DBFO shocks in store

In the week in which the Department of Transport announced the shortlists for the next tranche of DBFO road schemes, contractors tendering for the first four schemes are becoming increasingly worried that sky high prices could scupper or seriously delay them.

The high prices have come about because of the need for contractors to price all risk associated with the schemes over a 30-year period. One firm described the tendering method as a 'lottery'. 'You can put in a very competitive construction bid but still be undercut by another firm gambling on the risk element associated with the job,' said a senior estimator.

One top contractor, who wished to remain anonymous, said: 'The conforming bids will probably come in too high and will be heavily qualified. I think the Highways Agency will get a nasty shock when they see the figures. You have to ask what it is they are trying to achieve by loading all the risk onto the private sector? Does anyone really believe the roads will be any cheaper to build or manage? What should be addressed is who can best afford and manage the risk - in this case it's got to be the Government as they are the paymasters.'

Another said: 'The schemes are bound to come in more expensive. On average schemes have a 30% higher out-turn, often caused by bad ground conditions. The DoT is a self-insuring body that can spread these costs over a number of projects. A private sector group bidding for one project and taking on all the risk has got to budget for the worst case scenario which makes it more expensive.'

Several contractors privately expressed considerable cynicism over the way the Private Finance Initiative is being run. One observed: 'I don't think the Government will be at all worried if the high prices slow up the DBFO roads programme. It all helps to keep expenditure down.' See story on P.2.