Paris on the brink as City says it's Jarvis that needs renewing

Mired in controversy over its rail and school work, the services group will have to change, says Clayton Hirst
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The Independent Online

Paris Moayedi will step up to the rostrum in nine days to endure what has become something of a ritual for the chairman of Jarvis. The support services company has madea name for itself over the last few months - but for the wrong reasons. At the centre of a growing number of public projects, from railways to education, that have gone badly wrong, the Jarvis name is increasingly being taken in vain.

And the company's results presentation has become a useful opportunity for journalists to fire off uncomfortable questions at Mr Moayedi. Jarvis's interims, due on 25 November, are expected to be especially feisty because revelations last week over a long-delayed Private Finance Initiative (PFI) schools project in the Wirral have added to a burgeoning list of black marks against Jarvis.

But it could be the last time the 64-year-old chairman has to answer tricky questions. The Independent on Sunday has learnt that plans are being laid for Mr Moayedi to step down after nine years with a company that he transformed from a construction specialist valued at £2m into a support services group worth over £300m. Steven Norris, Jarvis's senior non- executive director and the Conservative Party's candidate for Mayor of London, is tipped as his replacement.

If Mr Moayedi doesn't bow out gracefully by the end of the year, he could fall victim to the rise in shareholder activism that last month claimed the scalp of Carlton's chairman, Michael Green. Investors' patience is beginning to run out at Jarvis. Most companies involved in the PFI and large public infrastructure projects expect a bit of flak. But Jarvis is never far from the headlines, and senior management changes are now seen as the only way to stem the flow of bad news. "It is rather alarming," says one top 10 shareholder who asked to remain anonymous. "Changes have to be made and we are pressing."

Jane Sparrow, an analyst at West LB Panmure, says: "It seems that there is just one thing after another. At first it was just the rail division, which is operating in a very political market, so you can understand why it got a lot of bad publicity. But now it is happening in other Jarvis businesses. Sometimes there is no such thing as coincidence. There is pressure for [Mr Moayedi] to step aside; changes cannot be made while he is there."

Investors are starting to worry that Jarvis's poor reputation in some markets could affect its ability to win new contracts in other areas. Take its £55m contract to maintain and build schools for Wirral Metropolitan Borough Council. Project delays have stopped five schools reopening for the start of the autumn term, it emerged last week. This follows a similar episode in the Huddersfield area, where delays on a Jarvis contract were alleged to be one of the causes for poor GCSE results.

Phil Davies, the cabinet member for education at Wirral Council, says: "We feel we are getting a whole bunch of excuses from Jarvis, but it hasn't delivered."

The council is considering making a compensation claim against the company, Mr Davies adds. "There is a provision in the contract which says there can be financial penalties if there is a certain level of underperformance. We have got a lawyer looking at the contracts. We don't want to get into a big battle in the courts, which will delay things further ... But I wouldn't rule out having to make a substantial claim."

Asked if the experience with Jarvis has tainted the council's view of PFI, he says: "This has not put us off working with the private sector, but it may well have put us off working with Jarvis again."

There are two theories on why the mud is sticking to Jarvis. The first, shared by Wirral Council, is that the company underdelivers and fails to assess project risks properly. The second is that it is no less competent than the next PFI contractor; it is just Jarvis's attitude that lands it in hot water. When things go wrong, its first reaction in the past has been to blame someone - or something - else.

Jarvis was responsible for maintaining the stretch of railway track at the scene of the Potters Bar rail crash, which killed seven people. Days after the accident, Jarvis claimed it could have been caused by sabotage. But in May the Health and Safety Executive ruled that the disaster, "resulted from inappropriate adjustment [of the points] and from insufficient maintenance". One senior source at a rival contractor says: "The sensible thing would have been to keep shtoom after the report." Instead, Jarvis lashed out and labelled the HSE conclusions "incredible", "facile" and "simplistic".

A senior rail industry source, who dealt with Jarvis for many years, says: "If there was a problem then Jarvis would immediately go on the attack. On one occasion it even read the rulebook back to us, when we had written it."

The derailment at King's Cross station in October prompted Jarvis to quit rail maintenance, citing "reputational issues". Network Rail has since brought all its maintenance contracts in-house.

Jarvis is still Network Rail's largest renewals contractor, with a 50 per cent share of the market. But once again it is mired in controversy, this time over its work on the West Coast Mainline.

The company is threatening to sue Rail magazine after the publication referred to irregularities inn documents relating to work done on the line. Inspectors had found that that track had not been properly "stressed" to deal with autumn temperatures, something which Jarvis does not dispute. John Armitt, the chief executive of Network Rail, says: "We are looking at the records of information that have been flowing between Jarvis and ourselves. We need to make sure lessons are learnt for the future."

Network Rail isn't expected to reach any firm conclusions for some weeks. But this may be too late for Mr Moayedi, who looks set to leave a controversial legacy.