1 Wednesday, 6 September 2017 2 (9.30 am) 3 MS LESLEY HINDS (continued) 4 CHAIR OF THE INQUIRY: Good morning, Ms Hinds. You're still 5 under oath. 6 Could I ask you and anyone else who is speaking at 7 the moment, Counsel, if they could slow down and speak 8 clearly so that the shorthand writers can record your 9 evidence properly, and accurately. 10 A. Okay. 11 CHAIR OF THE INQUIRY: Thank you. 12 Examination by MR LAKE (continued) 13 MR LAKE: Thank you, my Lord. 14 Good morning, Ms Hinds. Yesterday we were just 15 looking at the question of counsellors sitting as 16 directors in arm's length companies, and we'd looked at 17 the question of part of their role, but I wanted to ask 18 you about the question of democratic accountability, to 19 what extent you think having councillors sitting on the 20 boards of arm's length companies provides democratic 21 accountability? 22 A. Do I have the statement, sorry? 23 Q. Sorry. I should arrange for that to be given to you 24 again. It's TRI00000099_C. 25 A. Could you maybe also refer to the questions and answers 1 1 that's related to my statement. That would be helpful. 2 Is that okay? 3 Q. Where I'm referring to a particular passage in your 4 statement. This one is rather more general. It doesn't 5 relate to a particular passage in your statement. 6 CHAIR OF THE INQUIRY: That's the wrong statement. I beg 7 your pardon. That one has come up. 8 MR LAKE: It wasn't a question really relating to any 9 particular part of your statement. It was more 10 a question, do you consider that having councillors on 11 board provides democratic accountability and if so how? 12 A. Well, they're there, we had the discussion yesterday, 13 and as I explained yesterday, in terms of governance, is 14 that you're first of all appointed on to the arm's 15 length company as a councillor, and then your 16 responsibility and governance is to the board, but also 17 there is a democratic process in terms of you sitting on 18 that board, you're appointed by the Council. 19 So I would expect there would be a feedback from the 20 board as we discussed again yesterday, in terms of 21 reporting back to the Council, and the elected member 22 who is appointed on that board is appointed by the 23 Council. 24 So I would expect them democratically to report back 25 to the Council. 2 1 Q. That takes me to one thing that is in your statement, 2 please. Could we look at page 168 of that document. It 3 should be page 168 of the paper copy as well. 4 A. Sorry, it's right at the end. 5 Q. It's towards the end? 6 A. Which one? 7 Q. It will be paragraph 684 on that page. 8 A. Okay. 9 Q. This is in relation to the passing back of information 10 and what you say there is: 11 "I think it was difficult for councillors to 12 exercise control over the Edinburgh Tram Project. Those 13 who sat on the board of TIE were in a difficult position 14 as they did not feel they could report back information 15 when much of the information was confidential." 16 That seems to be the situation that once you impose 17 requirements of confidentiality, you limit the flow of 18 information and limit the effectiveness of that. 19 A. Yes, that's correct. In terms of if you're sitting on 20 a board, board like TIE, at the time I remember, this is 21 my memory, I remember that some members of the TIE Board 22 did find difficulty in basically sitting on the board, 23 and were told that a lot of the information was 24 confidential, and therefore they shouldn't be reporting 25 it back to the Council. And that's my memory serving me 3 1 along those lines. 2 Therefore, that's why I'm saying that they were in 3 a difficult position, because my understanding is, and 4 this is just memory as well, in that people who sat on 5 the TIE Board were told that a lot of information they 6 would be given was confidential and therefore could 7 not -- that detail could not be fed back to the Council. 8 Q. So if we turn it the other way round, the oversight is 9 really only going to work if there is an understanding 10 that those councillor directors can pass back 11 information up to the Council? 12 A. Well, obviously if, as discussed again yesterday, if -- 13 very clear the Council sets a strategic and the policy 14 direction for the board. And therefore I would assume 15 that if -- I never sat on TIE, so it's difficult for me 16 to make assumptions about people who sat on there, but 17 I have sat on many boards, and if I was unhappy with 18 information, even if it was confidential information, 19 that that board was not carrying out, I suppose, the 20 strategy and the policy of the Council, then I as 21 a board member would expect to go back to the Council as 22 appointed by the Council to report my unhappiness 23 regarding the Council's policy, the democratic process 24 of policy and strategy of that board. 25 Q. I'll come back to ask you a few more questions about 4 1 confidentiality in a little while. 2 But just dealing with the role of councillors who 3 weren't on the board of the company, to what extent did 4 those councillors, the Council in general, have a role 5 in relation to oversight or monitoring of an arm's 6 length company? 7 A. That would be as part of the Council setting the policy 8 and the strategy, and then reporting back in a process 9 in terms of the committee, and the members of the 10 committee and the Council and the officers. And as we 11 again discussed yesterday about advisers, often the 12 officials would sit on the board as either a non-exec or 13 they would sit on as advisers. And there was obviously 14 that liaison then between the Council and the board, and 15 that accountability then, but also as elected members 16 sitting on a committee or the Council. And many 17 briefings that we had from officers would then do that 18 accountability as well, scrutinising the TIE and TEL and 19 what their role -- how they were carrying out the 20 policies and the strategies of the Council, and that 21 would be the role of the elected member, to scrutinise 22 and to ask questions at briefings, but also be reported 23 to the committees as well. 24 Q. And whether through the whole Council or through those 25 committees, do you consider that those methods of 5 1 scrutiny you have described to us were effective in 2 relation to TIE? 3 A. This is just me making a judgment. You know, I wasn't 4 on the two committees, so the two at length board, but 5 I would say there was a frustration on behalf of the 6 Council about the information that was coming from TIE 7 and TEL. There would be some, which is in my statement, 8 about some briefings that would have members of TIE and 9 TEL, either Chief Executive or cChair would come to the 10 briefings of each of the groups. So you would have 11 an opportunity there. 12 What I think there was that kind of frustration 13 about the information flow, and if I can remember 14 correctly, again, this is memory, because of that, and 15 a follow-up was that there was the report -- number of 16 reports have been to the Council following TIE and TEL 17 and arm's length companies, to set up a more robust 18 process in terms of the reporting back to committee and 19 reporting back to Council, and that was being agreed by 20 the Council. 21 So following the TEL and the TIE and arm's length 22 company, there is now in place a more robust, I would 23 say, process of being able to scrutinise and report back 24 to the Council in terms of arm's length companies. 25 Q. Do you consider the question of reporting back and 6 1 provision of information to the Council changed during 2 the project at any time? Got better or worse? 3 A. I think that's -- it's a very difficult question to 4 appears. It was over a longer period of time. There 5 would be times at the briefings where it would only be 6 officers of the Council who would be briefing us on the 7 tram project, and there would be other -- probably as 8 time went on, this is just my memory as well -- as time 9 went on, there would be more briefings where people from 10 TIE would come to the briefings of the groups. 11 So there would seem to be, as towards the end of 12 TIE, I suppose, as an arm's length company, tended to 13 then turn up the officers, invited them, and then 14 I suppose towards the end of when that process before -- 15 I suppose negotiations, et cetera, regarding mediation, 16 it was then more the Council and the Council officers, 17 and TIE was then not part of that process. 18 The fact -- that kind of explains the process 19 clearer to you. Again, just to kind of clarify. I have 20 never been on TIE, never been on TEL and therefore I'm 21 just making assumptions, but as an elected member, it 22 started off with very much Council officers briefing us. 23 In the middle part, I would say, would be people from 24 TIE, mostly Chief Executive, this again memory, and also 25 the Cchair would come and officers of TIE, and then 7 1 towards the end it would only be officers of the 2 Council. 3 Q. Thank you very much. It was your perspective as 4 a councillor that I'm after in this regard. 5 Can I just be clear to avoid confusion of terms. 6 When you talked about the middle period there, you 7 referred to the Chief Executive. Is that the 8 Chief Executive of TIE or the Council? 9 A. Both. 10 Q. Both? 11 A. Normally it would be the Chief Executive, Director of 12 Finance, Director of City Development -- again, this is 13 memory -- who would come to the briefings, and I do 14 remember Richard Jeffrey, for example, was one of the 15 names. So there would be -- you will know there was 16 changes within TIE in terms of Chief Executive and 17 Cchair, so at different times; but that middle part, 18 I would say, there was then definitely Richard Jeffrey 19 was the name I remember, and remember him coming to one 20 of the briefings. We had many, many briefings and that 21 would be one of them I can remember. 22 Q. Can you remember the names of any other people who came 23 for briefings, to give you briefings? 24 A. There was also people from some of the consultants who 25 would perhaps be there as well, in case there was any 8 1 detailed questions on behalf of the councillors. But 2 the majority of them were very much briefings from 3 officers of the Council and at a senior level. 4 Q. Resuming -- turning back to the question of councillors 5 sitting on companies, I would like to ask you to look at 6 another document, please. It's reference CEC02086791. 7 This, you can see, is a report to the Council for 8 a meeting which took place later on, 13 December 2012. 9 A. Mm-hm. 10 Q. With the title, "Council companies", and it's a report 11 from Alistair Maclean, the Director of Corporate 12 Governance. Have you seen this before? 13 A. Yes. As far as my memory, you know, it's -- this is 14 aspiring over a long period of time and many reports, 15 but it follows up looking at the date of it, it follows 16 up just what I said before about the robustness of 17 looking at Council companies in terms of particularly 18 the concern that councillors had regarding TIE and TEL. 19 Q. Just looking at the recommendations on -- if you go to 20 the second page of the 12 pages of the report, we can 21 see here that the recommendations are simply to instruct 22 the directors of the various elements within the Council 23 to proceed in accordance with the main body of the 24 report, and that is what the councillors were going to 25 be asked to consider. 9 1 If you then go to page 4, I just read -- sorry. Go 2 to page 4. If you go to page 4 in the last document, 3 not the statement. That's reference CEC02086791. We 4 can see here there's a heading, "Background". 5 A. Mm-hm. 6 Q. Paragraph 1.3 notes that: 7 "It is important that the Council is clear about the 8 anticipated benefits from using an arm's length company 9 to deliver services rather than retaining service 10 in-house or contracting or partnering directly with 11 a third party provider in the public, private or 12 voluntary sector. In some cases an arm's length company 13 can offer financial benefits, for example charitable 14 companies currently qualify for business rates relief. 15 In other cases, the rationale for a separate corporate 16 vehicle may be less clear. In order to ensure optimal 17 and efficient delivery of services and Council 18 objectives, it is important that the overall company 19 structure is rationalised." 20 Was that consideration that arose out of what had 21 happened in relation to the tram project? 22 A. I wouldn't say it was just a tram project. I could say 23 there was other projects as well. For example, ETI and 24 again I think we mentioned yesterday Edinburgh Leisure, 25 Theatre Trust. There was a number of arm's length 10 1 company, first of all had been set up in terms of 2 financial benefits. And other ones were, for example, 3 I would say, yes, probably the tram project was part of 4 that, but there would be other companies as well. 5 I know there was a feeling certainly from many members 6 of the Council that they wanted to have a more robust, 7 as I said previously, a more robust process to ensure 8 that the arm's length company were accountable to the 9 Council as the wholly-owned shareholder, as you would 10 say, of the arm's length companies. 11 Q. This requires in that paragraph, or directs, there 12 should be some specific consideration given to 13 identifying precisely what the benefits are for setting 14 up an arm's length company before it's done? 15 A. Yes, and that's what did happen in terms of any arm's 16 length company. A report would have been put forward by 17 the officers and to the Council, normally I would have 18 thought to the Full Council Meeting, rather than 19 a committee, for the councillors to consider what the 20 benefits would be of setting up an arm's length company, 21 where that was financially -- or whether that was for 22 a better way of delivering a project. 23 Therefore, that would be a report that would go to 24 the Council, if you talk about democratic process, and 25 the officers would lay out the benefits to the Council 11 1 and to the service, and a delivery of a project or 2 a delivery of a service, and the reasons why they would 3 be recommending the setting up an arm's length company. 4 Q. Looking at the further recommendations down the page, if 5 you look at paragraph 1.5 and its subparagraphs, you can 6 see this says: 7 "As part of the consultation process, the Director 8 of Corporate Governance made a number of key 9 recommendations." 10 These include, 1.5.1: 11 "Elected members should not be directly involved in 12 operational decision-making of Council companies. Given 13 the potential for conflict of interest between their 14 roles as councillors and as directors (where there is 15 a statutory duty to act in the best interests of the 16 company and not the shareholder), it is recommended that 17 elected members do not act as directors on company 18 boards, but carry out a strategic direction setting, 19 oversight and challenge role as members of the relevant 20 Council committees." 21 A. Mm-hm. 22 Q. We see there that the director seems to be putting more 23 emphasis on the councillors carrying on to sit as 24 councillors, and that they should not sit as directors 25 on the companies. What was your view on that? 12 1 A. I think there was a difference of opinion. I think the 2 officers were clearer, perhaps because of the experience 3 of the TIE and the tram project. And that, which again 4 we discussed yesterday about the conflict there is, or 5 the diversity there is between sitting on a board and 6 sitting as a councillor. 7 I think that people's view was that if we shouldn't 8 be because of the tram project and TIE and TEL, that 9 shouldn't be that every other company, arm's length 10 company as I said previously yesterday, has not been 11 successful. An example I gave was EICC, we're on 12 budget, on timetable, and is still going strong. 13 But I think the officers, because perhaps of the 14 experience of the TIE and the TEL, felt that direct -- 15 that councillors should not sit on arm's length 16 companies, but I think elected members thought it was 17 useful and helpful because it had been useful and 18 helpful in terms of delivering projects and delivering 19 services on behalf of the Council and arm's length 20 companies. 21 Q. We see the next recommendation is that: 22 "In light of the same potential conflicts of 23 interest, Council officials should not sit on company 24 boards. As an alternative to acting as company 25 directors, it is recommended we have an observer right 13 1 on the boards of Council companies." 2 Did you have a view in relation to that? 3 A. The majority of officers didn't sit as board directors, 4 whereas they were sitting as observers, rights on 5 boards. So I felt that was probably the right way 6 forward. 7 Q. 1.5.3 was that Council companies should recruit and 8 appoint executive and non-executive directors with the 9 appropriate skills and experience: 10 "The boards should meet at regular intervals with 11 the minimum of five meetings every year. Each board 12 should, where appropriate, have appropriately 13 constituted audit, remuneration and nomination 14 committees." 15 I take it that's not going to cause any concern to 16 the Council? 17 A. No, I would probably say my experience, that boards do 18 have audit, remuneration and nominations committees 19 that -- but it's probably just setting out very clearly 20 the guidance in terms of companies. 21 Q. The following -- if we look at the next three paragraphs 22 then together. 1.5.4 is: 23 "For each Council company, the relationship with CEC 24 should be set out in a funding agreement or 25 shareholders' agreement as the case may be and also, 14 1 where appropriate, a Service Level Agreement." 2 A. Yes. 3 Q. I think we will come to later in the Inquiry, there was 4 an Operating Agreement in relation to TIE. Were you 5 aware of whether or not there was a Service Level 6 Agreement, or a set of minimum standards put in place? 7 A. Memory, you know, I can't -- I can't say. But this -- 8 this report as previously said was set out because there 9 was concern that it wasn't a robust, but also a very 10 clear direction in every company, arm's length company, 11 had to come under the same strict guidelines, and 12 therefore 1.5.4, which sets out a Shareholders' 13 Agreement, a Service Level Agreement, it says where 14 appropriate, but I think I would suggest that Service 15 Level Agreement, each of the arm's length companies was 16 what the elected members at that time felt was a way to 17 go forward, learning from the experience of the previous 18 arm's length companies. 19 Q. 1.55 refers to those agreements that I have just 20 mentioned needing to set out the objectives of the 21 company, but 1.56 goes on to say: 22 "Given the large number of companies delivering a 23 range of services, there is the need to determine 24 whether these organisations still have a role to play 25 and demonstrate the rationale for this, or whether an 15 1 alternative delivery model would be more appropriate." 2 That seems to be a concern that perhaps it was time 3 to turn the tide against using arm's length companies 4 and consider whether it could be brought in-house. What 5 was your view on that? 6 A. I don't think it was seen as being against arm's length 7 companies. I think it was seen as that, as I explained, 8 that each of these arm's length company report would go 9 to the Council, giving the reasons why it was set up in 10 the first place, and what the benefits were; and I think 11 it was just needing a review of all of these arm's 12 length companies, to say were they still delivering and 13 was it the right way forward in terms of arm's length 14 companies, when they were originally set up in the first 15 place. 16 Q. What would the advantages to the Council be -- might 17 they be in bringing back in-house something that's been 18 dealt with by a company? 19 A. Well, it may well be that times have moved on. Services 20 have developed, have changed. IT might be an example, 21 or other example, there is legislation, as I understand 22 it at the moment, in terms of business rates or 23 recommendation, which is going forward at the moment, 24 which may well have a direct effect on the festival 25 theatres, may well have an effect on Edinburgh Leisure. 16 1 So that may be something the Council will consider, and 2 whether they wish to bring it back in house. 3 So there will be either legal or financial or 4 changing of the way the services is provided, in the 5 circumstances at that time. 6 Q. Would there be instances where bringing matters back 7 in-house would increase the amount of control that the 8 Council have, and that would be considered beneficial? 9 A. Well, it would be both. It would be financial delivery 10 of the service, but also accountability as well. 11 Q. Is it likely to be the case that there will be greater 12 accountability if the service is in-house? 13 A. It's kind of general question you are asking, which is 14 a difficult one to answer, because, as I said, certainly 15 the arm's length companies I were on were very 16 accountable, and very much had a good relationship with 17 the Council in delivering the service they were set out 18 to do, and financially delivering what they were asked 19 to do. 20 And I suppose it is -- it's whether you bring it 21 back in-house would be, as I said, financially, would 22 that be the best possible way, service delivery, and 23 would it be better bringing it back in house, and also 24 accountability, and I think you can't generalise, 25 because each of them were set up for a different reason, 17 1 not all different, but for different reasons, in terms 2 of at that time. 3 Q. If you look further down the page now, to the lower half 4 of that page, taking the whole of the lower half, it 5 will be readable, we can see under the heading, "Main 6 report", paragraph 2 notes there had been a capital 7 coalition working group of elected members to consider 8 the officer recommendations and set out the arrangements 9 that members wish to put in place. Were you on that 10 working group by any chance? 