Ministers face compensation claims bombshell as £1.2bn Aberdeen bypass scheme costs soar

MINISTERS are facing a wave of compensation claims estimated at up to £100m in a land grab for one of Scotland’s biggest road schemes whose £1.2bn cost is up to four times an original budget, the Herald on Scotland can reveal.

In what is considered a test case for other multi-million-pound claims, Scotland’s Rural College (SRUC) has won a legal fight with ministers over its £24m compensation claim for land taken from them which they argued would have been used for a lucrative housing development.

It comes as sources from contractor Balfour Beattie have revealed that the 36-mile Aberdeen bypass project which only fully opened in February, 2019, after a series of delays, saw costs soar to £1.2bn – more than double an initial contractor cost.

The Herald on Sunday can reveal that the final cost is actually up to four times more than the original Scottish Government budget put at between £295m and £395m in 2005.

And while the bypass only fully opened in February, 2019 – it has emerged that is some eight years later than originally scheduled by Transport Scotland.

The Private Finance Initiative (PFI) scheme has been riddled with problems with executives from co-contractor Carillion blaming the scheme as one of the reasons for its financial implosion in 2018.

The Herald understands there are currently 63 outstanding compensation claims to the Lands Tribunal for Scotland in relation to the 1400-acre Aberdeen Western Peripheral Route (AWPR) scheme.

According to official documents seen by the Herald on Sunday, as of December, 2018 the Scottish Government had received 209 claims from landowners who were the subject of a compulsory purchase order over the bypass.

The estimated total compulsory purchase order (CPO) budget for claims at that point was put at £127.7m.

It is understood that in 2019 of the £102.6m paid out – £83.4m were not the result of CPOs, but voluntary purchases.

It has emerged that judge Lord Woolman has rejected a bid by ministers to quash the compensation claim from the SRUC over 81 acres of their land at Craibstone Estate, about five miles from the centre of Aberdeen, thrown out.

HeraldScotland:

The Scottish Government has been fighting a decision by the Lands Tribunal, which has jurisdiction over property in Scotland, to find in the SRUC’s favour – and a hearing over valuation of the financial loss was being planned. It is understood that the decision means that hearing will now continue.

The SRUC are claiming £22.8m for loss of development value, £500,000 for ‘injurious affection of the retained land’ and a further £75,000 for disturbance.

It argued that if had not been for the land grab, they could have developed at least an additional 320 homes on the land.

And it argued a breach of the European Convention of Human Rights “guaranteeing the right to peaceful enjoyment of property”.

But ministers have made a failed bid to appeal the tribunal decision in the Court of Session arguing that the AWPR arguing that they were not due to pay compensation because the land the SRUC retained had benefited from the scheme.

They used legal precedent which states that a landowner cannot claim compensation when the value of the property has risen by the very scheme which prompted the land grab.

But in arguments put to the tribunal, SRUC said: “On the face of it the [ministers] were required to pay the open market value for the land taken as at the date of acquisition.”

The land grab came in 2013, despite objections and ministers argued that it was needed for a bypass that would “improve access to and around Aberdeen, improve transport efficiency and support the industrial areas in the city and the area to the north and west of Aberdeen”.

Ministers argued that the tribunal reached an “irrational and illogical conclusion” in deciding that the acquired land would have been allocated for housing development.

HeraldScotland:

Transport Scotland’s plan leaflet

But Lord Woolman said that the tribunal’s decision was “logical and reasonable”.

He stated: “We understand that a number of other claims are pending before the tribunal and that this is a test case.”

A peripheral route around the Granite City was first considered back in the 1950s but it took several decades for serious planning to get out of first gear.

In January 2003, the then first minister, Jack McConnell, announced plans to build the AWPR to ease congestion by creating a fast link to the north, west and south of the city.

The news was broadly welcomed by business and council leaders But it has been a project beset with problems and obstacles.

