Contractor BAM suing national children’s hospital board in €20m costs dispute

Main contractor on hospital project lodges High Court proceedings

The site of the new national children’s hospital in Dublin. File photograph: Dara Mac Dónaill

The site of the new national children’s hospital in Dublin. File photograph: Dara Mac Dónaill

 

The main contractor on the new national children’s hospital project, BAM, is suing the hospital’s development board in a €20 million costs dispute.

Proceedings were lodged in the High Court on Wednesday by BAM Building Limited, against the National Paediatric Hospital Development Board (NPHDB).

It is understood the High Court proceedings followed the exhaustion of a mediation process mandated under the development contract.

Only a handful of the hundreds of claims for additional costs at the project have been resolved, and it is thought the claim at the centre of the High Court action may be the first of several significant claims to come through the conciliation process.

Both BAM and the NPHDB had no comment on the case when contacted. However, it is understood the dispute relates to extra costs which the contractor claims it is due as a result of delays caused by incomplete design and incomplete design information.

The NPHDB has previously rejected the claim of incomplete design, made by BAM. In a statement released earlier this year, it argued that there has been “no material change” in the design of the new children’s hospital since the GMP (guaranteed maximum price) was agreed with the contractor in December 2018.

The issue is understood to have been referred to the conciliator under the contract’s dispute resolution mechanism. Industry sources say the conciliator adjudicated in favour of BAM, but this was rejected by the NPHDB.

The company is seeking approximately €20 million in payment which sources say was awarded after the resolution process. It is understood this sum equates to about 45 per cent of the original claim. If successful, the High Court challenge could result in the full original claim being awarded - although it may also be revised downwards. It is understood the award covers a period of around 41 days during a two-year period across 2019 and 2020, although the original claim was for a longer period. Under the contract, the €20 million sum will be released to BAM arising from the High Court case, if the company posts a bond. If the challenge is unsuccessful, the contractor will have to repay it.

A spokeswoman for the NPHDB said: “As this matter is now subject to High Court proceedings and, so not to prejudice those proceedings, the NPHDB will not be providing any comment.”

Additional costs

Last year saw a similar case lodged, albeit by the development board against BAM.

That case related to the legality of an instruction to move to phase B of the project – however, the new proceedings relate to a dispute over costs.

The Public Accounts Committee (PAC) was updated on the project earlier this year, and was told by the NPHDB that contractor claims for additional costs have hit about €300 million. That covers about 700 claims. The final sum to be spent on the hospital is expected to be about €1.7 billion, with construction costs set to compose €1.4 billion of that.

The hospital was supposed to be completed by August 2022, but that has been pushed back to October 2022 due to the shutdown of the construction industry during the Covid-19 lockdown. However, the PAC heard earlier this year that the delays could be more significant than that.

David Gunning, the chief executive of the NPHDB, told the PAC that it is currently withholding 15 per cent of payments due to its stance that a compliant programme of works illustrating BAM’s approach to delivering the new hospital is supplied.

PAC also heard allegations that the main contractor was not advancing the construction due to “under resourcing”, and that BAM is “underperforming”.

BAM has previously said it rejects any accusation that it does not resource the project correctly or is underperforming.

Last year, the NPHDB told the Oireachtas Health Committee that it considered terminating its contract with BAM at the height of a bitter dispute over the company’s refusal to resume work on the site after Covid-19 restrictions were eased last summer.