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Wednesday, October 20, 1999 Published at 13:12 GMT 14:12 UK

UK: Northern Ireland

Shipyard in £100m dispute with client

Work on the deep drilling ships has run nearly 100m over budget

The Belfast shipyard Harland and Wolff has said it is in dispute with one of its biggest customers over payment for two vessels currently under construction in the yard.

If the dispute can not be resolved satisfactorily then it could have serious implications for the shipyard, the company said.

BBC NI business editor James Kerr: Row involves sort of money company can not afford to write off
Harland and Wolff Holdings Plc (H&W), one of Northern Ireland's biggest employers, are currently working on two deep sea drill ships for the US oil company Global Marine.

One is almost complete and the other is part built.

During construction Global Marine asked for major changes to be made to the job specification which have cost approximately £100m and which are likely to delay the completion of the contract.

These kinds of changes are common on contracts of this nature, but it has not yet been established who will be expected to pay for the costs.

[ image: Tough times ahead in spite of a return to profit]
Tough times ahead in spite of a return to profit
Global Marine have not been formally presented with an invoice for the changes but H&W have said they expect it to be challenged.

"The additional workscope has given rise to a substantial increase in construction costs, in addition to the acceleration costs associated with the effort required to complete substantially more work within a previously agreed timeframe.

"It is our opinion that such increases in cost and any slippage in delivery are due to the additional workscope requested by Global Marine. The additional workload resulting from increases in the overall project requested by Global Marine will form the basis of a claim for compensation," H&W said.

The shipyard also said negotiations have yet to be concluded on the payment of additional funding needed to complete the contract and that it has already had to take out a £50m loan in order to provide necessary working capital to continue work on the ships.

And H&W have warned that if an agreement is not made there could be serious consequences for the financial future of the company and jobs, its international reputation and its ability to attract orders.

The company said: "Harland and Wolff hopes that the negotiations will lead to an amicable solution which will alleviate the situation and enable all efforts and resources to be focused on completing the vessels.

"However, in the event that it is not possible to come to an acceptable solution regarding outstanding and additional costs, the financial consequences for Harland and Wolff and the local economy would be considerable, and the image of Northern Ireland would be seriously damaged."

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