Babcock & Brown pays for faulty Ballast work

Babcock & Brown has lost millions of pounds on the Tower Hamlets PFI schools contract, said a source this week, largely because of the costs incurred in sorting out faulty work carried out by collapsed contractor Ballast.

The company set up Tower Hamlets Schools (THS), a subsidiary, through which it ran the project for the London Borough of Tower Hamlets.

Ballast plc was THS's asset management contractor, both for build and hard FM. Subcontractors on these projects are reported to be owed about £5m. They claim that THS still holds this money, having resisted pressure to hand it over to the administrator.

However, a source close to the project dismissed this claim. "Babcock is not sitting on the subcontractors' money," he said. "The reality is that it has lost millions of pounds. There is a bond in place, which might replace some or all of this.

"It paid an awful lot of money to Ballast, but after assessing the standard of what had been done, it found that the work will have to be ripped out and done again. Ballast's subcontractors are angry, but they should recognise that Babcock is also an injured party."

Operating as a project manager, Heery International has been given an interim award by THS, for stabilising and reprocuring capital works only. Heery had already been called in by Babcock & Brown before Ballast's demise because of problems with delivery and quality of work.

"We were already doing design management work," said a source, "but the writing was on the wall."
An alternative FM provider is also being sought.