Nordic contractor, NCC, is suing the Swedish National Road Administration (NRA) for US$71.4M, in a dispute arising from the tunnelling work performed by NCC on the Southern Link highway project in Stockholm.
NCC was commissioned in 1998 to undertake work that included the blasting and shotcrete lining of tunnels, plus rock-reinforcement work. A total of 350 people were employed in the project, and final inspections of the work, earlier this year, produced very good results.
“It is unfortunate that a project that has been so successful in almost all respects, has to end up with such an extraordinary measure as a lawsuit,” Göran Svensson, Regional Manager at NCC Construction Sweden, said.
The current dispute involves the use of shotcreting as a method of lining the tunnel, which was decided and controlled by the NRA. After two months of work, NCC said it informed the NRA that the designed shotcreting was resulting in serious delays to the project, and that it believed this was the wrong method of sealing the tunnel. It also claimed that the consequent nine-month delay meant a substantial increase in NCC’s costs.
NRA believes it has no reason to refund costs. “We had a contract with NCC that outlined tunnelling methods,” Hans Rude, NRA’s director of the Stockholm region, said. “What they tell us now is that they have used another tunnelling method – one that was not pointed out in the contract. They haven’t followed the contracted methods. Other contractors used that method and didn’t have any problems.”
Following final inspection of the project, NRA also refrained from paying the value added tax that had accrued on previous payments made on account, despite the fact that NCC is legally obliged to submit a report of this tax to the state following final inspection. Value added tax accounts for US$26.9M of the total amount claimed. “We believe that the grounds for our case are very strong,” Svensson said.
The Road Administration argued that it has counterclaims against NCC in the form of penalties for delays. “We have in our contract, that they have to pay if there is a delay,” Rude said. “They should pay it because they haven’t finished the contract in the time specified. We cannot find any evidence that supports their claim.”
The original order was worth approximately US$75.5M, plus add-on orders worth about US$18.9M, that were received from NRA.
In its annual accounts for 2001, NCC wrote down the book value of the Southern Link project. NCC’s current assessment is that this write-down will prove sufficient.
Drill and blast construction on the other Southern Link contracts came to a close in August. The focus is now on completing the cut and cover works for the tunnels’ access ramps. The last to finish will be contract SL23, constructed by Skanska, to be completed in 2004.
