Statement by the City’s Executive Mayor,
Alderman Patricia de Lille
Settlement of Stadium fees dispute leads to reduction in
costs
The City of Cape Town and the Professional Team appointed to design and
supervise the construction of the Cape Town Stadium are pleased to
announce that a long-standing dispute over Professional Fees has been
resolved amicably.
The Professional Team had entered into individual contracts with the City
to design and supervise the construction of the Cape Town Stadium for
the 2010 FIFA World Cup™. The completion of the stadium was
undertaken against a pressing deadline and severe cost escalation.
According to the contracts that were entered into between the City and
the Professional Team, the Professional Fees could have amounted to R
637,3 million but this has been settled at a Professional Fee of R585
million including disbursements for the stadium and surrounds. This
amounts to a reduction of some R52 million on the contracted fee.
The matter had previously been referred for Mediation and Arbitration and
was due to return to Arbitration on appeal when negotiations on
settlement resulted in a tangible outcome that could be formulated as a
settlement offer. The settlement proposal agreed to by the City and the
Professional Team was accepted by myself as Executive Mayor under
delegated authority from Council. Today the Council considered the
matter and authorised the Chief Financial Officer to pay the Professional
Team in terms of the Settlement Agreement signed between the parties.
The City is pleased that the dispute has been settled with the various
disciplines constituting the Professional Team. The settlement is in the
City’s interests and avoided the long, costly and risky process which
would have confronted both parties through the Arbitration appeal and
the courts.
Mr Bev Mitchell, representing the Professional Team, expressed his thanks
to all of the many parties involved in the dispute and the resolution of the
dispute on an amicable basis. Mr Mitchell said it was never the intent of
the Professional Team to benefit from the excessive escalation
experienced during the construction of the stadium. The Professional
Team was pleased to settle with the City at a Professional Fee that
constituted fair reward for efforts and achievements and a substantial
discount to the contracted fee.
The final construction cost of the stadium determined by the Professional
Team’s quantity surveyor amounted to R 3,64 billion, with a Professional
Fee of R585 million including disbursements for the design and
supervision of the construction of the Cape Town Stadium and surrounds.
This amounts to a Professional Fee of approximately 16%, which is
significantly lower than originally negotiated between the parties.
Also included in the Settlement Agreement is a provision that the
Professional Team will support the City and the legal team currently in
place in the quantification of the damages that the City suffered by the
bid rigging of construction companies involved in the Cape Town Stadium
and which was highlighted recently by the Competition Tribunal.
The City is determined to claw back the damages that were suffered at
the hands of the construction companies and is currently preparing a
claim against the construction companies involved.
Mr Mitchell said the Professional Team is pleased to assist the City in this
matter as the Professional Team’s reputation also came under scrutiny
with the escalation of costs.
The Settlement Agreement does not restrain the City from pursuing any
claims it may have under the Client Controlled Professional Indemnity
Insurance Policy it holds and the Professional Team has agreed to
cooperate fully in this regard.
The Settlement Agreement is subject to a confidentiality clause.