Tie Limited and the City of Edinburgh Council have today announced the successful contract closure that heralds the beginning of the construction phase of the Edinburgh Tram project and will see the first tram tracks laid by September 2008.

After complex and lengthy negotiations, starting in October 2007, tie and CEC have announced the successful conclusion of a landmark deal with organisations of international repute which delivers both a world class tram and the infrastructure to match and also meets the expectations of all key stakeholders in the project

In Belfinger Berger Siemens the Edinburgh Tram project has a formidable consortium made up of two global companies that have delivered some of the most exciting and challenging infrastructure projects across the world.

Members of the BBS consortium have played a major role in the construction of over 30 urban transport schemes around the world, in countries including France, Portugal, USA, China, Turkey, Taiwan and Mexico.

The tram manufacturer, CAF, a world leader in light and heavy rail, is best known in the UK as the company that provided the first train fleet (Class 332’s) for the Heathrow Express in a consortium with Siemens. They have recently supplied the trams to Seville's new tram system and has recently put into service a fleet of diesel trains for Northern Ireland Railways.

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With these final fixed price contracts now completed all parties can now proceed to delivering this project safely to programme and budget and to the detailed specifications determined by tie as agreed with the City of Edinburgh Council and Transport Scotland.

The final contract agreements have been conducted in a background of difficult and uncertain international economic conditions combined with an extremely heated UK construction sector in terms of both material prices and demand on resources.

In reaching this final agreement tie with BBS have worked to minimise the consequences of the above factors and together we have consolidated and therefore eliminated more of the risks associated with the cost and delivery of the programme.

A major benefit of this approach has been to incentivise the BBS consortium so as to secure the delivery of the project through key milestones based on programme and cost. Intensive last minute negotiations with BBS over the past seven days have culminated in an agreement that sees a significant additional shift of risk transferred from the public to private sector and which reflects a full and final conclusion to the negotiations and price.

The final price agreed between all parties is £512m, which is a rise of 2.8% on the price forecast in the Final Business Case and remains well within the funding envelope of £545m set for the Edinburgh Tram Project.

Tie has recommended that the final terms negotiated represent the best result achievable for the public sector and has asked the council to authorise tie to proceed with the contract close.

Tie has maintained a focus on the competitiveness of the developing contract terms to ensure they remain best value and are fully aligned with relevant regulations.

Willie Gallagher, Executive Chairman of tie said: "I'm pleased that these negotiations have now reached a successful conclusion.

"These pressures on costs are not isolated to the tram project. The fact is that every major construction project in Scotland and in the UK is and will be impacted by these exact same factors. We have sought to successfully deal with them now."

(GK/JM)