The £3bn dualling of the A9 between Perth and Inverness will be delayed after only one bid was received for a key section of the project.
The scheme – one of the biggest infrastructure projects in Scotland – was originally scheduled for completion in 2025.
However, the Scottish Government said that timetable was “no longer achievable” after it became clear that the contract to widen the 9.6km stretch between Tomatin and Moy, a project worth an estimated £115m, could not be awarded.
Only one bid had been received from among the three shortlisted firms – Balfour Beatty, Graham and Willis Bros – to carry out the work and it was “significantly higher than expected”, transport minister Jenny Gilruth told the Scottish Parliament yesterday.
“Following careful consideration of the tender, the price of which was significantly higher than expected, even allowing for the real-world impacts of the volatile economy, ministers have concluded that an award of the contract at this time would not represent best value for the taxpayer,” she said.
The decision had been a difficult one, but “the only responsible one to take” in the circumstances.
“At any time, but particularly in the current climate, protecting public finances is an essential part of responsible government,” said Gilruth.
The three companies were invited to participate in a procurement exercise at the end of 2021, with final tenders due for submission last October.
Gilruth blamed external factors including the pandemic, disruption caused by Brexit and the war in Ukraine for the lack of viable bids.
“The inflationary impacts of all of those factors impacted significantly on the construction market,” she said.
Reaffirming the Scottish Government’s commitment to upgrading the Tomatin to Moy section, she said the necessary preparatory steps were already being taken by Transport Scotland to retender the contract, including an assessment of the current approach to risk transfer.
“Work has begun to update the contract terms, and work will continue on preparations for the new procurement for Tomatin to Moy with the firm aim of achieving a contract award before the end of this year,” she said.
As part of the retendering process, Transport Scotland will engage with representatives of the construction industry, including the Civil Engineering Contractors Association, on how elements of its standard terms and conditions for projects of this kind could be modified to make them more attractive to bidders, Gilruth added.
“If we need to change the way in which Transport Scotland approaches those projects, that will of course be looked at, because we need to make sure that we attract as much opportunity for investment as possible and that bidders are not put off by the process,” she said.
“It is fair to say that, in recent years, there has been a decline in the number of tenderers, and we understand from industry contacts that is largely due to the terms and conditions that are in our contract, including risk transfer.”
That approach will be reassessed in the light of current market conditions, she said.
“We will look carefully at how we can get the best balance between achieving cost certainty and making our contract attractive to the market by looking at appropriate risk allocation – which is fundamentally important – as well as looking at the role of contracting parties and improving collaboration between Transport Scotland and the contractor.”
The project to upgrade 80 miles of single carriageway on the A9, a crucial link between the Scottish lowland and highland, has been split into 11 sections, of which two are now complete. Ministerial decisions to complete the statutory process have been taken for eight of the remaining nine.
An announcement on the preferred route for the final section, from Pass of Birnam to Tay Crossing, is expected in the spring.
Last month it emerged that Solihull Council, in the West Midlands, had to extend a building-services contract held by Graham after its terms were deemed “unusual and unappealing” by contractors during an attempted procurement process.