Bellozanne subcontractors 'will get their money back'

Friday 15 October 2021

Jersey businesses involved in the sewage treatment works upgrade will get the £250,000 owed to them back, despite the main contractor’s collapse, Infrastructure’s Director General has told Express.

NMCN fell into administration last Monday after struggling financially for more than a year, leaving local subcontractors concerned that they would stand to lose significant amounts of money. All work on the site ceased that day.

Further uncertainty arose when Galliford Try announced that it had bought the business’s water operations for £1m – but gave no update on whether it intended to take on the £75m Jersey project.

It was then announced on Wednesday that the Government was now taking steps to become the main contractor and would be engaging with firms already involved in the project.

Andy Scate, Director General of the Infrastructure, Housing and Environment (IHE) Department, told Express that the project was “around 60%” completed and that the Government was keen to continue to working with the companies already involved.

Local firms, he estimated, are currently owed around £250,000 by NMCN – a sum covering more than a dozen companies with payments ranging from “relatively small amounts” to one owed a “six-figure sum."

Pictured: Director General of IHE, Andy Scate.

He said these bills related to more than a dozen contractors, ranging from “a bit of office furniture and cleaning, to plant hire, materials movement”. 

He said that the Government’s contract with NMCN had been designed “to provide us with comfort and mechanisms to deal with non-payment”, including a provision that NMCN must pay local contractors before Government makes its main payments.

Mr Scate confirmed that NMCN had paid up until September, but had outstanding bills for October.

These, Mr Scate assured, would be chased by Government once “who is owed what” has been worked out.

But ensuring local contractors are paid won’t be all that’s needed to get them back on site working on the project once more – each individual contract will have to be renegotiated.

Mr Scate said he hoped that “existing arrangements” would be able to continue so that the overall project cost is not pushed up, but said that the Government was ready for higher sums to be demanded. 

“They may try that, we are braced for that. I think that’s life. But the reality is that most want to finish the job – they started it and they take their own professional pride in what they do,” he said, before adding: “But if people do push us, we will push back.” 

The collapse of NMCN and its impact on the Bellozanne project – which had already received a £1.5m boost over summer to stop further “programme slippage” – had led to questions from States Members about how closely Government had been keeping an eye on the issue. 

Mr Scate was clear that the Government had been monitoring NMCN’s activity “since autumn 2020”, noting the resignation of its Chief Executive as a particular alarm bell.

As a result, he said Government had meetings with NMCN’s management and Finance Director “on a number of occasions”, where they received assurances that the company was “seeking to refinance”. 

“We had been hearing a lot of messages in the industry that they were quite hopeful of refinancing – sometimes you do see companies taking a different direction. We were being given some comfort through those conversations, but it didn’t work and as a result they’ve gone into administration,” he said.

However, he said that “good tracking allowed us to think about what we would do [in the event of the company failing].”

The Government had also been challenged on the initial procurement process that led to NMCN being appointed in the first place. 

A report in industry publication Construction Index suggested that the Bellozanne project was one of two “problem contracts” in NMCN’s struggling water operations. It was suggested that the project was overly ambitious for a company of NMCN’s size.

Mr Scate, however, expressed confidence that the Government’s process was “robust”, noting that they had gone through a “pre-qualification questionnaire approach” in which NMCN “came out very well."

He noted that “due diligence was done on financial strength at the time” and that “all indications were that the company were certainly able”, with NMCN at the time having shon “growth in its business and positive trends”. 

“It’s a lesson for all companies looking into the future, sometimes you can’t predict what’s going to happen.” 

Mr Scate said it was unlikely that NMCN’s collapse would spark any changes in the Government’s processes for procurement and contract design in advance of Jersey’s largest ever capital project, the £800m new hospital. 

“Nothing has indicated that there’s anything wrong with our process. We have a good commercial team here with experience in the construction industry and other sectors,” he said, describing NMCN’s collapse as “just an unfortunate event”. 

While the Government itself is not an expert in managing major water projects, Mr Scate said he was confident that there was already enough expertise among the contractors already involved to continue progressing the project, which he said he expected would continue to be ably led by existing Project Director Selva Selvakumaran, who was specifically employed by Government to work on the scheme. 

He also justified Government’s decision to absorb the project due to the “delay” that could result from searching for a new main contractor. 

“We could pause, we could try and retender, but that would invariably mean delay. Costs will go up. There could be inflation in the construction industry. And there’s no guarantee we’d get a contractor interested. We think the most sensible route as an island is to take the approach ourselves.”

Over the next 12 to 13 weeks, he said Government will be initiating conversations with NMCN’s administrators to ensure that, if any additional costs have been incurred as a result of its collapse, that money is recouped. 

“If we’ve incurred costs, we’ll be making that case very strongly.” 

There is one more primary settlement tank to construct, before the project moves into “a lot more detail around mechanical and electrical workings.”

Then a process of quality assurance – in other words, “making sure everything is working” – will begin. 

While NMCN has collapsed, so won’t be able to be held to account for any failings should they arise, Mr Scate confirmed that “the contract has various bonds associated with it”, including one that can be “called upon for defects”.

While he was unable to quantify its exact value, he said it was at “million-plus levels”, meaning that it would be able to deal with any substantial difficulties. 

Expressing optimism about the project, Mr Scate said he expected that the main works should be completed in 2023.