make a statement.

Mr. Mulley

A serious situation has arisen in connection with the completion of a number of current motorway and other trunk road construction contracts undertaken by W. & C. French (Construction) Ltd., most of which are on a firm price or limited variation of price basis. A full list of the contracts concerned is given below.

It has become apparent that without special assistance the contractor would be unable to complete these contracts, on which about £40 million worth of work remained to be completed at 1st March last. In view of the very large additional costs to public funds of having the work completed by other contractors the Government decided in November 1974 to make an ex gratia payment of £3.5 million to the company, conditional upon a review at the end of 1975. In the light of the evidence available at that time such a payment appeared necessary and sufficient to enable the company to complete the contracts.

However, subsequent forecasts showed that more money was required. Interim payments of up to £3.75 million were authorised to enable work to proceed while the position was fully investigated with the assistance of an independent firm of accountants, and it is now evident that a further amount of up to £6.75 million may be required to enable the contracts to be completed. An assessment of the additional costs which would be incurred in securing the completion of the current trunk road contracts by other contractors if, for lack of further assistance, W. & C. French (Construction) Ltd. were unable to continue trading and to complete them has shown that these would still greatly exceed the total amount of assistance needed to enable French to complete them.

In view of this, and after taking into account the total trading situation and prospects of the company, as well as those of the holding company, French Kier Holdings Ltd., and its other subsidiary companies, the Government have decided that it would be in the public interest, in order to ensure the completion of these important trunk road contracts at the least possible additional expense to public funds, to make the further money available to the company under the powers of the Highways Act 1959. I intend, therefore, to provide a further ex gratia grant of £2.25 million and will also be prepared if necessary to make avilable thereafter a loan of up to a maximum of £4.5 million, subject to the following principal conditions:

  • payments will be made in appropriate instalments, as may appear to be necessary;
  • loan payments will attract a rate of interest 1 per cent. higher than that charged to the company by its bankers;
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  • my Department shall have a right to convert any amount of loan outstanding after 31st December 1976 into shares in the holding company—the exercise of this option could lead to a holding of up to 28 per cent.—and to nominate a director to the board of the holding company;
  • no funds may be transferred from the construction company or the holding company to other subsidiary companies in the group without the Department's consent;
  • the Department shall have the right to monitor closely the financial position of the holding company and its subsidiaries;
  • if the eventual loss on the contracts is less than the forecast loss, half the difference between the two amounts shall be repayable;
  • the company will abandon a large volume of claims against the Department which if pursued to settlement would result in very substantial payments.

It is now for the company and French Kier Holdings Ltd. to ensure that the contracts are duly completed on the basis of this assistance.

  • M23 Bletchlingley-Pease Pottage
  • M18 Thorne-East Cowick
  • M62 Pollington-Rawcliffe
  • A69 Horsley-Hedon-Throckley
  • A406 Waterworks Corner
  • M23-Hooley-Merstham
  • M25 Reigate-Godstone (including M23-M25 Interchange)
  • A47 Kings Lynn bypass
  • A45 Stowmarket-Claydon bypass
  • M11 Redbridge-Loughton
  • M23 Gatwick Link and A23 Improvement
  • A12 Ufford and Wickham Market bypass
  • A127 Halfway House Flyover
  • A3 Esher bypass
  • A108(A19) Hylton Bridge
  • A78 Irvine bypass

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