11 A. I genuinely don't remember. Sorry, I could go back if 12 you'd asked me beforehand and be able to say that, but 13 there were a number of working groups, and I genuinely 14 don't know. I would have been at that time Convener of 15 Transport Environment, but I'm not -- I genuinely don't 16 know. 17 Q. If we just look at the next paragraph which gives the 18 conclusions from that working group: 19 "The elected members have indicated their wish to 20 participate directly in decision-making as directors of 21 Council companies. It is proposed that (save as set out 22 in paragraph 2.2.3) three elected members will sit on 23 the board of each Council company, one member from each 24 of the capital coalition groups and one from an 25 opposition group." 18 1 That seems to be the Council was essentially making 2 it quite plain they did not accept the recommendations 3 of the Director of Corporate Governance and were 4 determined to continue their role on the boards of the 5 Council. Of the companies. 6 A. Yes. Well, I think particularly because of 7 accountability, but also some of these arm's length 8 companies had big responsibility financially and 9 delivery, whether it was a project or service, 10 and I believe at that time the elected members felt they 11 still wished on certain companies, arm's length company, 12 it was a benefit and we shouldn't just make decisions to 13 come off all arm's length company because of an 14 experience of perhaps one or two. 15 Q. One or two being the -- (Pause) 16 When you had said the experience of one or two 17 companies, was that the tram companies that you had in 18 mind? 19 A. I would say probably yes, in general, yes. As I said 20 previously, that some of the arm's length companies had 21 been extremely successful in delivering financially, in 22 delivering the service provision and delivering 23 projects, and I suppose you don't just throw the baby 24 out with the bathwater, I suppose is the expression, and 25 that at that time, this is again memory, back to 2012, 19 1 was a majority of elected members, all elected members 2 felt that there were some companies, there was 3 a beneficial benefit of having elected members on those 4 companies. 5 Q. I appreciate it was a decision of Council members as 6 a whole, and it may not be that every councillor had the 7 same view, but can you recall, was there a consensus as 8 to why it was that the councillors felt it important 9 that they sit on the boards? 10 A. Well, to repeat myself is that I would say the majority 11 felt, ones who had been on boards, there was an 12 advantage to be on boards and had been delivery, as 13 I said previously, and therefore they believed there was 14 an advantage for the Council and for elected members to 15 be on arm's length companies as directors. 16 Q. I'm sorry if you feel I'm repeating myself, but what I'm 17 really trying to get to is: what is that advantage? 18 What was the perceived advantage for the Council? 19 A. Well, it would be overseeing, being more involved with 20 the project, being able to ensure that that company also 21 was delivering in terms of service level agreements, in 22 terms of delivery of the strategy and policy of the 23 Council. 24 Q. I think your role in the project, you had quite an 25 involved role from 2012 onwards, when it was at 20 1 post-mediation stage? 2 A. Yes. 3 Q. In the early stages, pre-2007, you had a lesser role in 4 relation to them. Then I think it was in 2007 to 2012 5 you were in opposition; is that correct? 6 A. Yes. 7 Q. So you have experienced it both from being in opposition 8 and then going on to be leader of the Council? 9 A. No, I was not leader of the Council. Transport 10 Environment Committee. 11 Q. Pardon me. 12 A. So I was -- I have been 33 years on the Council. So 13 I was involved as an elected councillor in terms of the 14 decision-making process of the tram project at the 15 beginning. I was then for four years, up to -- from 16 2003 to 2007, the Lord Provost of the Council, which is 17 very much a civic role, and then went in opposition for 18 five years when the tram project, say, perhaps in more 19 difficulty. And then I took over in 2012 as the 20 Convener Transport Environment, which was following the 21 Mar Hall and the agreement to have a revised budget and 22 a revised timetable. 23 Q. Now, the reason I wanted to ask about your various 24 involvements there was what I wondered was throughout 25 those various stages, at the time, did you feel you had 21 1 all the information you required as a councillor to 2 decide the matters brought before you? 3 A. So this is general or is it related to any of these 4 questions. 5 Q. General. 6 A. I would say before, when we made the decision regarding 7 to go ahead with the tram project, the information was 8 available as a councillor. And I suppose if I refer to 9 the Audit Scotland in 2007 report, which was, if 10 I believe correctly, was commissioned by the Scottish 11 Parliament, gave what I would call a robust and clean 12 bill of health in terms of governance, and then if you 13 look at the Audit Scotland report of 2011, there's 14 a very different picture there in terms of the concern 15 regarding the governance and overview. 16 So I would say taking that into account, and re-read 17 them before coming here, and memory is that between 2007 18 and certainly 2011, I was personally, and also, I think, 19 our Labour Group, frustrated in terms of the information 20 available, and often much of the information would end 21 up in the press and in the front page of the Evening 22 News, that we would have no indication, had no 23 information for. 24 So I think as a Labour Group who were supportive of 25 the tram project, and the reasons are laid out in my 22 1 statement, felt very frustrated between that period of 2 2007 and 2011, in that we certainly felt we were not 3 getting information, and felt when we had briefings, we 4 were not getting the answers and the information, and 5 that's in my statement as well, and became extremely 6 frustrated in terms of the information we were being 7 given. 8 And also, if I -- when I was interviewed, there was 9 many documents and emails that I was shown that 10 certainly I'd never seen before, and certainly was quite 11 shocked to discover that officers were well aware there 12 was a real problem with the tram project months and 13 months before it ever became clear to us, myself as an 14 individual, but also as a Labour Group. 15 Q. As you say, those documents had been shown to you and 16 they're referred to in your statement. You think that 17 information should have been provided. Do you think it 18 would have made a practical difference to the decisions 19 you would have made or the approach you would have taken 20 to the tram project? 21 A. Yes. I think if we had known months and months more in 22 advance, we would have been more pressure -- I have been 23 in administration and then in opposition, and in 24 opposition it's a different position to when you're in 25 administration. 23 1 Also, the Council at that time was very split in 2 terms of that you had an administration that had 29 3 votes and the opposition together had 29 votes. So it 4 was a casting vote of the Lord Provost. So you didn't 5 have administration at that time that was -- you had an 6 overall majority and were very clear. 7 Also, as I say in my statement, as well, is you had 8 an SNP Group who were part of the administration who, 9 part of that agreement was not to support the tram 10 project. 11 So there was quite a fluid situation which, you 12 know, was in the Council at the time, and therefore 13 information -- I think if we'd known a lot more months 14 in advance, then we would have been able to try to, at 15 least in the opposition, put more and more pressure on 16 the administration to deal with it in a different way 17 than they were at that time. 18 Q. Just looking then at the reasons why you might not have 19 information, you have talked about emails were simply 20 things just weren't passed on. Were you ever given any 21 reasons why things were not passed on to you? 22 A. Well, some of them I have only seen since -- in December 23 when I did the interview. Documentation and emails 24 that -- first time I had ever seen them. So I can't 25 answer that because at the time I didn't know that 24 1 information was available and that documents were being 2 circulated that certainly we did not have access to. 3 Q. Were you aware -- you referred there to the difference 4 between the administration on the one hand and the 5 opposition on the other. 6 A. Mm-hm. 7 Q. Is the information provided different to the opposition 8 and the administration, in your experience? 9 A. I can't answer it in terms of whether the people in that 10 time from the 2007 to 2012 had the information I didn't 11 have. You would have to ask them that. But certainly 12 if you are in administration, then you tend to have 13 a closer relationship with the officers, because 14 ultimately there is a convener, you're responsible then 15 for that -- the responsibility, for example, for 16 transport and environment that I was, and therefore you 17 tend to have more information, but officers can be 18 different. 19 There are some officers who will, if you're in 20 opposition, feel it isn't their duty and some who will 21 feel that they will treat you as an individual 22 councillor, and say you are entitled as an elected 23 member representing your constituents and the city to be 24 able to get that information. 25 Q. Looking at that question of obtaining information from 25 1 officers, actually asking them for information or 2 getting briefings from them, is there in fact -- is it 3 easier to get that information in general from officers 4 if you are the administration? You say some are likely 5 to be more co-operative. Is that in practical terms 6 your experience? 7 A. Generally, it would be if -- I suppose I would say and 8 I have put in my statement that that situation from 2007 9 to 2012, and maybe in being in opposition, felt and 10 certainly looking at some of the documentation, we did 11 not receive that documentation. 12 So when I -- and I put this in my statement. When 13 I became the Convener of Transport Environment, I did 14 everything possible to ensure that all elected members, 15 particularly transport spokespeople from all political 16 parties, got all the information regarding the tram, so 17 there was no surprises, and they were briefed and given 18 all the information I was given, because I think that 19 was the way forward. And if you look at, you know, the 20 delivery of -- on the budget, the revised budget and the 21 revised timetable following 2012, which people were very 22 cynical, didn't think that would happen, and it did 23 happen; and I think one of the reasons was that we had 24 all party agreement during that period of time, and as 25 a convener, and I stressed to the directors and to the 26 1 people involved with the tram project, during that time 2 that we needed to ensure that all elected members, but 3 as I say, particularly transport spokespeople of all 4 parties, had all the information in front of them. 5 I think that's only correct and right that they had 6 that. 7 I believe between -- it's my perceptions between 8 2007 and 2012, but particularly 2011 -- 2007 to 2011, 9 I felt that -- I felt and our group felt frustrated that 10 we did not have the information, and often in briefings 11 we just kind of sigh when officers left the room, and 12 just think we are not getting all the information here, 13 and it was very, as I said, frustrating, as a group who 14 had previously and still supported the tram project to 15 be delivered. 16 Q. Just from what you say there, you sighed when the 17 officers left the room. That means a briefing was 18 taking place, but you didn't think it was sufficiently 19 full? 20 A. Yes. Towards -- I would say, 2010/2011, we just felt, 21 all of us in that group felt as if we were not getting 22 all the information. You know, it's very difficult. 23 You can ask the questions. You can put pressure on. 24 You can try to get -- but if you're not getting all the 25 information, and I did say within one of my answers as 27 1 well is that I very, very clearly remember one officer 2 going to give more information, another officer putting 3 his hand on his arm to say, no, you don't need to give 4 that. 5 So that gave very clear indication to me that one 6 officer wanted to give us more information, another 7 officer saying no. So it's very clear in my mind, and 8 other people who were in the room very clear about that 9 as well. 10 So I think we at that moment started to think we 11 were not being given all the information. 12 Q. Can you remember what that subject matter was when that 13 one officer intervened to stop the other speaking? 14 A. I genuinely don't. I can't remember what it was about. 15 Q. But as councillors, if you're faced with that situation 16 as a briefing, even that most extreme example where one 17 officer stops another from speaking, did you press the 18 officer to carry on and ask what he was about to say and 19 why you couldn't be told it? 20 A. Yes, we did. 21 Q. And the answer was? 22 A. Well, basically, he was told that he couldn't say any 23 more, and therefore it was difficult then, if that was 24 the situation, a more senior officer. 25 Q. Did the senior officer give any reason why it was you 28 1 couldn't be given the information or shouldn't be given 2 the information? 3 A. No. Not that I can remember. This is a long time ago 4 as well, quite a number of years ago. But that was why, 5 there's one of the motions and the Council had more than 6 one motion which then did -- a long motion which in fact 7 the Liberal Democrats ended up agreeing to. It's in 8 here as well. Which said clearly we as a Council were 9 frustrated in terms of the way the tram project was 10 going and the information and how we were getting -- we 11 were not getting the right information and that is 12 a motion that was passed by the Council. 13 So, you know, we did everything possible and 14 Andrew Burns, as Leader of the Council, I can remember 15 almost every single meeting of the Council where you 16 have leaders' questions, he would ask, particularly when 17 we were going through the difficulty or challenge with 18 the contractor, he would ask: have you had a meeting 19 with the contractor, how were you pursuing this, 20 et cetera. 21 And therefore, you know, you are out there in the 22 open, in the public, asking all these questions and 23 pushing for answers. And as I say, I may be using the 24 word, but it was frustrating in terms of getting answers 25 to the questions that we were asking. 29 1 CHAIR OF THE INQUIRY: I think you refer to Andrew Burns as 2 Leader of the Council. At that time he was Leader of 3 the Group. 4 A. Sorry, Leader of the Group. Apologies: so much 5 of timescale. Yes, he was Leader of the Group, but the 6 main opposition member. 7 MR LAKE: Did you ever hit upon situations where it was 8 officers of one of the tram companies who was attending 9 and they declined to answer questions put to them? 10 A. Not that I can remember. Just one very clear memory in 11 terms of that. 12 Obviously, again within the statement, there was 13 a lot of briefings, terms of the dispute resolution. 14 And that would tend to be when we did have officers of 15 the tram companies, TIE would come to the briefings, and 16 that was more -- and that was about dispute resolution 17 and quite heated discussions, because, again, we felt 18 that at that time, we would be told that TIE would be 19 winning these dispute resolutions, and it became very 20 clear that was not the position. 21 So at that time, that was when they tended to come 22 to the briefings on that particular period of time 23 regarding the dispute resolutions. 24 Q. Did they answer the questions that you had for them at 25 these briefings? 30 1 A. Well, not fully, I would say. Not for satisfied, no. 2 We felt, I think, that -- well, this is again 3 recollection. We felt -- I'm not quite sure what the 4 words would be, but we felt that the answers we were 5 getting, and then as time went on, it was quite clear 6 that in fact the dispute resolutions were not being won 7 by TIE, but the contractor was winning them, and 8 therefore then we felt we were not being given all the 9 information, and giving a slanted position. 10 Q. So in that situation, you are referring to information 11 you were being given, but you weren't satisfied it was 12 accurate or truthful information? 13 A. Yes. Well, I wouldn't say -- I would just say we 14 questioned whether it was accurate information we were 15 given. 16 Q. You've already referred to the fact, and it is in your 17 statement, that a motion was put before the Council 18 about the provision of information to councillors. Do 19 you have any other remedies you could use to try and get 20 further information when you're being met with 21 a refusal? 22 A. Well, there would be obviously a process in terms of the 23 Andrew Burns as the Leader of the Labour Group would 24 have meetings with the Chief Executive, and I'm sure -- 25 you would have to ask him, but I'm sure -- and it would 31 1 be fed back to us, our concern regarding the way the 2 tram project was going during that period of time. 3 So there would be an opportunity for him on behalf 4 of our group to voice our concern regarding the way the 5 tram project was going and regarding the information 6 that was available to us. 7 Q. You refer to heated discussions over the briefings 8 concerning dispute resolution. Were there other 9 particular areas where you felt you were being denied 10 information? 11 A. Dispute resolution was a particular one I can remember. 12 Also, the issue of Princes Street and the -- wrong 13 concrete and the digging back up of Princes Street 14 again, which if I remember correctly, we only found out 15 on the front pages of papers. 16 So those are the kind of two that I can remember in 17 particular, dispute resolution, the issue of 18 Princes Street, and those are the two in particular that 19 I can remember. 20 Q. Were you faced sometimes with express claims that you 21 couldn't be given information because it was 22 confidential? 23 A. Yes. 24 Q. Did those claims, the refusal to provide information on 25 that basis, affect your ability to do your job as 32 1 a councillor? 2 A. Yes, probably, yes. 3 Q. Nonetheless, is it your view that there is some need to 4 keep information confidential? 5 A. I think within my statement as well, I do say that there 6 is a balance between obviously contracts and contractual 7 issues in particular, and if you're negotiating with 8 a company regarding contracts and finances, et cetera, 9 then confidentiality has to be at that level, but also 10 there is a balance to that as elected members and 11 democratically, if you don't have that information, then 12 it's difficult then to make a decision without all the 13 information. 14 Q. The question then is how to strike a balance between 15 those two competing objectives, isn't it? 16 A. Absolutely, and that is a real -- and again, I can't 17 answer on behalf of people who sat on TIE regarding 18 that, but certainly on a number of occasions, I do 19 remember that people who sat on TIE -- previously as 20 I stated were told it was confidential information, and 21 therefore they should not be divulging that to elected 22 members, and I think that was a frustration and as you 23 say, it is a balance to be struck. 24 But as I said yesterday, I think if people who sat 25 on that board felt that the Council's policies and 33 1 strategies are of concern, then that should have been 2 fed back, I would have suggested, to the Chief Executive 3 and the -- and/or the Leader of the Council. 4 Q. Dealing with the question of dispute resolution, just to 5 be clear, was the confidentiality being claimed in 6 relation to giving you information about the outcome of 7 those disputes, or the thoughts about whether or not 8 they were likely to succeed or the arguments? Can you 9 remember what it was that was said to be confidential 10 about them? 11 A. I don't think it's so much about the dispute resolution. 12 I think it was more about the discussions with the 13 contractor. Dispute resolution, we did have information 14 in terms of the number of disputes there were and the 15 numbers that they believed they would be able to win in 16 terms of dispute resolution. There was some information 17 on that. So I wouldn't quite say dispute resolution. 18 It's difficult to remember from so many years back, 19 but certainly on a number of occasions, but I can't 20 remember all the details, that members of TIE who were 21 councillors were told and had said they could not say 22 because it was confidential, but I think that was more 23 a discussion between TIE and the companies. 