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M5 (Contract)

Volume 932: debated on Wednesday 25 May 1977

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asked the Secretary of State for Transport what action he has taken to ensure that only amounts properly payable are included in the final account for the Gloucester to Cheltenham contract of the M5, and to seek compensation from Messrs. Freeman Fox and Partners for the additional cost to his Department arising from investigation of the matters reported in House of Commons report HC18.

The matters requiring investigation were shown by HC18 to have involved no question of corruption or fraud, and I should like to take the opportunity for re-emphasising this. It is also appropriate to recall the strongly expressed wish of the then Department of the Environment that part of the works under the Gloucester to Cheltenham contract of the M5 which would effectively permit Tewkesbury to be bypassed should be completed in 12 months in time to handle the summer traffic of 1970, and that the fact that this was achieved reflected credit on all concerned, not least Messrs. Freeman Fox and Partners.When Messrs. Freeman Fox and Partners saw HC18 on its publication and presentation to the House they considered that certain of the Report's findings were inconsistent with the facts as known to them. Discussions were held between Messrs. Freeman Fox and Partners and the Department of the Environment—now Transport—and a number of points were raised by the firm and re-examined with the assistance of Messrs. Corderoy. The outcome of these processes, as agreed between my Department and Messrs. Freeman Fox and Partners, is as follows.First, Messrs. Freeman Fox and Partners explained that the "Final Account" referred to in HC18 was in fact a draft which they prepared in December 1974 to assist the investigation and which would be subjected to detailed scrutiny before forming the basis for certifying the Final Account due to the contractor. The result of the firm's checking is that £27,809 of the apparent net overbilling of £41,662 summarised in Appendix B of HC18 is properly payable under the terms of the contract and that the net balance of £13,853 will, therefore, not be certified and will be excluded from the Final Account.Secondly, at my Department's suggestion Messrs. Corderoy compared the information concerning early payments with that of other payments which could be considered to have been delayed under the terms of the contracts rigorously applied. From this work my Department has concluded that it has not incurred additional cost in the discharge of the contract.Thirdly, Messrs. Freeman Fox and Partners will adjust the Final Account to allow for revalution of Claim 18, which they agree they undervalued by £11,862.Fourthly, they have also agreed to examine an alternative valuation of Claim 14 which is now being prepared, and to discuss any differences between this and their own valuation with the Department with a view to making any last adjustment to the Final Account which may be necessary for this reason.The investigation has imposed costs on Messrs. Freeman Fox and Partners as well as upon the Department. For the Department the question is how far it is justified in calling upon the firm to pay the fees due in Messrs. Corderoy. Many aspects of the matter which have been investigated have proved to be within the scope of discretion exerciseable by Messrs. Freeman Fox and Partners under the contract. On the other hand, the firm accept that there were two exceptional grounds in this case for calling upon them for a payment: first, because the investigation resulted from a disagreement between the firm and its measurement engineer on this contract, thus involving expenditure in fees to Messrs. Corderoy; secondly, because work done by that employee when he was within the firm on salary reimbursed by the Department had to be duplicated for the purpose of the investigation by other employees of the firm whose salaries were similarly reimbursed.

Accordingly, Messrs. Freeman Fox and Partners have agreed to pay to the Department the sum of £33,353 comprising a 50 per cent. contribution towards Messrs. Corderoy's fees for these studies and £13,500 being the cost of the reimbursed salaries involved in the duplicated work.

In the light of thorough investigation which has been conducted by Messrs. Corderoy with the full co-operation of Messrs. Freeman Fox and Partners and all others concerned, I regard this outcome not only as fair to the contractors and to my Department but also as creditable to Messrs. Freeman Fox and Partners.