Costain settles troubled Heads of the Valleys contract

Costain has reached a settlement with the Welsh government over its troubled A465 Heads of the Valleys contract, the firm has announced.

In September last year, the contractor said it would include a charge of £45m in its half-year results to 30 June after it lost an arbitration decision over the job.

Now Costain has announced that the financial terms of its new settlement are in line with that provision.

It said: “As a result of the settlement, the company has certainty of the final account sum payable by the Welsh government to the company, including further milestone payments.”

The settlement ends a long-running dispute over the contract. Costain initially won adjudication awards over project, having entered into the contract in 2015.

However, the Welsh government escalated a specific matter under the dispute resolution mechanism in the contract relating to the responsibility for design information for a specific retaining wall and whether it qualified as a “compensation event”.

The arbitrator’s decision, which emerged in September 2020, found that responsibility for the design information rests with Costain and, consequently, the additional costs associated with the building of the retaining wall is not a compensation event under the contract.

Costain said it would complete the job by September 2021. It remains responsible for the delivery and management of associated risks of the remaining works.