24 Q. Do you accept that sort of thing might be sufficiently 25 delicate that it does need to be kept confidential if it 34 1 was going to work? 2 A. I think that's -- you know, I think giving an individual 3 premise, you know, individual example, I don't think 4 I can answer that. 5 Q. Put it in a more general way. The examples were if TIE 6 are considering what approach they want to take to the 7 contractors, a tactic, say, try and get them somewhere, 8 that's the sort of thing they might want to keep 9 confidential because they don't want the contractors to 10 know about? 11 A. That may well be the case, but I don't think that would 12 be appropriate because I think that, as elected members, 13 you would want to have some indication of what -- you 14 might not want to know all the details, but you would 15 want to know what the tactics were in terms of going 16 forward and trying to get a resolution with the 17 contractor. 18 Q. But would you accept that if that's leaked to the 19 contractor, the tactics are likely to lose all effect? 20 A. Yes. And that's when you said it's a balance, isn't it? 21 And it's also about trust as well. 22 Q. I think there were leaks from time to time that you 23 record in your statement, issues with leaks? 24 A. Yes. 25 Q. Presumably that created or was detrimental to the trust 35 1 between the companies and the Council? 2 A. And it does come down to trust, and if information was 3 then leaked to the press, it wouldn't do benefit, and 4 again I'm expecting that if you're sitting on a board 5 and you are doing the best for that board, and you're 6 also an elected member doing the best for the project, 7 then you -- would you wish all of that information to 8 then be in the press, which would then undermine your 9 position in terms of getting a best deal in terms of the 10 company and the Council. 11 Q. We have been discussing for some time now these 12 briefings. I'm looking at both formal briefings that 13 might take place from time to time of your group and 14 informal briefings where you request information. 15 Were written records ever kept of the information 16 that had been provided? 17 A. There were on some occasions -- and I think they are 18 included in the many documents that you have -- there 19 would be -- sometimes there would be briefings where 20 there would be documents or an overhead presentation 21 regarding the position. 22 I have to say there would be notes taken by our 23 staff, but whether they've been kept or not, or they 24 would be mostly people would just take their own notes, 25 et cetera. Those briefings weren't formal meetings. 36 1 The only way they would be officially recorded would 2 be at the Labour Group, when we had a formal meeting and 3 it would be recorded then. But that would be only the 4 decision-making or the discussion that happened at that 5 meeting. 6 Q. Just to be clear about the end of that, you said it 7 would only be the decision-making or the discussion at 8 that meeting. Which meeting are we talking about? 9 A. The Labour Group meetings. We had, as recorded in my 10 statement, as a Labour Group have weekly, what they'd 11 call Labour Group Executive meetings, where conveners, 12 or when we're in opposition, would be the opposition 13 spokespeople, would report on a weekly basis to the 14 Executive, and other members of the group could attend 15 as well. So that would be the opportunity then for any 16 questions or answers, et cetera, and then the Tuesday 17 before the Thursday Council meeting would be the group 18 meeting, a full group meeting. 19 They would discuss any other kind of business or 20 what was -- mostly for the Council meeting that would 21 happen on a Thursday, and often we would meet at 22 9 o'clock before the Council meeting as well, if there 23 was any changes from the Tuesday night. 24 So they were regular Labour Group meetings where 25 there would be an opportunity for all group members to 37 1 ask questions of the spokesperson, and then latterly, in 2 2012, as a convener, I would report to them, give them 3 an update on issues to do with transport and 4 environment, but obviously on the tram project, on 5 a weekly basis. 6 Q. Just dealing with that role that you discharged as 7 convener later on in the project, you said that you made 8 sure information was disseminated so that everybody had 9 the sufficient information. How did you do that? What 10 changes did you make? 11 A. There was a -- following, I think, 2011, I think, there 12 was an oversight group, an all party oversight group. 13 And that was, if memory serves me, from 2012 was chaired 14 by Andrew Burns, and there was an update basically at 15 that group from Sue Bruce, Chief Executive, and 16 Colin Smith, and they would give an overview at that 17 meeting. So all parties were part of that. 18 But also I would ensure that if there was 19 information that I thought was -- would be useful and 20 helpful, and that the opposition spokespeople, I would 21 do it through the opposition spokespeople, I would make 22 sure they had that information, whether that was calling 23 them, emailing them, or getting them all together to 24 discuss it outwith those oversight groups. 25 Q. Just referring again to the All Party Oversight Group, 38 1 where briefings were given to all the parties at once, 2 was that helpful? 3 A. Absolutely. Absolutely. I think between that period of 4 2007 and up to 2011/2012, you know, as I said, it was 5 29/29, and therefore the Council was very split and you 6 had that administration who -- the smaller group, but 7 still SNP Group who did not want anything to do with the 8 tram project, and an agreement between, as I understand 9 it, Lib Dems and the SNP, that they would oppose the 10 tram project. 11 So you had that kind of turmoil. Following 2012, 12 I just really tried to make sure that -- I think all of 13 us, as elected members, felt the reputation of the 14 Council and the reputation of the city had been damaged 15 by the tram project, and we wanted to get that back on 16 track. And we wanted to all make sure, and I found that 17 the opposition spokespeople were helpful, were 18 supportive, because I think they wanted to ensure, like 19 I did, the reputation of the Council and, more 20 importantly, the city, could get the tram -- would make 21 sure that we got the tram on the revised budget and the 22 revised timetable and get it up and running and be 23 successful in terms of financially, and what was set out 24 in terms of passenger numbers and get that up and 25 running. 39 1 Therefore, from that 2012 until up and running, 2 I just ensured that all the spokespeople in particular, 3 and that meant they could then feed back into their 4 group, and having that all party group, I think, just 5 made such a difference of people working together for 6 the benefit of the delivery of that revised budget and 7 revised timetable. 8 Q. I want to talk now about briefings and talks and things 9 like that. Also I want to consider the question of the 10 reports that you were provided in relation to the tram 11 project. 12 Did you have a view on the adequacy or usefulness of 13 those? 14 A. That's a kind of -- I don't know how many reports there 15 were. I'm sure you maybe know. But in general, some of 16 the reports, I would say, if we look at -- in my 17 statement again, and this is coming towards 2011, was on 18 the Haymarket decision, for example, and the decision of 19 the Council at that time to go to Haymarket. 20 I was concerned about the information that was given 21 in the report that went to the Council, and I say in my 22 statement, I can't remember quite what question, but 23 I say in my statement that I was concerned that 24 information would be given regarding passenger numbers, 25 only information that had been asked for Lothian Buses, 40 1 for example, was to go to St Andrew Square at that time, 2 and not go on to Haymarket. 3 So that's one report, I felt concerned that the 4 information that we should have had wasn't robust enough 5 and wasn't full enough for me to feel comfortable. 6 Q. Going back to the reports that you had been given in 7 2007, when the decision was made to go ahead with the 8 project, they feature a number of -- when they have 9 a Final Business Case attached, technical items such as 10 contingency sums, provisional costs, optimism bias and 11 risk. 12 Were these concepts adequately explained to you in 13 the reports or in the briefings? 14 A. I would say at the time, yes. 15 Q. They were? 16 A. And I also want to go back to -- but the comfort was in 17 the Audit Scotland, which is an independent 18 organisation. In 2007 the Scottish Parliament made 19 a decision to fund the tram project and Audit Scotland, 20 independent organisation, gave what I would say a clean 21 bill of health in terms of governance and finance of the 22 project. 23 So I think all of us, certainly myself, felt at ease 24 that an organisation like Audit Scotland had given 25 a report which gave it a clean bill of health, maybe, 41 1 you know, but had -- given that the project was, in 2 terms of governance, robust and financially viable, 3 et cetera, and information. 4 So that gave me comfort, as well as information from 5 the officers, but also from an independent organisation 6 like Audit Scotland. 7 Q. Just looking still a little bit before we move on to the 8 further decisions in 2007 about the role of the Council, 9 you've explained the representation and how finely 10 balanced things were within the Council when the 11 decisions were taken. You said -- it's probably easier 12 to refer you to your statement. If you look at 13 paragraph 54 of your statement which is on page 12. 14 A. Yes. 15 Q. There's a sentence. It begins on the third line there: 16 "There were mistakes, I believe, that were made 17 between 2007 and 2012, in that the tram project did not 18 have all party support. I also often felt during that 19 period that the Lib Dem councillors would only come to 20 the other groups looking for our support very late in 21 the process. For example, they might seek our agreement 22 to a proposal the day before or the morning of a Full 23 Council Meeting. This was unfair because we did not 24 really have the information we needed to make 25 decisions." 42 1 Then you refer to the fact: 2 "From 2012 onwards, as Transport Convener, as well 3 as trying to deliver the ETP on a revised budget and 4 revised timetable, I saw that we had to learn from the 5 previous five years." 6 What I'm interested in is the linking in that first 7 sentence I read out between the mistakes on the one hand 8 and the tram project did not have all party support. 9 Are the mistakes you are referring to simply the manner 10 in which the administration went about getting the 11 support of the other parties? 12 A. I think it was both. I strongly believe that the 13 agreement between the Scottish Liberal Democrats and SNP 14 to go into administration with 29 councillors which 15 then -- if all the opposition voted together, would be 16 the casting vote, the Lord Provost, made it a weak 17 administration, but in my view, made it even weaker in 18 terms of the SNP insisted in the agreement that they 19 would not support the tram project. 20 So therefore I think that undermined the tram 21 project, and if you take the difference between 2007 and 22 2012, when Labour, who were the largest party, went into 23 agreement with the SNP, it was written in that they 24 would deliver the revised budget and revised timetable, 25 the SNP would agree to that as part of a capital 43 1 coalition agreement, and also there was a bigger 2 majority in terms of well over 29. 3 So I think the agreement as set out at the beginning 4 of 2007, I think, made it very weak for the tram 5 project. And I believe, you know, and this is just my 6 experience, is that the Convener, Councillor Mackenzie, 7 would often come the day in the morning at 9.30 when the 8 Council meeting started at 10.00, to try to look for our 9 support and I assume he did the same -- that's 10 assumption on my part -- to other political groups, we 11 were the major largest group in terms of opposition, 12 asking for support for their proposal or their motion. 13 I just felt that was not a very efficient or a very 14 good way to go about making decisions, and so I suppose 15 when I say mistakes at that time, that as Convener 16 I would make sure that all, as I said previously, and 17 I think it's just worth repeating, that all the 18 information and background were given to all 19 spokespeople, and party spokespeople, and they knew that 20 come the Council meeting, in fact all of the time, there 21 was all party agreement all the way forward, or 22 a support for either a motion that would be put forward 23 in terms of a Council decision. 24 Q. Just following that on, if you look at paragraph 56, 25 which is at the foot of this page and goes on to the 44 1 next one, the bit that's on this page is: 2 "We ensured that all of the parties were kept ..." 3 This is while you were convener: 4 "... were kept up to date from 2012 onwards. For 5 example, we set up the Transport for Edinburgh Board and 6 made sure that it was an all party group ... had members 7 from all the political groups. We also had the All 8 Party Oversight Group. As Transport Convener, I kept in 9 contact with all the opposition transport spokespeople." 10 The bit of particular concern: 11 "If there is anything that I have learned from this 12 project, it is that unless you can get all party 13 support, then party politics come into it. That can 14 damage the project as a whole." 15 A. It's such a large project in terms financially, and if 16 you consider other tram projects, which I say within my 17 statement as well, whether it be Nice or Dublin, is that 18 you cannot help but know that tram projects are 19 controversial, and therefore if you can get all party 20 support, I think it just helps with the process, and it 21 helps with the project. 22 I suppose if you don't get all party support, then 23 you do end up -- you mentioned earlier on about leaks to 24 the press, et cetera. Then you tend to then get people 25 who will use the project as a political football, and do 45 1 it as that. 2 For example, I do mention in my statement that there 3 was a by-election in the city centre prior to 2012 4 elections, where the SNP put on every single leaflet 5 that -- I was out campaigning, so I saw the leaflets 6 that they put out: we're very much anti-tram, we oppose 7 the tram. And if you compare that with the 2012, when 8 the SNP Group voted in September, I think it was, to go 9 to York Place, then there was very little mention of the 10 tram project then, and I think then that helped us 11 deliver it. 12 I'm not saying you have to, because all party, but 13 if you can get a majority, and I think when it is 14 projects of that scale, then it is important to be able 15 to do that. 16 Q. That could present quite a significant hurdle for having 17 local authorities implement this sort of project? 18 A. Sorry, I'm not quite -- 19 Q. Could that present quite a significant hurdle for local 20 authorities implementing this sort of project, in that 21 changes in politics, the political balance of a Council, 22 which happens from time to time, could imperil the 23 project part way through? 24 A. Well, except that politicians are elected and they're 25 accountable to their electorate, and the manifestos they 46 1 put forward would put that forward. So therefore, you 2 know, whether you can get all party support is -- I'm 3 saying, you know, it can damage the project, which 4 I think it did, but it doesn't mean that every single 5 project has to have all party support. 6 But what you will find is that within councils 7 throughout Scotland, is that the majority of the 8 decisions are taken on an all party basis. All I'm 9 saying is that if you can get all party support, I think 10 it facilitates and it helps the project. 11 Q. You referred to a situation as happened in Edinburgh, 12 where there was greater consensus after 2012 towards the 13 end of the project. If it happens the other way round, 14 you start with consensus, and then because of a local 15 election, you end up with a weaker majority or you lose 16 your consensus, that would suggest there could be damage 17 to a project in that situation? It could become 18 a political football part way through? 19 A. Yes. Except that it -- depending on -- this is kind of 20 surmising that depending on the political make-up of the 21 Council, and that's why I'm suggesting that if there was 22 a large project like this, if you can, I'm just 23 suggesting, that if you can get all party support, then 24 I think it does deliver the project easier than it does. 25 Yes, it can change, but normally now, rather than 47 1 four years before, you have a five-year term of local 2 authorities, and setting out at the beginning your -- 3 the projects you want to deliver, I think, is important, 4 and you have that period. 5 You could say that about every single service rather 6 than just projects like the tram project. 7 Q. I want to ask you about two passages in your report as 8 to where the balance of control lies in relation to 9 these matters. 10 If you could first look at paragraph 98, which is on 11 page 23 of your statement. 12 It's the last sentence of this. You emphasise that: 13 "Any process of making decisions was for the 14 Council, while the implementation of those decisions was 15 for TIE or TEL." 16 I think you pick up on that at a much later stage on 17 page 169 of your statement. 18 A. Which paragraph? 19 Q. We come to paragraph 688. It's just the sentence at the 20 top. We are missing the first word: 21 "... TIE were taking more policy decisions than they 22 should have done." 23 Right at the very top of page 169. 24 A. Okay. 25 Q. What were the policy areas which you considered TIE were 48 1 trespassing into? 2 A. One, I suppose, is the policy decisions in terms of 3 a direction -- I'm trying to think. In terms of going 4 forward in negotiations with the company, with the 5 contractors. In terms of what -- a policy in terms of 6 how they should be negotiating with that contractor and 7 what -- you mentioned about what type of discussions and 8 what their tactics should be, and I think that was 9 a policy decision rather than just being left for them 10 to do. 11 Q. So that should have been a matter that had gone back to 12 the Council? 13 A. I would say so, yes. I'm just giving that as an 14 example. Again, it's many, many years ago, and to just 15 pick out one policy decision. But I think that you 16 talked about, you know, confidentiality and that, and 17 I think in that middle period of time, and towards the 18 end, was whether TIE were making decisions that didn't 19 really tie up with the Council. 20 Q. I'm just interested in how this matter, in something as 21 ongoing as a commercial negotiation, how that could 22 effectively be reported to the Council so that they 23 could provide input or say what they wanted to do? 24 A. Well, that would be the -- with the Chief Executive and 25 the senior management team of the Council and presumably 49 1 the Leader of the Council, in terms of were they going 2 in the right direction that the Council wished to in 3 terms of policy, and whether that was for the example of 4 tactics in terms of negotiations with the contractor. 5 Q. Right. So you see it's a matter to be dealt with by the 6 Council Executive, rather than the Council members? 7 A. Yes. 8 Q. If you could also look, different passages within your 9 statement. Looking back at the role of the Council. 10 A. Which one? 11 Q. It's at page 78. 12 A. I have just mixed them up now. Sorry, which was that, 13 sorry? Page? 14 Q. It's page 78? 15 A. Okay. 16 Q. In paragraph 322 you talk about the relationship between 17 the Council and the contractors. There's a breakdown in 18 the relationship: 19 "When the dispute was at its height later on, tools 20 were put down and no work was happening, at every full 21 Council meeting there was an opportunity to ask 22 questions of the Council Leader. I remember Andrew 23 Burns, the Labour Group Leader, asking Jenny Dawe, the 24 Council Leader at every Full Council Meeting around this 25 time what she was doing or what actions she was taking. 50 1 It seemed they were doing nothing. The Labour 2 councillors were very frustrated that the administration 3 were sitting back and saying it was nothing to do with 4 them." 5 If you could also look at the following paragraph. 6 If you just look at the bit about six lines up from the 7 end, you record that: 8 "We were therefore very frustrated that there was no 9 political leadership." 10 What did you expect the Council to do? Or the 11 administration, I should say, to do? 12 A. If we're talking about this time, this was the ongoing 13 dispute between TIE and the contractor, and all tools 14 went down. Again, this is memory as well. All the 15 tools went down and nothing was happening. 