Suppliers take Jarvis to court

Contractors have lost patience with cash-strapped Jarvis and started a series of high court actions against the private finance initiative group as it tries to tie up a last-ditch rescue package.

Laboursite Ltd of North Harrow, Middlesex, is one of the firms that has lodged a £500,000 legal demand for dozens of unpaid bills for services going back as far as a year.

Alan Lovell, the Jarvis chief executive, insisted last month that the "crisis is over" but the company admitted yesterday that work is still at a standstill on 14 significant projects including one to modernise London's Whittington Hospital.

Some contracts under the government's PFI scheme have been halted for 11 months but the firm, chaired by former Conservative transport minister Steve Norris, insists negotiations to get them back on track will be completed "shortly".

A Jarvis spokesman confirmed action was being taken against it but said no one should immediately jump to the conclusion it was based on an inability to pay. "The construction industry is very litigious. We have said that there are issues with payment and we are seeking to address those but sometimes there are disputes over quality of work," he said.

No one at Laboursite could be contacted for comment and Jarvis declined to discuss in detail the Laboursite case or any others outstanding.

In its filing to the high court, Laboursite lists 103 different items that it alleges have not been paid.

Jarvis's financial troubles have knocked the reputation of the PFI scheme which is being used enthusiastically by the government to improve public buildings and services by bringing in the private sector to shoulder some of the risks and financing.

The 14 projects on hold because of Jarvis's problems also include one to modernise schools in Kirklees and another to upgrade fire stations in Tyne and Wear.

Jarvis is currently in talks with banks and other building firms to revamp these contracts or hand them over for completion to a third party.

But negotiations are complex because each is covered by a "special purpose vehicle" made up of Jarvis and several different partners. All must agree to the restructuring.

Jarvis would not say exactly when a full agreement might be reached but sources had believed it could be as early as this week if all went to plan.

But the stakes are high because a series of wider refinancing issues are dependent on these 14 schemes, the company admits. Just after Christmas Mr Lovell said the deal to sell its stake in the Tube Lines underground consortium, new banking arrangements and capping its exposure to the 14 PFI deals had turned the situation around.

A company spokesman admitted yesterday, however, the rescue was still dependent on a final signing off by lawyers. "We hope to do that shortly," he said.

Even if the company does survive after a traumatic couple of years, it will be a shadow of its former self. Under an expansion, guided by former chief executive Paris Moayedi, it took on enough contracts to become arguably the largest building firm in Britain.

Jarvis - which ran up interim losses of £283m - will come out of its restructuring as a relatively small provider of road and rail services.