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DoE sues Tarmac over sale of PSA Projects
00:00 23 Mar 1995
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The Government is suing Tarmac Construction in the High Court over
the controversial sale of PSA Projects to the contractor in
December 1992.
A National Audit Office interim report into the sale published today reveals that financial disagreements between the DoE and Tarmac have dragged on for two years and are now the subject of legal action.
Tarmac says that the row could be resolved soon, but the DoE has refused to comment.
The Tarmac-PSA Projects deal was the subject of much controversy at the time with Labour politicians claiming the œ49.6 million given to Tarmac by the DoE as a 'dowry' to takeover PSA Projects was too much. An NAO investigation into the deal was set up.
The court action has arisen over the allocation of a œ10.5 million fund which was given to Tarmac to cover the liabilities of PSA Projects when its ownership was transferred. This sum was paid to Tarmac in addition to the œ49.6 million.
But the deal required this œ10.5 million sum be adjusted up or down after seven months once the true value of the liabilities were assessed. This adjustment has become the subject of the court row.
Today's interim report reveals that Tarmac prepared a 'completion statement' of the sale in June 1993 which was audited by accountant Ernst and Young for the DoE and was the basis for the adjustment of the œ10.5 million sum.
But following the accountant's report in September 1993, the DoE and Tarmac failed to agree the adjustment figure.
The NAO report says the sale agreement allowed for any dispute to be referred to an Independent Expert, but that the DoE was forced to take legal action to enforce the referral to the Independent Expert.
Steve Reding, md of Tarmac Professional Services, said that the deal had gone well but added: 'The computation of the balance sheet presented some problems which we have sought to resolve with the Government.
'The status of a particular document required legal clarification. This has been done and there is little to prevent us resolving the issues.'
Neither Reding nor the DoE would confirm exactly how much money was in dispute and the DoE would not comment on suggestions that a deal would soon be struck. 'The matter is in the hands of the court,' said a DoE spokesman.
The NAO report said it could not conclude its investigation into the deal until the legal battle was complete.
A National Audit Office interim report into the sale published today reveals that financial disagreements between the DoE and Tarmac have dragged on for two years and are now the subject of legal action.
Tarmac says that the row could be resolved soon, but the DoE has refused to comment.
The Tarmac-PSA Projects deal was the subject of much controversy at the time with Labour politicians claiming the œ49.6 million given to Tarmac by the DoE as a 'dowry' to takeover PSA Projects was too much. An NAO investigation into the deal was set up.
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The court action has arisen over the allocation of a œ10.5 million fund which was given to Tarmac to cover the liabilities of PSA Projects when its ownership was transferred. This sum was paid to Tarmac in addition to the œ49.6 million.
But the deal required this œ10.5 million sum be adjusted up or down after seven months once the true value of the liabilities were assessed. This adjustment has become the subject of the court row.
Today's interim report reveals that Tarmac prepared a 'completion statement' of the sale in June 1993 which was audited by accountant Ernst and Young for the DoE and was the basis for the adjustment of the œ10.5 million sum.
But following the accountant's report in September 1993, the DoE and Tarmac failed to agree the adjustment figure.
The NAO report says the sale agreement allowed for any dispute to be referred to an Independent Expert, but that the DoE was forced to take legal action to enforce the referral to the Independent Expert.
Steve Reding, md of Tarmac Professional Services, said that the deal had gone well but added: 'The computation of the balance sheet presented some problems which we have sought to resolve with the Government.
'The status of a particular document required legal clarification. This has been done and there is little to prevent us resolving the issues.'
Neither Reding nor the DoE would confirm exactly how much money was in dispute and the DoE would not comment on suggestions that a deal would soon be struck. 'The matter is in the hands of the court,' said a DoE spokesman.
The NAO report said it could not conclude its investigation into the deal until the legal battle was complete.
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