16 Bits were dug up all over the city and there was an 17 impasse, and there was lots of stuff in the press about, 18 you know, robustness, so I am just giving you an 19 example -- 20 Q. I should have given you context for the passage we 21 looked at. If you look at the previous page, page 77 of 22 your statement; it is the difficulty of putting things 23 on screen like this. 24 A. I know. 25 Q. What we're looking at, it's a consideration by you of 51 1 the Princes Street dispute, which is the one that arose 2 in February 2009, and then you go on to two paragraphs 3 on the following page. 4 What you were crying out for was -- what you were 5 concerned by was a lack of political leadership and 6 I was wondering what it was you expected the leadership 7 of the Council to do? 8 A. If I -- I wasn't the Leader of the Council, but if it 9 was myself, I would have felt the opportunity to go and 10 speak to TIE, first of all, if I felt that they were 11 not -- all tools were down, nothing was happening, 12 then -- I'm only doing this on my view, and I think it 13 was a view of the Labour Group, that the Leader of the 14 Council should have got more involved and actually 15 should have -- as I said, I think, by the scruff of the 16 neck and tried to sort this out, and I would have 17 thought, and this is just my view, was at the time, was 18 that she should have then gone directly to Bilfinger and 19 the other contractors, but Bilfinger was the main 20 contractor, to try to resolve the dispute, because it 21 was obviously not being resolved by TIE. 22 Maybe that's undermining of TIE, et cetera, but at 23 the time, and I can only reflect on the time, is that it 24 seemed to go on for months and months, with no way 25 forward, and I think at the end of the day, the Leader 52 1 of the Council and the administration should have put 2 a more on hands kind of approach. 3 I think that was the -- this is again recollection 4 of Andrew Burns and our group was that -- she was the 5 Leader. Jenny Dawe was the Leader of the Council and 6 the Convener of Transport and what were they trying to 7 do to resolve it, and I can't tell them what to do, but 8 I just felt that the answers were: that's not up to me, 9 almost like, I'm only the Leader of the Council; 10 and I felt there was no action being taken by them. 11 Maybe there was action being taken, but it certainly 12 didn't come over at the Council. It was like, well, you 13 know: we are waiting for -- TIE is dealing with the 14 contractor and it will all be sorted out; but there was 15 like no action, and Andrew Burns would ask: what action 16 are you taking as Leader of the Council? And the answer 17 that came in, I can't verbatim say it, but the answer 18 that seemed to come back, and our perception was no 19 action. 20 Q. That sort of, as you described it in your statement, 21 taking by the scruff of the neck and going and 22 approaching the contractors directly, is that not the 23 exact undermining the whole purpose of having an arm's 24 length company? If you just do away with the company 25 and manage it direct from the Council? 53 1 A. That's ultimately what happened. That's ultimately what 2 happened towards the end of the project, that TIE were 3 wound up and the Council took it back in-house, 4 and I suppose what I'm suggesting, would that have been 5 more appropriate to take it earlier on, rather than 6 having months and months of that protracted kind of 7 discussion. And that is about a judgment to make, and 8 I'm just saying from our group's perspective, and 9 certainly Andrew Burns' perspective, was that the Leader 10 was sitting back and the Convener and not taking action 11 to try to resolve the situation. 12 Q. If it might have been appropriate to take control, to 13 take it back in-house earlier on, might it have been 14 appropriate to have that it that way from the very 15 outset? 16 A. I can't answer that. It's history. It's -- at the 17 time, back to -- at the time, it was deemed appropriate 18 to have TIE as an arm's length company for the delivery 19 of that project. We could go back to the reasons for 20 that, and that was honoured at that time, so that was 21 deemed as being appropriate to be able to deliver that 22 project. 23 Q. But by -- 2009 -- 24 CHAIR OF THE INQUIRY: I think in fairness, TIE wasn't 25 created only for the tram project. There were other -- 54 1 there was transport initiative, which are a series of 2 projects, and the impression I got from reading some of 3 the material at least was that TIE was set up to bring 4 into effect a lot of different projects, although the 5 tram project was by far the most significant. Is 6 that -- 7 A. That's correct. That's correct, yes. 8 MR LAKE: Moving on to a different matter, I want to 9 consider the governance structure of the tram. 10 Can you remember who the various companies and 11 organisations were, involved in the delivery of the tram 12 project? 13 A. In terms of the companies or -- 14 Q. Yes, companies and -- entities outwith the Council. 15 A. Well, obviously there's the contractor which was -- you 16 mean Bilfinger, CAF and Siemens, but Bilfinger were the 17 main contractor so the three of them were part of 18 a consortium. There were also other consultancies in 19 terms of latterly Turner & Townsend and I can't remember 20 all the names, but there were obviously people who had 21 been involved with other tram projects as well that were 22 brought in as consultants and expertise. 23 Q. I was thinking more of the client side when the project 24 was first established, 2007/2008? 25 A. Transdev, you mean as well? 55 1 Q. You had Transdev. You had TIE. Do you know which other 2 companies were involved on the Council side? 3 A. I'm not sure. It goes back to 2007. So ... 4 Q. Were you aware of Transport Edinburgh Limited and its 5 role? 6 A. Yes, it was very much seen as being a minor role. As 7 I can remember at the time. 8 Q. The Tram Project Board? 9 A. Yes. 10 Q. What was its role? 11 A. Its role was to bring in, for example, Transport 12 Scotland officers who had some expertise, and also 13 Lothian Buses, to bring in obviously their expertise in 14 terms of the delivery of a public transport system in 15 the city. And obviously they were 91 per cent owned by 16 the City of Edinburgh Council as well. 17 Q. That's Lothian Buses are owned by 91? 18 A. Yes, 91 per cent. It's 100 per cent publicly owned, 19 it's 91 per cent by Edinburgh, and then the other local 20 authorities make up the other 9 per cent. And obviously 21 they were key in terms of their very good reputation of 22 delivery of a public transport owned company. 23 Q. And then of course you had the Council and its 24 sub-committees as well? 25 A. Yes. 56 1 Q. Were you happy that there were so many different bodies 2 involved? 3 A. I can't answer that in terms of back to that length of 4 time. 5 Q. Were you happy at the time? Do you recall any concerns 6 on your part at the time? 7 A. No, I don't. I mean, I suppose if you do go back to the 8 Audit Scotland Report, they believed in that time, in 9 2007, that the governance process -- if you've got the 10 document, I did say that it was -- the governance set up 11 in their opinion was robust. So therefore I wouldn't 12 have concerns if that Audit Scotland report was saying 13 in 2007 that the governance, which is part of the 14 Council and the outside organisations was robust in 15 terms of the tram project. 16 Q. I think at the time of that Governance Report, Transport 17 Scotland was still involved in the governance, and you 18 will be aware that Transport Scotland, during 2007, 19 withdrew from the governance of the project? 20 A. Yes. 21 Q. Did that cause you any concern? 22 A. Yes, but at the time I wasn't aware of it. It wasn't 23 until I think there was a Freedom of Information request 24 that it became clear that -- and this is again memory -- 25 that John Swinney had instructed, as I understand it, 57 1 whether that's the word or whatever, but had told 2 Transport Scotland to withdraw from the Project Board 3 and it was -- some of those ones. I think I do say in 4 my statement, I think that was one of the reasons 5 perhaps I think it was detrimental to the project. 6 Q. Do you know which one of these various bodies actually 7 had the responsibility to execute the tram project? 8 A. Ultimately the Council sets the policy and the strategy, 9 but to deliver it would be my understanding, would be 10 TIE. And obviously TEL and perhaps that, you know, 11 having the two organisations, but there was, you know, 12 this is again -- unless you can show me, it was very 13 clear what the responsibility of TIE was, and what the 14 responsibility of TEL was. 15 Q. We will -- I want to come to look at the Final Business 16 Case in a little while, but firstly taking a little look 17 at TIE and the rationale for that in your statement. 18 Could you look at page 26 of your statement. I want to 19 look at paragraph 111 with its subparagraphs. You set 20 out there what you believe were the four important 21 reasons for the creation of TIE. 22 Just looking at the first one, first of all, is that 23 it allowed party scrutiny of the project because there 24 was representation of all political parties, apart from 25 the SNP. 58 1 Do you consider that that objective was met? 2 A. Probably not. But I think that's difficult for me to 3 answer. It's more -- I think it would be more for 4 people who sat on that board to believe. All I'm saying 5 is that in my view was one of the reasons, and I can't 6 answer that since I wasn't part of that board. 7 Q. Did you feel it was being subject to scrutiny by your 8 party while it was going on in those early stages? 9 A. Yes, and it then comes back to the previous question 10 about confidentiality, and we got reports from the 11 people who were on the board, but a lot of it was about 12 confidentiality, but they did report back in terms of 13 giving assurances that on certain issues, and that was 14 over a long period of time as well. 15 Q. The second important reason was said to be management 16 ability. That's buying in management ability for the 17 project. 18 In your view, was that objective satisfied? 19 A. I think -- this is just my view, and I think it was 20 a lot of elected members' view, is that a lot of the -- 21 a lot of management changes happened. I can't remember 22 how many Chief Executives there were. And changes in 23 the personnel at TIE and TEL, and therefore I would 24 probably say not, because the changes that seemed to be 25 people left and new people came in, and I don't think 59 1 that's very -- it's not very good in terms of stability 2 of the management and giving confidence to the people 3 who worked within the organisation. 4 Q. The third reason you look at is the opportunity to 5 engage non-executive directors who were not councillors 6 with experience of trams, transport projects, 7 construction and those types of areas. 8 Now, do you consider that TIE was successful in 9 engaging non-executive directors who had experience in 10 those areas? 11 A. My memory served me at the time, the individuals' names 12 did have experience, and were brought in for that, and 13 that was my memory at the time, and that there were 14 people who had a reputation and at that time was 15 reasonably happy with the individuals at the beginning. 16 But as you know, there was changes in the non-execs as 17 well. 18 Q. Finally, the opportunity and capability to review 19 funding for the projects. Did TIE engage that? Is that 20 still a justification for its existence? 21 A. Well, also, as well, is that when -- I haven't put it in 22 there, but perhaps one of the issues -- I know that one 23 of the issues was whether funding could be facilitated 24 from other organisations, whether it be European funding 25 or other ways of getting funding in as well. The 60 1 Council might not be able to do, but TIE would have that 2 opportunity to use some of their expertise as 3 non-executive directors, and some of the people that 4 were there to bring in funding that would help the 5 project as well. Not just that project, but as 6 I previously mentioned, other projects as well. 7 Q. Was the performance of TIE -- are you aware of the 8 performance of TIE being subject to any review? 9 A. No. 10 Q. Would that have been useful? 11 A. Yes. 12 Q. Was there any examination of the track record or 13 previous experience of TIE on other projects before they 14 were engaged to do the tram? 15 A. If my memory serves me, no. 16 Q. I think it's established that the approval of the tram 17 project, the ultimate decision to go ahead, took place 18 in December 2007. I'm just interested to establish what 19 was being weighed up by the Council at that time? 20 Because the money that the Council were being asked to 21 expend was 45 million maximum. 22 A. Mm-hm. 23 Q. In return for that, they were getting something which 24 would have a benefit in the region of GBP545 million 25 because of the Scottish Government contribution? 61 1 A. Mm-hm. 2 Q. Did that not make really as far as Edinburgh were 3 concerned, the benefit of the trams was always going to 4 be far exceeded by the city's contribution? 5 A. Yes, because the Scottish Government had made a -- 6 sorry, the Scottish Parliament had made a decision to 7 allocate 500 million and the project at that time, for 8 both line 1a and line 1b, was to be around about that 9 745 million and the contribution from the Council was 10 45 million, but the contribution from the Scottish 11 Government was 500 million. And obviously the advantage 12 of that, and being able to deliver earlier on, I talk 13 about what the benefits are, but deliver publicly owned 14 public transport, and a different mode of transport in 15 the city, was seen as an advantage for the city. 16 Q. The benefit to Edinburgh was always going to be greater 17 than GBP45 million? 18 A. The benefit to Edinburgh would be to bring in a new 19 publicly owned public transport system and part of it 20 was also how it would integrate with Lothian Buses as 21 well, which I said previously, is 91 per cent, but 22 wholly owned by the Council. So 91 per cent and to have 23 an integrated public transit system. 24 We, as a city, were growing. We have a fantastic 25 Lothian Buses, and increased public transport use in the 62 1 city at that time as well and it's growing, and the 2 challenges we have in terms of congestion, in terms of 3 getting more people on public transport, and the 4 advantage also in terms of a tram is that you will get a 5 mode shift. There was a lot of discussion regarding 6 that, in that people who perhaps might not use a bus 7 would use a tram, and that was an experience from other 8 cities. 9 So the benefit of Edinburgh financially, yes, but 10 also the benefit of increasing use of public transport 11 and integration with Lothian Buses was seen as an 12 advantage for the city. 13 Q. And all these advantages flowed to the city were just 14 a maximum -- intended maximum of GBP45 million? 15 A. Yes. 16 Q. So because of the contribution from the Scottish 17 Government, the GBP500 million, it was almost 18 a no-brainer for Edinburgh to say yes, this made sense 19 for Edinburgh? 20 A. Well, if you take -- obviously you take the principles 21 of what the reasons why you're -- why the project, you 22 want to do it in the first place, and how you finance 23 it, and obviously how it stacks up in terms of, you 24 know, the benefit, but also, yes, if you're going to get 25 500 million out of a 545 million project, then that 63 1 would obviously be advantageous for the Council and the 2 city. It's an investment into your public transport, 3 not directly from the Council, but from the Scottish 4 Government. 5 Q. Looking back at 2007, trying to do away with hindsight, 6 how important was it to the Council that the 7 GBP45 million should not be exceeded -- their 8 contribution? 9 A. I would say it was pretty important because we had lots 10 of other challenges in terms of education, in terms of 11 school buildings, in terms of leisure facilities, in 12 terms of investment in our roads, and investment in 13 other projects. And therefore I would say that at that 14 time, and we were given assurances that when the 15 contract was signed, that it was a 95 per cent -- it 16 sticks in my head very clearly, as I probably say quite 17 often in my statement, 95 per cent fixed price, and 18 therefore our assumption with putting in contingencies, 19 et cetera, that we would not be asked for any more than 20 the 45 million. 21 Q. If I could ask you to look at page 35 of your statement, 22 please. 23 A. 35? 24 Q. 35. 25 A. This is getting mixed up now. Okay. 64 1 Q. At paragraph 151 and its subparagraphs. You refer to 2 the significant risks facing the project. The first one 3 there is the advance utility works, and you note in your 4 statement that this was a big concern for the Labour 5 Group. What was the concern? 6 A. Well, as I also say in my statement, that Edinburgh is 7 a very old city, and the issues were when you start 8 digging up what you will find. I think you did find 9 quite a few interesting past burial grounds et cetera 10 and that as well. So what were you going to dig up. 11 But also it was very clear there was not a clear map 12 of where all the utilities were situated as well. So to 13 me that was -- and the Labour Group was a risk in terms 14 of the utility works and ensuring there was enough 15 contingency in the budget to ensure that, because it's 16 not something you can anticipate. You can do some kind 17 of preparatory work, but it wasn't something you could 18 anticipate. And that's why -- this again memory -- is 19 there was lots of questions about contingencies in terms 20 in ensuring there was a large enough contingency in the 21 budget to ensure if there were challenges in terms of 22 when you dug it up, or where the utility works were, and 23 what these changes were. 24 Also you will have the working with utility 25 companies as well. 65 1 Q. The second risk you refer to is changes to project scope 2 or specification. Were you given any information about 3 what could be done to try and address that or prevent 4 that? 5 A. Well, particularly is design issues. And I think it 6 came very clear to me during the project, probably not 7 at this time you are asking me the question, but to my 8 experience, and particularly if I go back to very early 9 on in the EICC, that what I was very much taught then is 10 that you must have your design issues sorted out really 11 totally before you sign any contract, because after 12 that, then that's when you get into difficulties in 13 projects that I have been involved with, where every 14 single design issue is nailed down before you sign 15 a contract, it's absolutely crucial. 16 So that's why I'm saying that that project scope or 17 specification, but particularly the link to design 18 issues needs to be, and at that time, was given 19 assurances that was the case. 20 But it's obviously clear from the documentation that 21 I have been shown in December last year that in fact 22 that was not the case. I think it was only 40 per cent 23 of the design issues had been resolved, but I was not 24 aware of that at the time and I was only aware of that, 25 the December last year, when the documentation and other 66 1 information was given, but at the time, you know, 2 I would have asked them, I am positive I would have 3 asked the questions because of my experience on other 4 projects, design issues are absolutely crucial in terms 5 of delivering the project on your time and on budget. 6 Q. You referred there to the figure of design 40 per cent 7 completed. What difference would it have made to you if 8 you had known that back in December 2007? 9 A. I wouldn't have been happy to sign a contract. 10 Q. This is inviting a little bit of -- are you aware what 11 the response might have been of your fellow councillors 12 if they were aware that it was only 40 per cent 13 complete? 14 A. I think they would have been similar, because many of 15 them had experience of other projects and had sat on 16 other board, but also had experience as conveners at 17 that time. The group had experienced councillors who 18 had been either convener and responsible for projects 19 and they would have been, I'm assuming, similar to 20 myself in terms of design. 21 Q. Could we look at the following paragraph, please. 22 That's 152. Particularly the second subparagraph of 23 that. This is in relation to maintaining control of the 24 capital cost of the project, certain steps would be 25 taken and the second was: 67 1 "Negotiations with bidders should continue with 2 a focus on achieving a high proportion of fixed costs in 3 the final contracted capital cost." 4 It's an obvious question, but what did you 5 understand by the expression fixed costs? 6 A. 95 per cent fixed costs. 7 Q. That was the number of costs that were fixed? 8 A. Yes. 9 Q. But what did it mean to have a cost fixed? 10 A. It meant that the budget would be 95 per cent fixed 11 cost, which would mean that the budget would be then 12 including contingencies, but the 95 per cent was fixed 13 cost, which meant all the designs were sorted out and 14 the costs, then the budget would not exceed the 15 545 million. And that's my understanding and as I say, 16 the 95 per cent is fixed in my head, that these were 17 fixed costs so we would not go over the 545 million. 18 MR LAKE: My Lord, if there was going to be a morning break, 19 I'm going to go on to another document now. 20 CHAIR OF THE INQUIRY: We will adjourn until 11.20 for 21 a break. 22 (11.01 am) 23 (A short break) 24 (11.20 am) 25 CHAIR OF THE INQUIRY: You're still under oath. 68 1 A. Yes, thank you. 2 MR LAKE: Thank you, my Lord. 3 Just before we broke, I said I was going to refer to 4 another document. But there's just something I would 5 like to pick up from matters you were discussing this 6 morning. You mentioned that when you were being given 7 briefings by Council officers, claims for 8 confidentiality were made from time to time. 9 Can you recall now which Council officers said that 10 matters were confidential? 11 A. I mean, we had how many briefings. Probably, you know, 12 tens if not hundreds, but probably coming up to that. 13 I think it was, to be honest, it was more the people 14 who sat on the TIE at TEL Boards, the elected members, 15 who had said that it was confidential and they couldn't 16 give some more detailed information. And if -- the 17 majority of the people who briefed, it would be 18 Tom Aitchison, the Chief Executive, Donald McGougan and 19 the Director of City Development and Corporate Services. 