When Darlington Borough Council opted to delay core town centre reconstruction work in October 2005, it hoped to help the town’s hard-pressed shopkeepers in the run-up to Christmas.

Instead, the authority was putting in place a chain of events that would leave taxpayers facing a massive bill. A confidential report by solicitors Ward Hadaway for the council, which has been obtained by The Northern Echo, reveals what went wrong. Nigel Burton reports.

Question: What is the background to this case?

Answer: Darlington council appointed planning consultants Gillespies to develop a new vision for the town centre in September 2003. Controversially, the plan called for the town’s famous High Row to become a pedestrian precinct.

This scheme came to be known as the Pedestrian Heart, and in July 2005 the authority appointed Birse Civils Limited as the main construction contractor.

The project hit a major problem in January 2006 when contractors hit a cast iron gas pipe.

A few weeks later, councillors approved funding to divert the gas main. This added £780,000 to the final bill The entire scheme, which was originally budgeted at £6.9m, eventually cost £9.22m.

Q. Why did the accident, and subsequent delays, leave the council with such a massive bill?

A. Because of the contract between Darlington council and Birse. The authority had signed a deal that said it would receive 90 per cent of any savings if the scheme came in under budget.

Crucially, however, the deal also left the authority liable for 90 per cent of any cost overruns.

The report says: “It is not known precisely how the decision was made to use the same percentage on either side of the target sum. The percentages are frequently different with... overrun costs being predominantly at the contractor’s risk.”

Darlington council hoped it could bring the scheme in under budget by omitting areas of work if necessary.

But when the scheme exceeded its budget, and the costs started stacking up, the authority found itself responsible for 90 per cent of the massive extra bill.

Q. Couldn’t the council have reduced the cost of the scheme by scaling back on non-essential works as it planned?

A. The report says: “We are told... that the council... delayed core works until after Christmas because of their potential impact upon Christmas trading, but that they nonetheless required a start to peripheral works.” Hopes of avoiding overruns by omitting non-essential work “became inoperable once the decision was made… to begin work on the peripheral areas rather than to adhere to the planned path through the main pedestrian area.”

Q. Why didn’t the contractor know the gas pipe was there?

A. A radar survey was carried out in 2004 and some bore holes dug to check for unexpected obstacles. However, a hole was not sunk in Prospect Place, where the gas main was encountered. There was nothing to suggest it was a risk location.

Q. Why replace the entire gas main? Why not just patch it up?

A. According to the report the pipeline did not require immediate replacement.

But, as the pipe was very old, the authority opted to bite the bullet and replace it all.

The report adds: “This decision was taken in the context that the pipe would require replacement within the foreseeable future and the council were reluctant to see the (pedestrian heart) disturbed and dug up, possibly soon after its completion.”

However, because the gas main did not require immediate replacement, the council could not share some of the cost with the public utilities.

Q. What about the paperwork?

A. The report says: “Despite the concerted efforts of the council officers instructing us, very little information has been forthcoming from the council’s own files recording their involvement in critical decisions. The facts had to be pieced together from third party accounts… based very much on memory rather than actual record.”

Although Gillespies were selected as lead consultants in 2003, the report adds: “What is apparent is that no appointment was, in fact, finalised and executed by the parties.

The absence of a signed contract is not helpful…”

Q. What does the report recommend?

A. It concludes that a legal bid to recover compensation from Gillespies would be extremely expensive and disproportionate to the probable prospects of success.

The council has been urged to invest in a training programme so its technical staff have a better understanding of engineering contracts.

The report says: “The whole ethos of the contract is based upon joint proactive working to anticipate and avoid risks.

It is certainly not a contract which permits the employer merely to observe the contractor without active direction and intervention.”