Council demands ‘bond’ back for £4million Leeds cycle superhighway contract after Carillion collapse

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LEEDS Council has announced it is “calling in” contingency measures it had put into place to protect public funds in the event of the collapse of failed contractor Carillion - which was already building one multi-million pound flagship project in the city and in line to work on another.

The collapsed firm had won a competitive tender for the city centre cycle Superhighway City Connect 2, (phase 1) contract in October last year.

However the council confirmed the contract was subject to receiving an ‘On Demand Bond’ from a major bank in the event of Carillion Construction Limited going into liquidation.

Leeds City Council chief executive, Tom Riordan, said: “As part of the original contract for work on the Superhighway City Connect contract we made sure that public funds were protected by making it a condition that a bond was woven into the Carillion contract in the event of the contractor becoming insolvent.

“Consequently we are in contact with the bank, HSBC, who provided the bond to confirm that Leeds City Council are calling-in the payment of the guarantee.

“We are also contacting the Official Receiver to let them know that as Carillion Construction Ltd has had a winding up order made against it, Leeds City Council are terminating the contract with them. The council is arranging to use our own staff and sub-contractors to make the site safe and do any necessary work so the highway can be reopened.”

The YEP reported earlier that Carillion had also won the contract for the East Leeds Orbital Road, a major link road in the city.

However, the authority insisted last week that the final contract had not been awarded and the council is now looking at options to secure an alternative contractor or re-tendering.

Less than a quarter of the £4m of work on site had been completed on the cyle superhighway.

Across the UK, Carillion had public sector or public/private partnership contracts worth £1.7bn, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 army base homes for the Ministry of Defence.

But it has seen its shares price plunge more than 70 per cent in the past six months after issuing a string of profit warnings and breaching its financial rules. The group, which employs around 20,000 British workers, has been struggling under £900m of debt and a £587m pension deficit.