20 They were the four main people who would normally brief 21 us. I can't -- you know, in terms of the number of 22 briefings, name one individual or all of them or 23 whatever in terms of confidentiality. 24 Q. The same problem may arise in relation to my next 25 question. 69 1 In addition to briefings you might get from the 2 directors, the councillors who were directors on the 3 company, did you get briefings from other directors of 4 the companies or from the officers of those companies 5 where they said they couldn't disclose matters because 6 of restrictions on confidentiality? 7 A. I don't -- I genuinely don't remember, what the 8 individuals, et cetera, but there was times when people 9 would say they couldn't say because it was confidential, 10 and because of the negotiations with the contractor, and 11 they didn't feel they could give that information, 12 because I think they believed that it may well end up in 13 the public domain. 14 Q. I understand. Now if I can turn to the document which 15 I said I was going to look at. It's got reference 16 CEC02083536. 17 You can see from the title page of this that it's 18 for -- it's item or a paper, a presentation that was 19 going to go forward to a meeting of the Council taking 20 place on 25 October 2007? 21 A. Mm-hm. 22 Q. If you can just take it from me, that by that time you 23 had the first version of the Final Business Case had 24 been made available. 25 I just want to ask you first of all, although it was 70 1 a long time ago, can you remember who gave this 2 presentation to the Council? 3 A. I don't remember, but normally it would be the person to 4 sign off the documentation would be the Chief Executive, 5 Director of Finance and Director of Corporate -- 6 Director of City Development, but ultimately I would 7 assume at that time it would be the Chief Executive. 8 Q. If we go on to the next page, and rotate it, you can see 9 just the title page, explains that this does relate to 10 the presentation, it does relate to the Final Business 11 Case. 12 Then if we go to the following page, and rotate it 13 once again, you can see under the heading of June 2007, 14 one of the matters noted is the review of the tram 15 project by Audit Scotland, and there are two quotations 16 or sound-bites from that relating to financial management 17 and procurement strategy. And you have already 18 explained to us this morning the reliance you placed on 19 that. 20 What I want to ask you about, is if you look at the 21 foot of the page, under September 2007, you will see 22 there's reference to a further external audit being 23 carried out by OGC, that's the Office of Government 24 Commerce, confirming project status green. 25 Were you aware of that at the time? 71 1 A. If it was a presentation to the Council, then I would 2 have read the reports and we would have had a briefing 3 before. So if it's on the report, then I suppose Audit 4 Scotland was more what I was looking at and the two 5 quotes that are there, but if it's in the document, it 6 would have mean then, it would have given me and other 7 members of the Council comfort that the status was green 8 as well. Which would mean, presumably green means it's 9 okay. It was robust, is the word I would probably use. 10 Q. I know it's a long time ago once again, but do you 11 recall ever having seen the report from the Office of 12 Government Commerce? 13 A. I genuinely don't know. I can't remember. I'm assuming 14 if the preparation was there, then the documentation -- 15 this is where it's very difficult to work out the 16 timeline because towards either the end of the project, 17 but certainly after 2012, there became a process, 18 particularly under Sue Bruce, there was a process which 19 would be before this, but there was a process where 20 elected members could go into what's called a data room, 21 and there would be an officer there. You would sign in, 22 and you would be able to see all the documentation, the 23 back documentation, and I don't know whether that was 24 the case then or not, but certainly after 2011/2012, as 25 I say, there was a data room where elected members could 72 1 go in and see all the papers and be -- ask -- a large 2 number of documents and ask questions. 3 Q. Was everything placed in the data room or were there 4 some restrictions? 5 A. Most -- I would say my recollection is all of the 6 documentation was in the data room, but you had to sign 7 a document saying that it was -- you would not repeat 8 outwith and you couldn't take copies and things, but 9 everything -- as far as I can remember, that was after 10 I would say, this time. I'm not sure if we had a data 11 room then or not, but certainly towards 2011 and 2012 12 onwards, and it still continues to this day, there's 13 a data room for the current position regarding the 14 extension of the tram where every elected member can go 15 along and have a look at all the documents, and that's 16 my recollection, that all the documents were available. 17 Q. In the period 2007 to 2011 there were concerns about 18 leaks. 19 A. Mm-hm. There's always concerns about leaks in 20 a Council. 21 Q. But notwithstanding that, from what you are saying, 22 everything is made available. People sign an 23 undertaking not to disclose it, but -- 24 A. If my memory serves correctly, I do not think it was at 25 this time, but it became basically after -- this is my 73 1 recollection. And Sue Bruce and Alistair Maclean is 2 that they then had a data room that you could have all 3 the documentation, and maybe that was a lesson from 4 previous -- you would have to ask them but certainly as 5 an elected member, I have been to data rooms for 6 different projects, but particularly the tram one where 7 all information, all the appendix, all the information 8 was available for you to request and to have a look at 9 and ask questions to the person that was sitting there. 10 Q. Just going back then to 2007, could we go forward in 11 this document to page 14. 12 We can see there that the second last bullet point 13 refers to 99 per cent of the costs now firm, fixed or 14 based on agreed rates. 15 How important was that to you in being faced by this 16 in October 2007? 17 A. Very important. I think -- I'm not quite sure why it 18 changed from 95 to 99, but certainly that gave, as an 19 elected member, kind of a comfort that we were going to 20 bring in the project on the budget. 21 Q. If you go to the following page, the second bullet point 22 there notes that if the programme and scope are adhered 23 to by the Council and TIE, very limited exposure to cost 24 overrun. 25 Once again, what importance was attached to that 74 1 when you were considering this at this time? 2 A. Very important, yes. Obviously you're looking at the 3 timescale and budget, are the two important points of 4 the project, and obviously quality as well, but you're 5 obviously wish it to keep within the budget. But also 6 delays as well in terms of whether it's financial or 7 whether its timescale is very important, because of the 8 disruption in terms of for businesses and for the 9 public, and therefore I think that's really probably 10 saying financial, but both were quite important. 11 I presume based on no major delays means delays in terms 12 of timescale and cost overruns probably means financial. 13 I read it as that. 14 Q. Yes. Then look at another document. This is at 15 CEC01395434. You will see this is the Final Business 16 Case Version 2, dated December 2007. Do you recall 17 seeing this document round about the time? 18 A. If my memory serves me correctly, it would have been -- 19 if it's a Final Business Case Version 2, it would have 20 been presented as a briefing. 21 I'm not sure if this was presented to the Council as 22 well or was it just for a briefing? I don't know 23 because it doesn't really have details of whether it's 24 Council report or whether it's a briefing report. But 25 it would be one or the other. 75 1 Q. What might make it clear is if I go to another document, 2 which is CEC02083448. 3 A. Okay. 4 Q. This is a report to the Council for a meeting on 5 20 December, recommending approval of the Final Case 6 that's been prepared. So this is I think what would go 7 with the Final Business Case -- 8 A. This one had obviously definitely gone to the Council, 9 so it would be seen by us all as elected members, but 10 the problem is that previous document, unless it was, 11 I suppose, put down as briefing to elected members, 12 I wouldn't -- because there were so many briefings and 13 so many papers, I can't say whether it definitely was or 14 whether it was just to other people. I don't know. 15 Q. If you look at page 4 in this document, which we have on 16 screen, in paragraph 5.1 we can see that Final Case 17 Version 2 is included as a background paper to this 18 report. 19 A. Okay. 20 Q. And reflects no material. So that would seem to record 21 the document that we saw before had gone to Council. 22 Can we go back to looking at the Final Business 23 Case. That was CEC01395434. 24 Without having to go through every page, if you take 25 it from me, it's over 220 pages long, this report? 76 1 A. Okay. 2 Q. Did you have an opportunity to consider this in detail, 3 read it fully before the meetings took place to consider 4 the position? Make this decision? 5 A. Did you say this was part of a appendix? 6 Q. This was the appendix to the report? 7 A. Well, if it was an appendix to the report, then the 8 appendix would be available for elected members to -- 9 whether it was included -- because we are going back to 10 2007. And I'm not sure if everything was on computers 11 by that time or it was paper. But mostly at that time 12 it would be paper. So if the appendix was there, then 13 you would have an opportunity to go through it, and as 14 I explained, we would have before the Council meeting on 15 the Thursday, the Labour Group meeting on the Tuesday 16 evening, and obviously there were times when -- and 17 I can't say this is the case or not. There was times if 18 this was extremely important, obviously, Final Business 19 Case, you might have the officers at the beginning of 20 the Labour Group meeting, and I would expect it to go in 21 detail as part of the discussion of the Labour Group 22 about the Final Business Case. And would have read the 23 document. 24 Q. Was it your experience that members would read through 25 the document in full, or would they rely on the briefing 77 1 that was being given by the officers? 2 A. It's a mixture. It's down to the individual. Obviously 3 this is really important because it's the Final Business 4 Case to be signed off by the Council. So I would expect 5 all elected members to have read it in detail, and 6 obviously if you've got a briefing, that briefs as it's 7 called, it's a briefing. So you get an overview, but 8 I think an important document as this, I would have 9 expected all of the elected members to read the 10 document. 11 Q. Go forward to look at section 6 of the report, which 12 begins on page 84. You can see the heading, 13 "Governance", at the top of the page. If you look at 14 paragraph 6.4, it notes: 15 "The structure deployed in this period to mid 2007 16 is described in the following sections and highlights 17 the following four key bodies, the roles of which are 18 represented in two figures which are on the following 19 page." 20 But we have got the TEL Board, Transport Edinburgh 21 Limited, the Tram Project Board and then two 22 sub-committees of the Tram Project Board. 23 A. Mm-hm. 24 Q. Were you surprised, do you recall why it was that TIE 25 was not by that time regarded as one of the key bodies? 78 1 A. I genuinely can't remember and don't know. But looking 2 at it now, and I can only look at it now, then yes, it 3 does look a bit peculiar. 4 Q. If we jump forward then to page 91 of this, and we look 5 at paragraph 6.32, it notes that the TEL Board is 6 focused on its overall responsibility to deliver an 7 integrated tram and bus network for Edinburgh on behalf 8 of the Council: 9 "It will make formal recommendations to the Council 10 on the key aspects of the project." 11 Did you understand that that role of making 12 recommendations to the Council had switched to TEL by 13 that stage? 14 A. Not aware of that. 15 Q. At paragraph 6.38, towards the foot of the page, we can 16 see that it is envisaged that certain of the elected 17 members of the TIE Board and its independent 18 non-executive directors will join, if not already 19 members, the TEL Board or the Tram Project Board, 20 including specific sub-committees, to ensure consistency 21 of approach and utilise relevant experience 22 productively: 23 "The redeployment of the elected members and the 24 independent non-executive directors will reflect the 25 emphasis of the TEL Board on oversight on behalf of the 79 1 Council of matters of significance to the elected 2 members in relation to the project delivery and 3 preparation for integrated operations ..." 4 Two: 5 "... the emphasis of the Tram Project Board on 6 delivery of the tram system to programme and budget and 7 the preparation of integrated operations." 8 It seems to me there is a lot of emphasis there that 9 it will be the Tram Project Board responsible for 10 delivery of the tram system to programme and budget. 11 Does that reflect your understanding at the time of how 12 it was to be done? 13 A. My understanding was that both TIE and TEL had a job to 14 do. But the Transport Project Board had, for example, 15 as I understand it, at the time, had Transport Scotland. 16 I don't know when they came off it, but they were 17 Transport Scotland and Lothian Buses and other people 18 that were on that Transport Project Board which would be 19 more for the delivery in terms of their expertise and 20 knowledge. 21 Q. So if you look over the page, if you look at 22 paragraph 6.45 on the following page, you can see it 23 says that the Tram Project Board maintains its role as 24 the pivotal oversight body in the governance structure: 25 "The Tram Project board is established as a formal 80 1 sub-committee of TEL with full delegated authority 2 through its Operating Agreement to execute the project 3 in line with the proposed remit set out in section 6.32. 4 In summary, the Tram Project Board has full delegated 5 authority to take the actions needed to deliver the 6 project to the agreed standards of cost, programme and 7 quality." 8 If the Tram Project Board has that full delegated 9 authority and is there to execute the project, what did 10 you understand the role of TIE to be? 11 A. TIE was the overall organisation to presumably 12 scrutinise and -- the Transport Project Board would then 13 feed into the TIE Board as well in terms of an overview 14 of delivery. 15 Q. It's just that the start of that paragraph, we saw that 16 it said that the Tram Project Board has its role as the 17 pivotal oversight body. I'm just wondering if the Tram 18 Project Board is the pivotal oversight body and is also 19 the one executing the project, what is left for TIE? 20 A. My understanding at the time with the information I was 21 given at the time was that TIE was the overall, and they 22 appeared to be the ones who would be part of the 23 briefings and were seen as the organisation where they 24 had elected members and other non-execs on it, would be 25 the ones that would be having the oversight and 81 1 delivery. Not so much delivery, but the oversight and 2 scrutiny, which would then feed in. 3 So perhaps the TIE's -- I'm just surmising in terms 4 of at that time. The TIE would be the organisation that 5 would feed into the Council, and report to the Council 6 what the delivery of the project and design matters, 7 et cetera, would be. The Project Board. 8 I'm just -- you know, this is back to 2007, and as 9 you say, quite a few hundred pages of reports, 10 and I would expect the people and the elected members 11 who were on the TIE and the TEL Boards, but the TIE 12 Boards in particular, to feel comfortable that this was 13 a way to go forward. 14 Q. So I think what you are describing there, a certain 15 reliance on the people who are closest to the companies 16 to be comfortable with what was happening? 17 A. Yes. And also you have the conveners and the 18 spokespeople, and you can rely on them as an elected 19 member to keep you up to date as well. If you do all 20 the reports, what you would expect them to highlight any 21 changes or any issues that they may well think is 22 appropriate, and that's what you would expect, that 23 spokesperson or convener to be able to keep elected 24 members up to date, but also if they were a member of 25 that board, to at least say -- this is going back to 82 1 2007 -- if there was changes, what were the reasons for 2 the changes and what was the positives. What was the 3 reason for the changes. 4 Q. If you go forward -- we will start with page 97, just to 5 get some context. 6 I'm going to section 7 of the report now where it's 7 dealing with procurement. 8 If we then turn to page 104, you get to discussion 9 of the SDS contract. I think we understand that's the 10 design contract that had been awarded to Parsons 11 Brinckerhoff. 12 Under that heading, if you look over the page to 13 paragraph 7.53, you can see there it says: 14 "The original assumption was that overall design 15 work to detailed design would be 100% complete 16 when the Infraco contract is signed. Due to a number of 17 delays, largely outwith TIE's control, this is now not 18 achievable. However, by identifying key risk areas and 19 prioritising SDS activities, TIE is completing several 20 key elements of the detailed design in time to inform 21 the Infraco bids on price critical items. This has 22 enabled the Infraco bidders to firm up their bids based 23 on the emerging detailed design and thereby reduce the 24 provisional scope allowances and design risk allowances 25 that they would otherwise have included." 83 1 Now, I think you've said earlier that you thought 2 the design was going to be 100 per cent complete at the 3 time. We're told here that it's not 100 per cent 4 complete. Were you told how complete it was? 5 A. I don't remember from that time, but I'm assuming there 6 would have been questions. If it wasn't 100 per cent, 7 what percentage. But if -- in that paragraph also, it 8 does say there's completing several key elements of the 9 detailed design in time. So you would expect, if that 10 several key elements, it would be quite a high 11 percentage. My assumption at that time would be there 12 were questions asked about what the percentage -- 13 I can't remember, but if it was an example, I only found 14 out last December, it was only 40 per cent, I think, 15 most of us would have been extremely concerned. 16 I assume that it wasn't 100 per cent, but it was by that 17 wording, which is there, several key elements are there. 18 In time to inform the bid, you would have expected that 19 was key elements, then it would be quite a high 20 percentage. But I can't remember what percentage at the 21 time. 22 Q. You can't remember what you had in mind reading this at 23 the time? 24 A. I would have thought, if it was a key element, we would 25 be looking at, you know, probably 80, 90 per cent. If 84 1 it wasn't, then if that was the answer that would be 2 given, I would be then concerned. 3 Q. Jump forward then to page 109. We can see part way down 4 the page, "Activities under MUDFA". If we look at the 5 paragraph at the foot of the page, 7.78, we can see that 6 it was reported to you that: 7 "The physical diversion of utilities commenced in 8 July 2007 and is scheduled to end in winter 2008. This 9 will result in the majority of utilities diversion works 10 being completed prior to commencement of on-street works 11 by Infraco. This means that potential conflicts between 12 the utilities and infrastructure works will be 13 minimised, and any remaining time overlap can be managed 14 so as to avoid programme conflicts on the ground. To 15 date work has commenced on some of the most congested 16 sections, such as Leith Walk, and is expected to be 17 complete on cost and programme." 18 What did you take from that? 19 A. I took that the utilities and the moving of the 20 utilities as it says, the majority of utilities 21 diversion work were completed prior, and therefore that 22 would be -- it was two sections that were sorting out 23 the utilities and then the contract would then -- be -- 24 for the tram would then come into place, and that the 25 majority, if not all of that, would be commenced before 85 1 the contract would then come into place for the delivery 2 of the tram project. 3 Because obviously one of the key issues, as we 4 previously discussed, was about utilities and one of the 5 concerns out of the three was about utilities. So 6 therefore, you know, if it's saying the resulting 7 majority of utility diversion works will be completed 8 prior to commencement of the on-street works by Infraco, 9 then I would have taken comfort by that that as one of 10 the three key issues that I mentioned in my answer, was 11 being dealt with. 12 Q. Can we turn to page 168. We just see here we are moving 13 into the section that was entitled "Risk Management", 14 and I want to move forward through this to 15 paragraph 11.48 which is on page 179. We see that the 16 first thing is the discussion there of allocation during 17 the development period, and we notice one of the key 18 risks, the fourth bullet point, is that there would be 19 detailed design development during the period. Do you 20 see that? 21 A. Yes, I do. 22 Q. Moving on to the following page, we can see the new 23 heading of "Allocation during the Construction Period". 