UP to £40 million could be at stake in the legal dispute between Herefordshire Council and its former major contract partner Amey.

This morning (Wed) the Hereford Times revealed that both parties were at odds over a “high value and complex” dispute.

Now, the Hereford Times understands that two disputed items alone could be worth up to £30 million.

Other claims could take the total at stake to around £40 million.

The disputes stem from a contract variation made in 2010.

Amey broke off long-running negotiations with the council last month to take the dispute to Adjudication.

As a result, the council is having to draw on its £3.5 million risk mitigation reserve to protect related rights and interests.

A closed doors decision taken this week also allows for the council to appoint specialist professional, legal and technical support without going to tender.

The council is not outlining the extent of issues or sums involved saying such information is exempt under the Local Government Act 1972 and could be subject of a claim to “legal professional privilege”.

At issue are the contracts the council had with Amey that ended in August 2013.

Over 30 separate areas of dispute remain between the parties and have been under negotiation.

In January, Amey broke off negotiations and referred four matters to Adjudication.

Three of those referrals will be determined as a consolidated matter by one Adjudicator.

A fourth, however, is of high value and complexity and has been referred to a different Adjudicator.

The Hereford Times understands that Amey and the Council are very far apart in their  respective views on the disputed issues.

Council papers identify the need for “specialist barristers and technical experts” to present its case.

It is still possible that further Adjudication Notices or other legal proceedings may be issued by either party.

 Advice from counsel and other technical experts is said to “strongly support” the stance taken by council officers in resisting Amey’s claims and the potential for successful counter claims.

Behind the scenes, though, there is concern at the extent of resources needed to protect the council’s legal rights.

But top council managers and senior political leaders have been warned of a “significant risk” that Amey’s claims could succeed by default without the deployment of appropriate resources.

The release of  funds from the risk mitigation reserve was signed off this week by Cllr Patricia Morgan, cabinet member for corporate services.

This  decision was taken without reference to a committee but could still be called in by scrutiny.

With the decision comes an “overarching” exemption to the council’s contract procedure rules to appoint specialist professional, legal, and technical support without going to tender.

A special project team has been set up to manage the disputes with Director for Economic, Communities and Corporate Geoff Hughes as Project Executive.

Though the council is claiming exemption from disclosure of the financial resources required, it does say that the level is “considered appropriate” to ensure that the disputes are dealt with effectively.

In 2013, the Hereford Times revealed that more than £3 million of “disputed items” remained to be resolved when the council ended its service provision contract with Amey.

Then, the council was warned of the potential risk these disputed items presented to budget planning.

Some of the impact, however, was identified for absorption  within the 2013-14 budgets managed by Amey through the managing agent contract agreement formed out of two contracts renegotiated in 2009.

In total, the council paid £38.5m to Amey Wye Valley over 2012-13 – up from £32m in 2011/12.

Subsequent council budget papers revealed the disputed items risk. Following the adjudication of a sample of disputes earlier that year,  talks were underway between the council and Amey to evaluate the impact of this ruling.

Then, the council expected some £885,000 of income from Amey – for  which provision had been made in the previous years’ outturns – and an additional expectation of £166,000 for the five months to that August.

Earlier in 2013 Amey missed out on the council’s £200m public realm contract  covering highways, parks, street cleaning and street lighting.

The contract went to Balfour Beatty.

Public realm was one of the council’s first private sector partnership initiatives.

In 2003 the council entered into a contract with national construction and engineering firm Jarvis PLC for the provision of contract services worth around £13m a year over 10 years.

The contract involved establishing a joint venture company called Herefordshire Jarvis Services (HJS) with staff transferred over from the council’s former commercial services arm.

Just a year later Jarvis saw its share price plummet and started talking about breaking up the company to survive.

A proposed sale of HJS that all parties came to rely on fell through and the council had to prepare contingency plans to keep key services running until Amey agreed to buy the 80 per cent share Jarvis had in HJS with the council keeping its 20 per cent.

Amey Wye Valley took over the contract in August 2007 and soon had to cover much of the £2m plus HJS was found to owe sub-contractors, suppliers and other creditors, a debt that caused considerable tension within the county’s business community.

In 2009 elements of the council’s two contracts with Amey – the other entered into after a company providing the council with technical services was taken over by Amey – were re-negotiated to form a single managing agent contract through which  Amey Herefordshire would deliver highways, parks and public rights of way service plus a range of support services such as printing, catering and couriers.

* Herefordshire Council also has to draw on risk resources over a legal dispute relating to an adult residential care home contract.

Though this dispute in smaller in scale and complexity, it is said to be of “significant” financial value and requiring input from specialist counsel.