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Waste Plant Project Cost Over-Run – Who Carries the Can?

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

Two companies, each of which claims the other should bear the heavy burden of a cost over-run during construction of a waste-to-energy plant, had to resort to the High Court to make sense of their respective contractual obligations.

Company A had employed company B to design the plant’s engineering elements. The former said that it had based its tender for the project on the latter’s initial design work. However, that design was modified as work progressed, resulting in the project costing substantially more than had been initially projected.

In making declarations as to the proper construction of the contract, the Court found that, to the extent that there were changes to the design which did not comply with the original specification, company B was, on the face of it, liable for the extra cost incurred thereby.

However, company B’s overriding duty was to design the plant using reasonable skill and care and it was only obliged to stick to the specification to the extent that doing so would not be negligent. The Court’s ruling provided parameters within which the dispute was expected to be ultimately determined by an adjudicator.

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