24 If we look over the page you see what it says about that 25 at paragraph 11.59. 86 1 It notes that: 2 "Changes in design which are required by the public 3 sector after the signing of the Infraco contract will be 4 at risk of the public sector. The progress of detailed 5 design has somewhat mitigated this risk." 6 Dealing with the first sentence of that, from what 7 you say about your experience in other companies, you'd 8 not be surprised that changes in design required after 9 signing the contract would be at the risk of the public 10 sector. 11 A. Yes. 12 Q. What did you understand by the next sentence, that the 13 progress of detailed design has somewhat mitigated this 14 risk? 15 A. I'm assuming that the progress was progressing well. 16 Q. Were you given any indication at the time to the 17 contrary for any cause for concern? 18 A. No, other than the previous paragraph that you mentioned 19 about the 100 per cent. And what -- no. And I said -- 20 repeating myself -- I was quite shocked when I saw the 21 document last year. First time I was informed that 22 there was that percentage design, the officers were 23 aware of, had not been -- and presumably TIE had not 24 been sorted out before signing the contract and on this 25 date for the councillors. 87 1 So from information -- from what I can remember from 2 2007 and then reading it here, I would have felt at ease 3 that the design had been -- detailed design had been -- 4 basically the risk was not high. 5 Q. If you turn to page 189 of this, we can see a heading 6 about a third of the way down the page, "Milestone 7 summaries", and then different tables for different 8 elements of the project. 9 You can jump forward two pages to 191, we come to 10 the table for design and TROs. 11 I think we can see that the -- within that, the 12 third element on the table is the completion -- the 13 fourth element, completion of detailed design phase 1a. 14 A date was being given of 6 November 2008. 15 Was there any discussion with you as to how that 16 date had moved or was moving, or did you understand that 17 date to have always been the one that was being used? 18 A. If it was in the report, I would expect that that was 19 the one that was being used. I really genuinely don't 20 remember such a detail. 21 Q. Again, I appreciate it's a long time ago. Was there any 22 discussion of slippage in that date at the time? 23 A. As I previously said, if I thought that the design had 24 not been all sorted out before signing the contract, and 25 the utilities, et cetera, and these timescales, I would 88 1 have thought that we wouldn't be comfortable by agreeing 2 this report and agreeing the Final Business Case. 3 Q. If we could look back at the report which accompanied 4 this which we looked at a couple of minutes ago, it is 5 the document reference CEC02083448. If we can turn to 6 page 5 of this, and paragraph 8.1, the report notes 7 that: 8 "The report to Council in October 2007 provided 9 a detailed financial analysis of the Final Business 10 Case, based on the design work completed at that time 11 and upon the firm bids received for tram vehicles and 12 infrastructure. Some cost allowance has been made for 13 the risk associated with the detailed design work not 14 being completed, at the time of Financial Close." 15 What did you understand that to mean, that cost 16 allowance had been made for the risk associated with the 17 detailed design work not being completed? 18 A. There would be a contingency within the overall 19 financial details, and I'm assuming at that time there 20 would have been questions about that. What was the 21 percentage? I can't remember back then what the 22 percentage was because I think it changed. What there 23 would have been -- remember very clearly people asking 24 what the contingency was for certain parts, and did the 25 contingency -- was it in their opinion as officers, the 89 1 risk and the contingency matched up together in terms of 2 the contingency put aside was enough in terms of the 3 risk associated with it? 4 Q. I know I'm asking you to look back ten years, but do you 5 recall those questions being asked, or are you of the 6 view that those questions were likely to have been 7 asked? 8 A. I'm pretty clear on the design issues and on the 9 utilities, and I'm pretty clear that always a very key 10 issue for elected members about what contingency has 11 been made and within the contract. So I'm almost 12 positive those questions would have been asked about the 13 contingency, and whether officers felt that contingency 14 was at the amount that would balance up with the risk 15 associated with it. 16 Q. Can you say of whom that question would be asked? Would 17 have been asked? 18 A. I assume it would be the Chief Executive and Director of 19 Finance. But I can't say because -- they were always 20 the ones that were there, including the other directors 21 I mentioned. Because obviously it's to do with finance. 22 So you would expect -- and contingencies and -- 23 et cetera. That would be finance and director, and the 24 Chief Executive. 25 Q. If we can go now to a different document with the 90 1 reference CEC00906940. 2 This is a report to the Council for a meeting of 3 1 May 2008, entitled "Edinburgh Tram - Financial Close and 4 Notification of Contract Award". 5 If we see there's a narrative given of the situation 6 in paragraph 2.3: 7 "Negotiations have taken longer than expected, due 8 to the complexity and scale of contractual and related 9 issues arising from the contract suite. There has also 10 been a substantial amount of work undertaken to minimise 11 the Council's exposure to financial risk, with 12 significant elements of risk being transferred to the 13 private sector. This has resulted in 95 per cent of the 14 combined Tramco and Infraco costs being fixed with the 15 remainder being provisional sums, which TIE Limited have 16 confirmed as being adequate. The net result of 17 negotiations is a final estimate of phase 1a of the tram 18 network of 508 million. This figure secures the best 19 deal possible for the Council and Transport Scotland and 20 is well within the agreed funding envelope of 21 545 million." 22 We can see there a reference to the figure of 23 95 per cent which you have already talked about in your 24 evidence. 25 There's reference there in that context to 91 1 significant elements of risk having been transferred to 2 the private sector. That's in the negotiation since 3 December. Were you informed at the time of what risks 4 had been transferred? 5 A. I don't have -- genuinely don't have a memory of that. 6 But obviously the question would have been about the 7 risk to the Council, and I assume there would be 8 questions asked at that time of what was meant by 9 transferring into the private sector and what did that 10 mean. But I genuinely can't remember the details of it. 11 Q. You can't remember what was said. Again, I appreciate 12 time has elapsed, but can you remember for definite 13 whether or not these matters were raised as questions, 14 or whether it was just you would have expected them to 15 have been raised. 16 A. I would have expected it to be raised because it's all 17 about risk, it's all about contingencies, but also the 18 risk, as we had previously been told in the previous 19 year, when we finalised the contract, the risks would 20 not be to the public sector, and I assume we would be 21 asked the question about why -- what did it mean by 22 being transferred to the private sector, what was being 23 transferred to the private sector, and I would expect 24 that question to be asked. I genuinely can't remember 25 whether it was answered. 92 1 Q. If you look, it may be the same answer to paragraph 3.5 2 on the following page. You see that the increase in 3 baseline aggregate cost is largely due to the firming up 4 of provisional prices to fixed sums, currency 5 fluctuations and the crystallisation of the risk 6 transfer to the private sector as described in the Final 7 Business Case. I take it you wouldn't have a -- from 8 what you said already, you wouldn't have a recollection 9 of what risk transfer that is considering? 10 A. No. Sorry, but if you look at it, it's saying it's the 11 same risk transfer in terms of the report in 12 December 2007, which was part of the contract. So 13 I would expect from that that it was included in the 14 risk provisions reported to the Council in 20 December. 15 So from December to this time, looking at it now, 16 and I assume at the time when I read it, it would have 17 meant that it hadn't changed since that report on 18 20 December, the previous year. 19 Q. For completeness, could you look, please, at another 20 production with reference USB00000357. Now, this is 21 a report, not to the whole Council but to the Policy and 22 Strategy Committee of the Council, for a meeting on 23 13 May, headed "Edinburgh Tram - Financial Close and 24 Notification of Contract Award". 25 I don't think you sat on the Policy and Strategy 93 1 Committee at that time? 2 A. I think I did, and looking back, I didn't sit on the 3 Transport and Environment Committee, but looking back on 4 the committees, I think I did. 5 Q. You did? 6 A. Yes. 7 Q. Could I ask you -- 8 A. Sorry, it's just there was changes in leadership, and so 9 it might be later on, so it's quite difficult to work 10 out exactly the date. I might have. But I'm not 11 absolutely sure. 12 Q. I'll ask you questions about this as well and see if you 13 can tell me your understanding, even if you weren't on 14 the committee. 15 If we look to the following page, paragraphs 2.9 16 through to 2.11, 2.9 notes that: 17 "Following the introduction by Bilfinger Berger 18 Siemens of additional cost pressures late in the due 19 diligence process, TIE held negotiations with 20 Bilfinger Berger Siemens to substantiate its requests 21 for contract price increases and to seek to limit the 22 increase. To help reduce the risk of programme delays, 23 the price increase agreed will be paid as a series of 24 incentivisation bonuses over the life of the contract on 25 achievement of specified milestones. This approach 94 1 should minimise the risk to businesses and residents of 2 Edinburgh of delays to the agreed programme of works. 3 These changes increase costs by GBP4 million to GBP512 4 million, but have corresponding advantages by further 5 transferring risks to the private sector." 6 Again, do you have any idea, any recollection of 7 what further risks had been transferred between 1 May 8 and this? 9 A. I don't, no, sorry. 10 Q. In 2.11: 11 "In return for the financial amendments, TIE has 12 secured a range of improvements to the contract terms 13 and risk profile. Currently these areas are regarded as 14 highly confidential but, subject to contractual close, 15 a more detailed report will be submitted to the tram 16 sub-committee." 17 We have a clear example. You have been told 18 something has happened but you are not going to be told 19 what it is? 20 A. Correct. 21 Q. Do you recall ever being told what the changes were? 22 A. No. 23 Q. I'm finished with that document. 24 I would then like to return to your statement and to 25 look at paragraph 331 which you will find on page 80. 95 1 It's something we have touched upon earlier in your 2 evidence, but I just want to be quite clear about. 3 When you're referring to asking questions about the 4 risks associated with the disputes, was that being asked 5 of Council officers or representatives from the 6 companies? 7 A. Both. 8 Q. Both. Can you recall who you were asking the questions 9 of? 10 A. It would be -- it would have been the Chief Executive, 11 Director of Finance and the other directors I named. 12 And also, if my memory serves me correctly, and I would 13 have to kind of look back, it was Richard Jeffrey, 14 I think, was there. I can't remember who else, but I do 15 remember, I think, at that time that was when -- you 16 need to look to see whether that was the time that he 17 was there, but certainly someone from TIE/TEL -- TIE who 18 were giving us reassurances regarding dispute 19 resolution. 20 Q. Did they indicate whether or not that was their view, 21 the reassurance was their view or whether it was on the 22 basis of legal advice they had taken? 23 A. In this again memory, it serves me that at that time, 24 there was quite a lot of legal advice taken. So if my 25 memory serves me correctly, I think it was legal advice 96 1 as well as their advice, because at that time, if you 2 were in dispute, then you would have got legal advice in 3 terms of the likelihood of you winning those disputes or 4 not, and I don't think they would have taken legal 5 advice. That would be my memory of it. 6 Q. Can I ask you then to look at a different passage in 7 your statement. It's page 95, paragraph 386. You are 8 referring there to something that was noted in the 9 report, and perhaps I should say for completeness that 10 the report in question is identified on page 93 of your 11 statement as one from 20 August 2009. 12 But you note that it indicated that it was no longer 13 possible to forecast the final outturn of the tram 14 project and you were concerned about it? 15 A. Sorry, which paragraph? 16 Q. That's 386, the one that is enlarged on screen at the 17 moment. 18 A. Okay. 19 Q. The effect of that report was it noted that it was no 20 longer possible to indicate how much the tram project 21 would cost. 22 A. I don't think so. I think it was at that time when all 23 of these -- the majority that we were told at the 24 beginning that the disputes between TIE and the 25 contractor would be won by TIE, and then it became 97 1 clear, as I think further briefings happened, that -- 2 and also from -- probably, I think if I remember 3 correctly, from the press as well, that TIE were losing 4 the cases and that -- I can't remember the percentage, 5 but a high percentage were being won by the consortium, 6 and we did press very hard because we'd been told very 7 clearly, and assuming legal opinion, that TIE would be 8 winning these disputes; and I think that's when at that 9 point in time the Labour Group in particular started to 10 be extremely concerned about whether this was going to 11 be kept on budget, because if we were losing disputes, 12 obviously there would be a financial consequences for 13 that. 14 Q. You say that the Labour Group were concerned, in that 15 you were being told it was no longer known how much the 16 project was going to cost finally, what was the reaction 17 to being told that? You just couldn't get that 18 information? 19 A. Frustration. Sometimes a bit of anger because, again, 20 look back at 2007. Audit Scotland said it was 21 governance financially robust, et cetera, and then we 22 were getting to this time where, you know, it was about 23 the reputation of the Council, and we as individual 24 councillors as well, because we were associated 25 obviously with the business plan, signing off the 98 1 business plan. It was all the groups actually, who all 2 signed off the business plan, and therefore it was a bit 3 of anger as well, to be honest, at that point in time, 4 in that we were told these disputes would be -- the 5 majority would be won by TIE, and it was very clear that 6 was not the case. 7 So the information had been given to us. Then ended 8 up the risk and all of that seemed to be coming to TIE 9 and to the Council. 10 Q. Did you just have to accept the position that you could 11 no longer be given an anticipated final cost for the 12 project? 13 A. No, I don't think we accepted it, but it was very 14 difficult as the opposition to press it, and that is why 15 certain motions and certain Council meetings, we would 16 be pressing for more information and pressing the 17 officers, but also the Council, of where we were in this 18 moment in time. 19 Q. Did you get any further information from this time as to 20 the anticipated outcomes of dispute resolution 21 procedures or the likely final cost? 22 A. No, not as far as I can remember. And also, when I look 23 at the documentation, and this is about looking at 24 timing, if I look at the documentation that was given 25 last December, I was quite surprised that -- obviously, 99 1 from my perception, is that officers were well aware and 2 with some of the emails and documents, that they were 3 well aware that the budget was not going to be kept to 4 545 million, but that didn't appear for a number of 5 months to come -- this is me reflecting about March, at 6 that time, and it wasn't until probably later on that 7 year, the latter part of the year, that it came clearer 8 that the budget was not going to be kept to. 9 Q. If that had been made known to you earlier, what 10 difference do you think it might have made to decisions 11 made by councillors on the project? 12 A. Would we have then have pursued, because I think by the 13 end of that year, both the officers and the councillors 14 had lost trust in TIE. And therefore would, if we'd 15 known that then, would we have said, and asked for: how 16 do we get out of this situation, what are the options? 17 Were there options to come out of the contract and -- 18 altogether and what were the options in terms of taking 19 the project forward? 20 Should we bring it back internally, as was done 21 latterly? Would we have made that decision earlier? 22 This is all in reflection, would that have made 23 a difference? I just leave a question mark. Would it 24 have made a difference if we'd known a lot earlier that 25 the budget was not going to be kept to? 100 1 Q. Can I put the question back to you. Do you think it 2 would have made a difference? 3 A. Yes. 4 Q. Do you have an idea what difference it might have made? 5 A. Well, I think financially, and in terms of finances and 6 also timescale, et cetera, because my memory is very 7 clear at that time, it just seemed to -- everything 8 seemed to drag on from months upon months with no action 9 being taken, and it just seemed to be that kind of long 10 period of time where just nothing was happening. And 11 I think if we'd known earlier on, then hopefully I would 12 have thought action would have been taken then, rather 13 than waiting until months later. 14 Q. Can I ask you to please look at page 109 of your 15 statement, paragraph 445. I really want to check, is 16 that what we've just been talking about, that had you 17 had the information, it might have had an effect on your 18 decisions? 19 A. Yes. 20 Q. If you look further on then at paragraph 465, which 21 appears on page 114, you set out in your statement here 22 what you were being told as of October 2010 in the 23 report. We can see the second element is contingency 24 planning work had been carried out by TIE and the 25 Council to identify funding options for up to GBP600 101 1 million in costs: 2 "Due to the current uncertainty of contractual 3 negotiations, it is not possible to provide an update at 4 this time on the ultimate capital costs of the project." 5 What was your reaction to that? Firstly, trying to 6 get funding up to GBP600 million but it's not possible 7 to say what it will ultimately cost? 8 A. I'm just repeating myself in terms of, you know, 9 unhappy, costs were spiralling out of control, I would 10 say, by this time, and we weren't getting the 11 information in terms of what was then going to happen 12 and what action was being taken to resolve the 13 situation. 14 Q. We can see on the fourth point there is that you were 15 given information regarding the dispute resolution 16 procedures, and told that the outcome remains finely 17 balanced and subject to debate between the parties. 18 A. Mm-hm. 19 Q. Over the page, paragraph 467, you made the comment that 20 by that time you did not really believe: 21 "... the senior officers, TIE or the Transport 22 Convener were providing us with accurate or sufficiently 23 detailed information." 24 Did that apply to the comments we have just seen 25 specifically in that October report, regarding costs and 102 1 the dispute resolution procedures? 2 A. Yes. I mean, it's always difficult to just know the 3 timeline. But as time went on, and obviously dispute 4 resolution was pretty crucial, design issues as we found 5 out later was pretty crucial and also utilities, and it 6 just came to the point that I believe myself and other 7 members of the Labour Group just lost trust, I suppose 8 is the word. Lost trust in the information and details 9 we were being given about the project, and I do say a 10 sense of despair, because it was the reputation of the 11 Council and the reputation of the city of Edinburgh. 12 CHAIR OF THE INQUIRY: Can I ask you, you say this was the 13 position as at October 2010. You had effectively lost 14 trust in the information you were being given. 15 Were you aware that in March of 2010 Richard Walker 16 had written to the Chief Executive, the Director of 17 Finance and the Director of Development as well as 18 Councillor Mackenzie, pointing out or claiming that the 19 information that the Council was being given about 20 the -- or expressing concerns about the accuracy of the 21 information that the Council was being given? 22 A. I wasn't aware of that letter, but I was aware -- I'm 23 not absolutely sure of the timing but I think it's 24 within the statement as well, that there was a letter 25 that came from Bilfinger to every single individual 103 1 councillor, and I'm assuming this is round about this 2 same time, but I'm not aware of that previous letter, 3 but obviously every councillor received a letter from 4 Bilfinger, which then did also question basically the 5 information we were being given. 