Crossrail firms must stump up 50% of cost overruns

Aaron Morby 12 years ago
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Crossrail contractors will have to pay half the bill for any cost overruns on the £14.5bn project.

Procurement bosses at Crossrail are using target price contracts with tough pain or gain clauses to keep spending on target.

Under the NEC 3 contracts being used by Crossrail, tier 1 contractors stand to make 50% of any cost savings on target prices but will also have to dig deep to pay for half the cost overruns.

Martin Rowark, head of Crossrail procurement, told the Enquirer: “Target price contracts have been used to good effect on the Olympics and CTRL.

“We are using the same approach with a 50:50 pain and gain split, which we believe is a good incentive to control costs and deliver within the target price.”

On the Olympic site the pain and gain share is less onerous with contractors having to payout 20% of any cost overruns.

Rowark also underlined Crossrail’s commitment to making sure contractors and the rest of the supply chain are paid promptly.

Speaking to a National Specialist Contractors Council meeting in London, he confirmed that Crossrail intended to stamp out the use of retention payments in favour of a 2.5% retention bond.

He added: “Crossrail has a major focus on SMEs not because we’ve been told to but because we feel its the right thing to do”

Rowark said he would not allow any payment abuse in the supply chain and believed project banks accounts would help to ensure payments passed quickly down the supply chain.

Crossrail is also publishing a standard form subcontract, which it wants Tier 1 contractors to adopt to prevent onerous clauses being slipped into contractors’ in-house standard forms.

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