The road was built under a Private Finance Initiative (PFI) scheme by Aberdeen Roads Limited (ARL), originally a joint venture between Balfour Beatty, Carillion and Galliford Try in a design, build, finance and operate contract for the Scottish Government’s Transport Scotland agency, Aberdeen City Council and Aberdeenshire Council.

The scheme had to be redrawn in 2005 after objections by residents about an earlier route and was given final approval by then finance ministers John Swinney in December 2009, following a public local inquiry a year earlier.

Preparatory work for the bypass began in August 2014, and construction began in February 2015.

Campaigners went all the way to the Supreme Court in 2012 to get it scrapped but failed.

Construction finally started in 2015, six years after being formally approved in 2009.

Problems also included delays caused by bad weather from the Beast of the East in 2018 which slowed construction.

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The original timetable

There were also technical issues with the River Don Crossing which delayed the opening by around 13 months.

The worst flooding in the region since records began also hampered work.

But the most significant impact on the project was the collapse of Carillion at the beginning of 2018.

In January 2019, Scottish transport secretary Michael Matheson said his government would not “pick up the tab for mistakes made by construction companies” after the bypass missed a December 2018 deadline.

Galliford Try and Balfour Beatty were obliged to complete the rest of the contract with funding shortfalls resulting from Carillion’s liquidation shared equally.

After lengthy discussions with Transport Scotland both Balfour Beatty and Galliford Try agreed to respective £32m cash settlements to cover additional costs on the job at the end of 2019.

Galliford Try said the settlement brought “to a conclusion a complex and challenging project, averting a lengthy and costly litigation process”.

A Transport Scotland spokesman said it reached a “strictly commercial settlement with no admission of liability by either party”.

Galliford Try was forced to put out a series of profit warnings, leading to the eventual break-up of the firm with its housebuilding business being picked up by Bovis Homes at the start of 2020.

Last month, Balfour Beatty sold its stake in the bypass which chief executive Leo Quinn said had cost the team building it £500m more than it should have.

He has said that Balfour lost £200m on the scheme with the £533m cost, signed as a fixed-price lump sum deal, ending up more than doubling in price.

While striking the £32m settlement last year, Balfour Beattie retained a stake in the PFI which it has now sold to Luxembourg-based investment firm BBGI Global Infrastructure.

Housing developer CALA had been chosen by SRUC as the developer for surplus land following a formal agreement 15 years ago.

Its assessment was that unlike some housing sites, Craibstone was not reliant upon the completion of bypass.

Chartered landscape architect James Welch who acted as an adviser for SRUC told the tribunal that without the by-pass, a further 320 homes would have been added to the 700-house scheme.

Legal documents seen by the Herald show that the SRUC felt that the additional 320 houses on the land grabbed property was a “conservative estimate” of the numbers that might be accommodated there as it was based on relatively low density housing proposed and promoted by CALA.

Ministers argued that without the bypass it was “unlikely” grabbed land would have been used for housing development at the time or have received planning permission.

But the tribunal said: “We find the acquired land would have been allocated in the LDP [local development plan] for 320 houses, in addition to the allocation on the retained land.”

Keith Petrie, of commercial property consultants FG Burnett Limited said that it had been advising and continues to help “many property owners and occupiers” that have been affected by the Aberdeen Western Peripheral Route (AWPR) for several years including SRUC.

“Accordingly, you will appreciate that, set against this background, it would be inappropriate for either my company or I to provide you with any comment,” he said.

An SRUC spokesman said: “The claim is ongoing and it is therefore inappropriate to comment further at this stage.”

A Transport Scotland spokesman said: “Discussions with Scotland’s Rural College on compensation are continuing so it would be inappropriate to make any further comment at this stage.”

The source added: “Owners of land purchased for the AWPR scheme will receive fair compensation, independently assessed by the district valuer. As for any of our major road projects, anyone claiming compensation has the right to take their case to the Lands Tribunal if they disagree with the compensation offered.”

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992