6 MR LAKE: Have there been other situations when you had the 7 same loss of trust between the councillors on the one 8 hand and the Council officers on another? 9 A. Right, okay. I think this one is probably the most 10 serious. Also, when -- I'll just give you an example. 11 So I suppose that it was around about the same time, 12 I would say, was the care and support tender process, 13 which was people with disabilities, and this was 14 previous to this time, or round about this time as well. 15 I was health and social care spokesperson for the Labour 16 Group, and it was a report that went to Council which 17 was about putting out the Health and Social Care 18 Contract, for people with disabilities et cetera, out to 19 the private sector, away from the voluntary sector, and 20 during that time I did become very aware -- it was 21 a long protracted process, in fact, to the point of kind 22 of summarising because it was a long process. I worked 23 with the voluntary sector and some of the individuals 24 and organisations, and it came to the point that in fact 25 the Council, I think it was only two votes in the whole 104 1 of five years, that the Council overturned the 2 administration, but that the care and support tender 3 didn't go out to the private sector, and it was kept in 4 as it was. 5 That was at that time as well, I was feeling unhappy 6 with a lot of the information I was being given by 7 officers, particularly on that subject. 8 Q. That was a particular example there of the consequence 9 of the loss of trust, the tender not going out? 10 A. Yes. 11 Q. Did you have a view of what the consequences were of the 12 loss of trust that developed in the tram project? 13 A. Loss of trust meant that we didn't trust what was being 14 said to us by officers and by TIE and officials, and it 15 then -- I suppose you then -- it's very difficult to 16 make decisions, because the information you were given 17 at that time, you didn't begin to trust. And there is, 18 as I say, a motion that was passed by the Council, by 19 the Liberal Democrats, who were part of the 20 administration, which criticised the way the process, 21 the way the information was being given out. We could 22 probably bring it up, but I think at that time then, 23 they agreed to that, which was like -- criticising 24 themselves, which seemed to me at the time quite 25 peculiar. But that was that kind of loss of trust in 105 1 the officers and the information we were being given. 2 Q. I want to move on now to the mediation that took place 3 in 2011. 4 What role did the councillors have in that mediation 5 once it had been decided to go to mediation? 6 A. We would be -- in terms of the mediation, there was 7 no -- as far as I'm aware, there was no direct 8 involvement at the negotiations. It was left with 9 officers, but obviously they would come back and would 10 brief, I'm assuming, the Leader of the Council and the 11 Convener of Transport Environment, and also we were 12 briefed on why -- if I remember correctly, there was 13 a report agreeing we would go to negotiations at 14 Mar Hall. And at that time then there was -- the 15 appointment of the Chief Executive, Sue Bruce, and as 16 I say in my statement, I felt certainly my work with her 17 from 2012 onwards, I think we built up a trust with each 18 other in terms of that. 19 So I think there was a feeling at that time of 20 elected members, certainly myself, that we had trust in 21 the Chief Executive and was more open, and also in 22 Alistair Maclean as well, who gave information, and we 23 began to build up a bit more trust following up to that 24 Mar Hall. 25 But I would say involvement in the direct part of it 106 1 would not -- was not part of what -- what we were doing, 2 but we would be briefed in terms of what the 3 negotiations -- what they were likely -- negotiations 4 were likely to be and then the outcome of negotiations. 5 Q. That was information provided by the officers to you as 6 councillors? 7 A. Yes. 8 Q. In terms of being briefed as to likely outcomes, did the 9 Council officers give you any indication of what they 10 hoped or expected to achieve? 11 A. If memory serves me correctly, yes, they did give us 12 an indication. Well, basically they wanted the project 13 to get back up and running and they wanted to achieve it 14 at a cost and a timescale that would be in order to 15 deliver the tram project. 16 Q. Did they discuss with you their goals regarding cost and 17 timescale? 18 A. I think not until after rather than before. That's just 19 my memory serving me. I don't remember, because that 20 would be obviously part of negotiations and that 21 wouldn't be -- I would assume, given that information in 22 terms of confidentiality before the negotiations. 23 Q. Even before the negotiations, did the councillors give 24 any guidance or directions as to what they wanted out of 25 the negotiations? 107 1 A. Well, yes, we wanted as near to the price as we'd gone 2 out for the contract and also the timescale. So -- 3 Q. Essentially as quick as possible, as cheap as possible? 4 A. Yes, because of the time that had taken months and 5 months and months, it seemed like, seemed like years at 6 the time, of just no action and nothing happening on the 7 streets, and the frustration of particularly businesses, 8 but also the communities and the residents that nothing 9 was happening. 10 So we just wanted, basically, the instruction 11 was: try to get it, I suppose, at a price that's 12 affordable, but also deliver the tram project at 13 a timescale that is as quick as possible as well. 14 Q. Was there any discussion of what affordable meant in 15 this context? 16 A. No, not as far as I can remember, no. 17 Q. Just the best deal you can? 18 A. Yes. 19 Q. Now, presumably you didn't expect the Council officers 20 to actually sign the deal and commit the Council at the 21 mediation? 22 A. No. 23 Q. What did you expect them to bring back for your 24 consideration? 25 A. Either one option or several options. And whether it 108 1 was a recommendation in terms of -- they'd been in 2 negotiations. So they would have a clearer picture in 3 terms of what would be the best deal for the Council. 4 Q. So there might be a number of options but with 5 a recommendation? 6 A. That would have been normal process in terms of, you 7 know, different -- normal process would be 8 a recommendation from the officers. That doesn't 9 necessarily mean the Council would agree it, but 10 normally there would be a recommendation from the 11 officers. 12 Q. And different -- there might be different prices 13 obviously attached to different options? 14 A. Yes, and it's expected -- I think at the time expected 15 whether it would be the whole of line 1a or would it be 16 part and what would the cost be et cetera. I think that 17 was the expectation anyway. No, probably the 18 expectation was that it would be the whole of line 1a, 19 to be honest. 20 Q. But in terms of what you're saying about cost, you 21 anticipated that you would have them present a costed 22 option to you and the councillors would either take that 23 option or leave it. They wouldn't be able to negotiate 24 the price. It was just a fait accompli as far as that 25 was concerned? 109 1 A. Yes, because we weren't part of the negotiating body and 2 you gave trust for them as officers to get the best deal 3 possible, in terms for the Council, in terms of risk, in 4 terms of pricing, in terms of timetable. 5 Q. Post Mar Hall, I think you said already, the concept of 6 the arm's length company was dropped, and the matter was 7 managed essentially in-house by the Council with the 8 benefit of consultants Turner & Townsend? 9 A. Yes. 10 Q. What was your view of how well that worked? 11 A. Well, if we're jumping on to -- I'm not sure if you're 12 jumping on to the revised budget and the revised 13 timetable. 14 Q. Yes. 15 A. I thought it worked very well because we delivered it on 16 the revised timetable and revised budget. Sue Bruce was 17 very hands on, and my understanding, I wasn't part of 18 the interview process, but obviously getting the tram 19 project up and running and sorting it out, I suppose, 20 was one of the main duties of the Chief Executive. So 21 she was very much leading that, and as I said, there was 22 a very good trust built up between myself as a convener 23 and herself. We worked very well together. 24 Q. Mm-hm. 25 A. I was going to say, so much we got an award for it. But 110 1 we worked together very well. 2 She also brought in Colin Smith, who I think she'd 3 worked with in Aberdeen previously, and she had trust 4 between him, and I think I had built up a very good 5 working relationship with Colin as well, in terms of him 6 keeping me informed and then me keeping the other 7 spokespeople informed as well. 8 And obviously Turner & Townsend worked in 9 partnership with Colin Smith, but the two main people, 10 I would say, would be the Chief Executive and 11 Colin Smith that built up keeping elected members 12 informed and working with the consortium, and one of the 13 key points of the working with the consortium was that 14 Colin would always say to me was sorting out the little 15 minor problems before they became big problems. 16 And he would have very -- charts that he took me 17 through and a better understanding of sorting out what 18 were the minor problems and sorting them out with the 19 consortium, rather than waiting until they got into real 20 problems and real difficulties. And I felt comfort that 21 that was being -- there was a good relationship, which 22 had not been previously between the Chief Executive and 23 Colin Smith with the consortium. 24 Q. Just to be clear. Colin Smith was a consultant who was 25 engaged on Sue Bruce's recommendation? 111 1 A. Yes, as I understand it. 2 Q. You have also referred to Turner & Townsend. Did you 3 have any direct dealings with them? 4 A. Mostly, I would say, with the Chief Executive and with 5 Colin Smith. I also at the beginning, when I was first 6 convener, attended meetings on a weekly basis in the 7 morning. I can't remember exactly which group it was, 8 but it's recorded in here, which included 9 Transport Scotland, communications people, and other 10 people who were involved with the project. I just 11 wanted to make sure that I felt comfortable that the 12 project was going in the right direction, and attending 13 those meetings gave me that comfort in terms of the 14 discussion, in terms of the updating, and also 15 contributed towards those meetings as well. 16 I also attended, I think, just the one, but another 17 meeting out -- with the group that were delivering the 18 project, more delivery group, and again, just to get 19 that better relationship in terms of working together, 20 and we all wanted a common aim to get it on the revised 21 budget and the revised timetable, and how that was 22 communicated and how we communicated with traders in 23 particular, but also the community as well. And how we 24 worked together, I think, built up a very good working 25 relationship. 112 1 MR LAKE: Thank you very much. I've got no further 2 questions. Thank you, my Lord. 3 CHAIR OF THE INQUIRY: I take it no-one else has any 4 questions? 5 Thank you very much, Ms Hind. You're free to go. 6 You are still subject to the citation, but in case it's 7 necessary to recall you. I'm hoping that won't be 8 necessary? 9 A. So am I. 10 CHAIR OF THE INQUIRY: If it does prove necessary, Ms Fraser 11 will make contact with you and have a discussion. 12 A. Thank you very much. Thank you. 13 (The witness withdrew) 14 MR LAKE: My Lord, the next witness I propose calling is 15 Ewan Aitken. 16 MR EWAN AITKEN (affirmed) 17 Examination by MR LAKE 18 MR LAKE: Mr Aitken, could you state your full name, please. 19 A. Ewan Ritchie Aitken. 20 Q. The Inquiry has the details of your address. Would you 21 state your occupation, please? 22 A. I'm the Chief Executive of Cyrenians. 23 Q. I think that's a charitable group? 24 A. It's a charity that engages in issues of homelessness. 25 Q. I think you were involved as a councillor with the City 113 1 of Edinburgh Council from 1999 to 2012? 2 A. That's correct. 3 Q. You have been asked certain questions regarding the tram 4 project in that context? 5 A. That's correct. 6 Q. Do you have in front of you a statement -- we can put 7 this up on screen. It's reference TRI00000015. 8 A. Yes. 9 Q. Now, is this the statement that you gave to the Inquiry? 10 A. It is. 11 Q. I think you will see you signed it on the last page? 12 A. Yes. 13 Q. Are you happy to adopt that as your evidence for the 14 purposes of the Inquiry? 15 A. Yes. 16 Q. I have a few additional questions that I would like to 17 ask you. I wonder if you could start by looking at 18 page 10 of your statement? 19 A. Yes. 20 Q. At paragraph 30. 21 A. Yes. 22 Q. Perhaps easiest if you read the whole paragraph for 23 context: 24 "This returns to my point about the key moments of 25 decision-making. People need to be confident that those 114 1 making leadership decisions were able to make them 2 clearly and effectively and get them agreed at the 3 Council meetings. The new administration were going to 4 be making political choices and have to be working in 5 collaboration with other parties when they could not 6 depend on their coalition party. They chose not to do 7 that which meant that on several occasions, we went into 8 Council meetings for key decisions without certainty, 9 and sometimes finding the outcome was the complete 10 opposite of what we wanted. If you create that 11 circumstance by the choices that you make, you 12 fundamentally change the relationship between the client 13 and the contractors." 14 It's that bit at the end really, the relationship 15 between the client and the contractors. 16 What do you consider was the practical effect of the 17 coalition arrangements between the Council on the 18 relationship with the consortium in this project? 19 A. So you are referring to the coalition between 2007 and 20 2012? 21 Q. Yes. 22 A. So all contracts are in the end a form of relationship, 23 and if there is uncertainty in that relationship, in 24 clarity about how decisions are going to be made, which 25 have a big impact on the activities that are the content 115 1 of that contract, then there will be -- there will be 2 difficulties, because those contracts are about managing 3 a whole number of things, including risk. And it adds 4 to the risk. 5 If you have a programme of work, and you're not 6 certain that the decisions you require to be taken at 7 given points to meet the milestones will be taken, then 8 it adds to the difficulties in a very complex 9 contractual arrangement. 10 Q. Did you have any information or direct knowledge of 11 concern on the part of the contractors at the situation 12 within the Council? 13 A. I think the fact that the contractors came back almost 14 immediately after the Final Business Case was signed in 15 2008 and said that it was going to cost more is one 16 indicator of their concern about that relationship. 17 Q. Could you explain how the concern about the relationship 18 would lead to them coming back with the concern as to 19 costs? 20 A. They wished to manage risk, and risk has cost, and so 21 they wish to -- it would be -- it was my reflection on 22 it that that was an indication that they were trying to 23 mitigate the cost of the increased risk by increasing 24 the money they were asking for. 25 Q. Correct me if I'm wrong. I want to make sure I'm 116 1 understanding what you're saying. 2 The demands for additional money were partly to 3 reflect what they perceived as the increased risk 4 arising from the Council's position? Correct me if I've 5 got that wrong? 6 A. That's what I interpreted from those circumstances. 7 Q. There's a similar passage on page 8. Paragraph 8 on 8 page 3. Again, you are referring to the same time, post 9 2007. You say this is where the difficulty arose: 10 "There was the creation of a coalition, where one 11 half was against the trams and one half was for them. 12 Things became more complicated because it required 13 a level of collaboration from the part of the coalition 14 who were in favour of the trams, along with groups other 15 than their coalition partners. That did not happen and 16 it became a significant issue because of the difficulty 17 the contractors then had with their confidence in the 18 key decision-making body. If the partnerships are not 19 solid with clear direction and leadership, the 20 contractors are going to be nervous. The difference of 21 opinion amongst political parties was not necessarily 22 a problem, but I saw the weakness of leadership from the 23 coalition administration becoming a problem." 24 I just want to try and clarify this. On the one 25 hand we've got the idea that the fact there is 117 1 a coalition might itself make the contractors nervous, 2 and that's what you were referring to when we looked at 3 paragraph 30. Here it seems -- you seem to be saying 4 that the fact there is that -- isn't necessarily a cause 5 for concern? 6 A. Sorry, if you read paragraph 7, you will note that the 7 previous paragraph, you will note that I make reference 8 to the fact that political disagreements are simply part 9 of where we are at. In any organisation, there will be 10 differences of opinion. They themselves are not 11 inherently a problem. It's how you manage them. 12 Now, the reference I make to paragraph 8, the 13 coalition agreement clearly said that the one thing that 14 they would not agree with -- on was trams. 15 One would then assume that there would be a strategy 16 from the partner in that agreement who was pro trams to 17 get the decisions they needed through the Council by 18 working with other parties on the Council, because at 19 29/29, it was possible to manage that by reaching on 20 a case by case agreements with opposition partners. 21 That quickly became clear that that was not the 22 case. Regularly we saw the case where one partner would 23 bring up -- the partners in the coalition would bring 24 separate motions to the Council, but nobody had talked 25 to the opposition parties about how they were going to 118 1 manage that process, and that means you would enter key 2 decision-making moments without clarity as to what was 3 going to happen and the leadership was required to help 4 make those things happen. 5 Leadership is not simply about what happens in the 6 chamber, but about the preparation before you get to the 7 chamber. 8 Q. So when you talk about leadership in that paragraph 8, 9 you're talking about leadership in terms of managing the 10 politics within the Council Chamber? 11 A. Yes, absolutely. There is an inherent tension with 12 public sector contracts where the politicians have to 13 provide the leadership, although the implementation is 14 done by others, but without that leadership, that 15 implementation does not have the direction it requires. 16 And that requires clear and strong decision-making. 17 Q. But as you say yourself, the idea of political 18 differences and divisions is a feature of local 19 government. 20 A. Absolutely. It's a feature of all kind of political 21 contexts. But the point is what you do about that. You 22 go into that context knowing that you are going to have 23 to manage it, and you have to have a strategy for 24 managing it. And at no point did it appear that the 25 coalition, having identified that they had a key 119 1 disagreement on, frankly, the one thing they really 2 needed to deliver, had a way of dealing with the fact 3 that they had a disagreement. 4 And that led to the kind of uncertainty that I'm 5 referring to later on. 6 Q. Now, a project such as the tram project is implemented 7 over a long period. We know this started way back in 8 2002 or thereabouts, and didn't complete until much later, 9 until eventually the Mar Hall mediation had to rewrite 10 it in 2011. 11 In that sort of length of time, you are always going 12 to get changes within local government. You're likely 13 to get some changes within local government. 14 A. We had political unanimity when the trams were voted for 15 prior to 2007. We had cross-party unanimity bar one. 16 I think the Draft Business Case in 2006 had one vote 17 against. 18 So we had a way of working to achieve that. And 19 post 2012, when -- after Mar Hall had started, the 20 leadership then, even though it was in a coalition, did 21 two things. 22 First of all, got the SNP, who were the ones who had 23 previously disagreed, to agree to implement things on 24 the basis that we had reached the point where we need to 25 implement them, and secondly, operated in an all party 120 1 context by drawing everybody into the discussions. 2 My suggestion is that if you don't have that in the 3 middle, it doesn't matter what the elections are. You 4 have to have a strategy for dealing with what you have 5 found. 6 The problem is not the advent of disagreement. The 7 problem is the managing of disagreement. 8 That simply didn't happen in the way it should have 9 done during that period. 10 Q. If one looks back at the example of the position in 11 2003/2004, it would have been impossible to put in place 12 measures to deal with it then because it simply couldn't 13 be foreseen what was going to happen in three or four 14 years' time? 15 A. No, so it's the task of the politicians, once the 16 elections were done, to make that work. That's their 17 job. And you make political choices as a consequence. 18 Q. In terms of the decisions that were taken by the Council 19 to determine the strategy, you have noted that there was 20 in the early stages unanimity in relation to the tram 21 project. 