Nato goes on defensive over HQ cost overruns

5 March 2014

The consortium building Nato’s $1.4bn headquarters in the Brussels suburb of Evere has run into financial difficulties, according to a report in Der Speigel magazine.

The consortium building the enormous steel and glass structure is led by Dutch contractor Royal BAM.

In a meeting with Nato bosses last month, the BAM Alliance warned that it needed more than $335m of additional funding and that the project’s completion would probably miss its spring 2016 deadline by at least nine months.

Der Spiegel reports that, according to documents it has seen, BAM Alliance is in financial difficulty "resulting from miscalculation and high claims from subcontractors".

The conclusion was that the project would not be able to stick to the budgeted upper limit of $1.4bn, and that without a fresh injection of capital, work would come to a halt.

The consortium had won the contract for $630m in 2010, a price that was much as $290m below the costs estimated by NATO, and this led to some scepticism that it could complete the work for the contract price.

A meeting of Nato’s member states on 19 December agreed that there was no question of the project being halted, and many delegates, including the Germans, said they favoured providing additional funds.

Nato’s glass and steel headquarters is intended to present a more accessible image than its old concrete building (Assar Archtitects)

"We pointed to the disastrous effect on the image of the alliance if construction were to stop and if Nato appeared to be incapable of punctually completing a construction project that was decided at the Nato summit of government leaders in April 1999 in Washington," the German ambassador, Martin Erdmann, told Berlin in a confidential cable.

The meeting approved a $27m injection, but Erdmann commented that "the risk of a further a increase is already palpable", although it would be cheaper to pay the extra money than face the costs that would result from a halting construction, given the damage that would be suffered be the half finished building, which is not yet weather tight.

The consortium’s spokesman told Spiegel: "Several unforeseen circumstances including significantly increased security requirements" by Nato had led to construction exceeding the agreed sum. The spokesperson declined to comment on the looming insolvency.

The Telegraph newspaper reported that the cost to the British taxpayer of the project’s inflating budget could be as much as $250m at a time of national defence cuts.

A spokesperson for the Ministry of Defence said: "The construction of the new Nato HQ is a large and complex project with unique features driven by security requirements. Such projects carry the risk of claims for additional cost and time."

Daniel Hannan, Conservative MEP for South East England, commented: "I’m afraid that, after a while, the primary goal of every international bureaucracy becomes its own expansion and comfort. It’s true of the UN and FIFA and the EU, and it would be surprising if it weren’t also true of Nato."

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