This is evident from correspondence that de Volkskrant obtained by invoking the Government Information (Public Access) Act. ‘Should Van Oord finish the job if the BAM falls?’ was a pressing issue at Rijkswaterstaat in October 2020 during an internal presentation. Accountant PricewaterhouseCoopers was called in to investigate BAM’s financial situation (turnover in 2020: 6.8 billion euros, 18 thousand jobs).
According to Rijkswaterstaat, BAM could go bankrupt if no agreement was reached on the division of the enormous additional costs of the renovation of the Afsluitdijk. That job was awarded in 2018 by Rijkswaterstaat to the Levvel consortium – consisting of BAM, maritime contractor Van Oord and financial consultancy Rebel.
However, Rijkswaterstaat turned out to have failed to provide crucial information regarding water levels and the wave heights that the renovated dyke had to withstand. Due to the millions of additional costs that this entailed, liquidity problems threatened Levvel in the summer of 2020. This is apparent from data submitted by the builders during a management meeting. The contractors had to advance all costs because of the chosen contract form (DBFM, or: design, build, finance, maintain).
teetering
BAM had just had a dramatic six months with a record loss of 235 million euros. The construction company suffered from the corona pandemic, systematically faced cost overruns, had to write off large amounts on international projects and reached a settlement of 200 million euros with the German city of Cologne. The city archive collapsed there because of the construction of a metro tunnel by BAM. specialist newspaper Cobouw wrote at the time about ‘a tottering BAM’. ‘BAM is just not managing to become financially healthy.’
The Afsluitdijk debacle came on top of that, although its impact was not yet publicly known. In August 2020, the Levvel construction consortium indicated in a Rijkswaterstaat management meeting that ‘it is no longer able and willing to pre-finance the various extra costs.’
If Levvel was unable to meet contractual obligations, there was a risk that banks would get hundreds of millions from the project. Shareholders BAM and Van Oord would be jointly and severally liable. Rijkswaterstaat’s assessment was that BAM may not be able to bear that consequence. In order to prevent this scenario, Rijkswaterstaat decided to meet the greatest need with advance payments. This was possible within the rules, but was not an obligation.
Bankruptcy Scenario
A bankruptcy of BAM was not an attractive prospect for Rijkswaterstaat either. It would lead to even more delays and even higher additional costs for the prestigious Afsluitdijk reinforcement. Rijkswaterstaat also relied on BAM for many other projects. Moreover, the collapse of the builder would have led to job loss for many employees in the highly uncertain corona time. A bankruptcy of BAM was also considered immoral by Rijkswaterstaat, because the mistake of the client would have been an indirect reason for it.
‘In the autumn of 2020, RWS conducted an exploration into all possible scenarios and their consequences. This exploration also includes a consideration of the consequences for the financial situation of a contractor’, Rijkswaterstaat responds to questions from de Volkskrant† However, there were no concerns about Van Oord, according to correspondence. ‘It mainly concerns the position of BAM.’
BAM says in a response that it has not included the bankruptcy scenario in negotiations. The construction company declined to comment further.
Financial escalation
It is becoming increasingly clear how much the Afsluitdijk debacle escalated financially. In the spring of 2019, a ‘worst-case scenario’ of ‘tens of millions’ was still being taken into account, according to correspondence. But in the summer of 2020, the builders claimed 450 million euros in additional costs. Rijkswaterstaat was prepared to compensate Van Oord and BAM with a maximum of 260 million euros, based on the renovation of the existing discharge sluices. That job has now been removed from the contract and is being tendered again.
Rijkswaterstaat emphatically denies that the impending bankruptcy of BAM was a reason to compensate the builder with more than was considered reasonable. It is remarkable that both amounts that circulated behind the scenes (260 million and 450 million) are considerably higher than the setback of at least 120 million euros that then Minister Cora van Nieuwenhuizen (Infrastructure and Water Management) paid six months later (in May 2021). the House of Representatives reported. The builders were then compensated with 85 million euros.
Three weeks ago, her successor Mark Harbers spent another 238 million euros. The parties are still negotiating about 87 million euros in additional costs; a disputes committee is looking into this. For the renovation of the discharge sluices, the original budget item (more than 100 million) is also expected to be exceeded.
Last year, BAM set aside approximately 60 million euros to absorb setbacks. CEO Ruud Joosten said that for the time being, the construction company no longer ventured into large projects above 150 million euros. “We no longer want to bear those risks.” Three weeks ago, the listed company welcomed the recently agreed settlement: an additional write-off is not necessary.
The Wob request was carried out by Erik Verwiel
Additional costs 435 million
An earlier publication stated that the total costs for the renovation of the Afsluitdijk are ‘not 900 million but 2 billion’. The costs were indeed initially estimated at 921 million (2018). But this was immediately raised to 1,571 million (2019) after the job was awarded due to maintenance costs for 25 years. The costs are now estimated at more than 2 billion. The additional costs now amount to at least 435 million euros. The project was initially supposed to be ready this year, but that will probably only be 2025 for the dyke and 2030 for the discharge sluices.