22 A. Yes. 23 Q. That changed as you approached -- to 2007 when the 24 emergence of the SNP councillor within the Council and 25 the dissent that arose from that. 121 1 A. Yes. 2 Q. It was more sharply divided beyond 2007? 3 A. Yes. 4 Q. To what extent was it possible for the Council to give 5 scrutiny to the major decisions of strategy that it had 6 to make? 7 A. By that do you mean did we receive the information we 8 required to make those? 9 Q. Let's start with the information. Do you consider you 10 received the information necessary to make decisions? 11 A. I think we received a lot of the information required, 12 but it would appear that we didn't receive all the 13 information that we needed. So the decisions we made 14 were based on the information we had at that point. 15 Q. At the time did it appear that the information was 16 adequate? 17 A. I think at times it got quite frustrating because we 18 would say: can we learn more about this; and we were 19 told: no, you can't about that, there's commercial 20 confidentiality; and so on. 21 But we were able to probe pretty deeply, and I think 22 most of us felt that, given what we knew, and we weren't 23 getting any indications from officers that the decisions 24 we were suggesting were wrong, that they were -- that we 25 had enough to make the decisions we wanted to make. 122 1 Q. How were you getting that information? 2 A. So there would be a combination of briefings, and 3 reports, and prior to a Council meeting there would be 4 a -- usually a -- members of TIE and Council officers 5 come to the group meeting, and we would also follow that 6 up with information -- requesting information, further 7 information on specific issues if we couldn't get the 8 answers in the face-to-face meeting. 9 Q. When you requested that additional information, specific 10 information, what was your experience in having it 11 responded to? 12 A. Generally speaking, it was adequate. 13 Q. Generally speaking -- 14 A. It was adequate. 15 Q. Were there occasions when you didn't get the information 16 you wanted? 17 A. I couldn't give you a specific, but I know that there 18 were times when we had conversations when we said: we 19 need more information or it would be good if we had 20 further information; but if this is what we're allowed 21 to have, we will have to make a decision based on that. 22 Q. What information did you say you wanted that you weren't 23 getting, type of information? 24 A. Often it was about timelines or about why costs had 25 risen specifically, or about what was happening, 123 1 particularly in the court disputes. 2 So we -- TIE took the view that the way to deal with 3 conflict was to go to court. I have indicated I don't 4 think that was wise. And to begin with, we were being 5 told, yes, we won, and even sometimes when they lost on 6 a technicality, they would say it's still a win and they 7 would try to explain about that. But after a while they 8 stopped giving us that information, and that became 9 quite frustrating because it became difficult to 10 understand the frame with which those decisions were 11 being -- making and the overall impact they were having 12 on things like the timeline and the cost. 13 Q. Was there anything -- you have focused there on the 14 disputes. Just trying to understand what other 15 information you weren't being given. Were you being 16 given any information as to the strategies and 17 approaches that were to be taken to the contractor? 18 A. So -- sorry. To the contractor, in what sense do you 19 mean that? 20 Q. You referred to them going to court? 21 A. Yes. 22 Q. You've made your views on that plain in your statement. 23 But were you given other information as to what strategy 24 TIE or the Council had for managing the disagreements 25 with the contractors? 124 1 A. No, in fact to be honest, that was the primary method. 2 Once things started to go wrong, it would appear that 3 court was the only tool that they were willing to use. 4 Q. Were you told why you weren't being given information 5 you were seeking? 6 A. Usually blanket terms like legally confidential. 7 Q. Who was saying that? 8 A. The officers who were briefing us. 9 Q. Was that officers of the Council or of the companies? 10 A. Both. 11 Q. Can you remember who they were? 12 A. So Dave Mackay, Richard Jeffrey, Dave Anderson. 13 Q. The first two of the companies and Mr Anderson of the 14 Council? 15 A. Yes. 16 Q. Was that simply accepted by you and your colleagues or 17 was there any attempt to challenge that and go behind 18 it? 19 A. My experience of challenging blanket things becomes 20 quite difficult. So you would push back a bit, but if 21 they push back and used a legal frame to resist, then 22 you would go: well, that seems to be it. 23 Q. Did you feel you were, with that restriction, adequately 24 informed for the decisions you were required to take? 25 A. I think it might have helped us better understand why 125 1 the relationship was with the situation it was in, and 2 perhaps some of the -- I can't say for certain because 3 I still don't know the answer to many so of those 4 questions -- why some of the operational issues, 5 particularly, for example, around Princes Street or 6 delays -- of cost rises, occurred. 7 They may have influenced further decisions further 8 down the line. The ones I was particularly responsible 9 for prior to 2007, rather than the ones I was responding 10 to when we were in opposition, I felt we had the 11 information we required to take the decisions we needed 12 to take. 13 Q. So after 2007 you felt you did have the -- 14 A. Yes. 15 Q. At that stage was any information being withheld from 16 you on the basis of confidentiality or further blanket 17 reasons? 18 A. You had some interesting things like -- I remember 19 when -- one of the contracts, I'm now not going to be 20 remember which. I think it was the MUDFA contracts. 21 They had to put code names in it because the two 22 companies were still being debated. So we knew the four 23 companies but not the two, which was kind of slightly 24 odd. 25 On occasion we would be told that some of the detail 126 1 would be commercially confidential, but our task was to 2 create the frame and get the outcome, rather than know 3 the operational details. So I think it's unlikely 4 that -- I think it's -- I don't think I ever felt in 5 that period of time I wasn't getting what I required. 6 Q. Actually what I was coming to, the decisions that the 7 Council take in this regard are by and large higher 8 level decisions, matters of strategy? 9 A. Yes, yes, and necessarily so. 10 Q. To what extent you needed the information you were 11 seeking from the Council officers or the company to take 12 those high level decisions, or was it merely a case that 13 you would like to have had it? 14 A. If you look at the Draft Business Case for which I had 15 responsibility, there were, I think, ten documents, ten 16 separate documents that came for us to do. 17 That took a long time to get through and you would 18 ask a lot of questions and some of it you would need to 19 check out, because it would be technical stuff. 20 The summary, however, captured that and would allow 21 us to make -- capture the key issues and allow us to 22 make, I believe, the right decisions at that time. 23 The problems that came afterwards, when particularly 24 we were in opposition, when things were clearly going 25 wrong, and you wanted to understand what was going 127 1 wrong, became more complex because there were things we 2 weren't allowed to be told or were simply not being 3 told, and it only became -- we only became aware even 4 after that we were not being told. 5 So I would separate the information that we were 6 attempting to glean to make strategic decisions for 7 which we had responsibility, and the information 8 required to understand a set of circumstances that were 9 coming about when we were playing a different role in 10 the Council. 11 Q. Do you accept there is a need to protect some 12 information to keep it confidential or not? 13 A. It would appear that that's the case, yes. I can 14 understand that. Sometimes it does feel a little bit 15 like a lack of trust, but perhaps that's the tools you 16 have to put in place for those circumstances. 17 The difficulty is knowing when that that is actually 18 the case and when that's being used as a blanket way of 19 keeping information away. And those sort of things only 20 come out much later on. 21 Q. I think we've heard there was use of a data room 22 sometimes which makes information available to 23 councillors on a restricted basis? 24 A. That was used on occasion, and so was one way of getting 25 round commercial confidentiality and may have been 128 1 a tool that could have been used more often. 2 Q. Were you aware that there had been problems with 3 information leaking from councillors back to the 4 consortium parties and TIE felt it was to their 5 detriment? 6 A. I was aware that they felt that, yes. 7 Q. The trouble is if there's information leaking in that 8 way, it makes it very difficult to release anything to 9 councillors, whether in the data room or otherwise; 10 would you agree? 11 A. I think you create yourself a difficulty when you choose 12 to define your methodology entirely on the alleged 13 behaviour of one or two folk. There are 58 councillors 14 at the time, and it may be that one or two were not 15 acting as they should have done, and perhaps they should 16 have been pushed harder to find that. But if the 17 consequence of that is the others are not able to do -- 18 get all the information they require or there's 19 a feeling that there's a lack of trust across the board, 20 then that's going to create difficulties. 21 Q. Is there a problem when the decision-making body is so 22 large, 60 people, that you have to give the information 23 to 60 people, that increases the chances of leaks and 24 problems? 25 A. You touched there really on the challenge we have about 129 1 democratic accountability. There is a necessary 2 requirement for projects such as this to be held to the 3 standard of democratic accountability, and that requires 4 the elected members to be part of the decisions. 5 Therefore, the task is to find a way of doing that 6 that meets that test, as well as the requirements to do 7 things in a commercially effective way. And I think 8 those were one of the biggest struggles that we had this 9 and many other, I have to say, public sector 10 infrastructure projects. 11 Q. At the moment, or when you were a councillor, who makes 12 the decision as to what is confidential and what is not? 13 A. Generally speaking, it is -- it would be the most senior 14 officer in charge of a given project, although I'm aware 15 that that may have been on the advice of, in this case 16 anyway, the Chief Executive of the arm's length company 17 as well. 18 Q. Are you content or do you have a comment on the fact 19 that it is the Chief Executive and/or the person in the 20 company that makes a decision as to what is 21 confidential? 22 A. It's difficult to know quite how else you could have 23 done it. Perhaps it could have been -- the political 24 leadership could have been drawn into that as well. You 25 are again in that situation where people are tasked with 130 1 a job and they have to sit in a commercially -- 2 commercial context, but required to be called to account 3 by politicians whose role is not commercial but has 4 a commercial consequence. 5 Perhaps they could have found a way of including 6 politicians in that, although that would require you to 7 tell the politician what it was you wished to keep 8 confidential, and that does put yourself in a difficult 9 position. 10 Q. Indeed. 11 In terms of briefings given to councillors, you 12 indicated, I think, the briefings to your group, 13 political group? 14 A. Yes. 15 Q. Was it necessary, in your view, to have briefings done 16 group by group, rather than have briefings given to all 17 councillors to ensure they all got the same information? 18 A. Is there any indication that different groups got 19 different information? I assumed that we got the same 20 information, except for those things for which each 21 individual group asked for further information on. 22 Q. In your experience of the Council, is there a difference 23 in the availability of information by way of briefings 24 between the administration on the one hand and the 25 opposition on the other? 131 1 A. Yes. 2 Q. What's the difference? 3 A. There will be probably more detail, and usually the 4 politicians who are responsible for that particular area 5 of work will have a greater knowledge because they will 6 have been involved with it for longer. 7 Q. Have you come across situations where briefings have 8 been given to the leaders of each of the groups? 9 A. Yes, I was regularly given briefings when I was leader 10 of the group. 11 Q. What was it expected you would do with the information 12 you were given by way of briefing? 13 A. I would be passing it on to colleagues. So our group 14 met every week, well, the executive anyway, and I would 15 make sure that they were brought up to speed and 16 a decision would be taken as to whether that needed to 17 be passed -- that particular briefing, whether it needed 18 to be passed on to the whole group at that point or we 19 could wait until the monthly group meeting. 20 Q. Were you ever given information you were asked to keep 21 in confidence from your group? 22 A. Not that I recall. 23 Q. In terms of these briefings that were given, was there 24 ever any written record of what you had been told in 25 such briefings? 132 1 A. Sometimes I would ask them to give me a written version 2 of what they had told me to make sure that -- 3 particularly if I had kind of technical or operational 4 issues, because that seemed to me a useful thing to do. 5 We would -- so that was for the individual briefings. 6 For group briefings there were regularly papers 7 produced specifically for them, and if we wanted to know 8 more about a particular subject that wasn't included in 9 that briefing as such, we would often then get a further 10 briefing written for that purpose to be circulated 11 around the group. 12 Q. At the same time or alongside the briefings you were 13 being given, you were also getting reports from Council 14 officers for meetings, sub-committees and so on? 15 A. Yes. 16 Q. Did the briefings and the reports work alongside one 17 another, supplement one another? 18 A. One should be indicative of progress towards the other. 19 So the Council reports are a report progress. So the 20 briefings should be where you've got to in between those 21 reports. 22 Q. When a report was being produced for a meeting on 23 a complex matter such as the trams, would that generally 24 require supplement by briefings? 25 A. Absolutely. 133 1 Q. And how much of the information that was really 2 important to the councillors was actually likely to be 3 contained in the briefings, rather than the written 4 report? 5 A. I would have expected it to be in both. There should be 6 some version of what you're getting in the briefings in 7 the report, whether it's in an appendix or reference. 8 Q. Was that always the case? 9 A. I couldn't tell you whether it was all the case. 10 I worked on the assumption that it was, and I certainly 11 don't recall ever being in a situation when I've gone, 12 "I've heard this but it's not in the report". 13 Q. Now, that all arose out of questions I was asking about 14 matters being considered in the Council by way of vote, 15 either in committee or in the whole Council. Was there 16 much discussion within the Council meetings itself for 17 discussion or debate or asking of questions? 18 A. Yes, regularly. 19 Q. And who would the questions be asked of in that context? 20 A. So you could ask the Council officers. I think I recall 21 the Chief Executive of TIE being brought in to answer 22 questions as well. That would be a specific 23 requirement. That wouldn't be an assumption. So you 24 would have had to prepare that in advance. 25 But generally it would be the Chief Executive or the 134 1 head of -- the member of the senior management team who 2 was in charge of that particular area who would answer 3 questions. 4 That would happen prior to the debate happening. So 5 the report would be presented and then you could 6 question it before you got to the point of having the 7 debate. 8 Q. So was that questioning taking place essentially in 9 a pre-meeting briefing? 10 A. No, it would be in the Council meeting. 11 Q. It would be in the Council meeting? 12 A. In the Council meeting. 13 CHAIR OF THE INQUIRY: Mr Lake, is this a convenient point? 14 MR LAKE: Yes, my Lord. 15 CHAIR OF THE INQUIRY: We will adjourn for lunch now, 16 Mr Aitken, and resume again at 2.00. 17 (1.00 pm) 18 (The short adjournment) 19 (2.00 pm) 20 CHAIR OF THE INQUIRY: Good afternoon, Mr Aitken. You are 21 still under oath. 22 MR LAKE: Good afternoon, Mr Aitken. We have just been 23 discussing the role of the Council in its 24 decision-taking of the project, and the information to 25 the Council available to the Council, and we talked 135 1 about the chances for discussion and debate and asking 2 questions of people. 3 When it came to taking a vote on the strategy 4 issues, did it generally divide along party lines? 5 A. Yes. 6 Q. So for all the discussion and all the information, it 7 essentially came down to the certain parties in favour 8 of the trams and one party against it, and that's how it 9 divided? 10 A. Yes, but that -- there are really two tasks for the 11 actual process of decision-making. The first is the 12 preparation. So you go in, having prepared. So you are 13 not making a decision based only in the information you 14 receive on the day. That would be unhelpful, unwise in 15 something as complex as this. So you've already reached 16 to some extent a conclusion of where you think you are 17 going to go. 18 The second is the business of public transparency. 19 So the debate is not only for the decision, the people 20 in the room, but it is to ensure that those who are 21 watching who have put you there, the public, either 22 directly or through the media reporting of it, 23 understand what it is that has taken you to the point at 24 which you are going to vote. 25 So therefore that conversation is a conversation for 136 1 beyond the chamber as well as in the chamber as well, 2 and therefore has a role to play in public transparency. 3 Q. I want to ask about one of the other ways that not so 4 much taking decisions of strategy, but oversight. 5 I think there was a tram sub-committee? 6 A. There was, yes. 7 Q. If you could look at your statement, please. Again, if 8 you could look at page 30 of that. I'm interested in 9 paragraph 104 on page 30. 10 It's the final sentence of that. This is talking 11 about governance changes in August 2007? 12 A. Yes. 13 Q. The change that was made to the governance structure, 14 pardon me, in December 2007, was the introduction of the 15 tram sub-committee. It was created but it did not 16 operate as it should have done? 17 A. Yes. 18 Q. You don't elaborate on that in your statement. In what 19 respect did it not do what it was supposed to do? 20 A. It rarely, if ever met and therefore couldn't do what it 21 should have done. 22 Q. Why did it not meet? 23 A. I don't know. I wasn't on it. 24 Q. Would other councillors not raise the issue of why it 25 wasn't doing what they had charged it with doing? 137 1 A. I think you will find in 2008 and further on, we made 2 reference, the Labour Group of which I was a member, 3 made reference to the fact it hadn't met in our motions 4 to the Council. 5 Q. Okay. We talked before lunch about provision of 6 information and you expressed some of the frustrations 7 you had on the Labour Group. Would it have been open to 8 you to force the issue of provision of further 9 information by withdrawing your support for the tram had 10 votes came up, or even voting against it? 11 A. That would assume that it was the political 12 administration who were withholding the information. 13 I don't actually think, generally speaking, that was the 14 case. 15 I don't think there would have been a productive 16 strategy to do that. Particularly as we were in favour 17 of the tram, and I think it would have been very 18 difficult to explain why we voted -- we were then 19 appearing to vote against it. 20 Q. It would have been inconsistent with your earlier 21 position? 22 A. Yes. It would have been perceived as such and most of 23 politics is about perception. 24 Q. We have heard that the tram was delivered through what's 25 termed an arm's length company? 138 1 A. Yes. 2 Q. That was a reference to TIE? 3 A. Yes. 4 Q. It's not the only arm's length company that the Council 5 have; is that correct? 6 A. Are you talking about arm's length companies with 7 relation to the trams or with -- 8 Q. On, generally? 9 A. Generally speaking, that's correct, yes. 10 Q. What is your understanding of an arm's length company? 11 A. So it can mean a number of things, but generally 12 speaking, it is a legal entity that is, as I understand 13 it, wholly owned by the Council, but has a governance 14 structure that allows you to bring in people from other 15 sectors into key decision-making. 16 So you can bring in people from the private sector, 17 for example, who understand the particular issue. So 18 you have got different types of entities. You had the 19 entity that did the work in Craigmillar, the name of 20 which -- 21 Q. Park? 22 A. Park, yes. You have Edinburgh Leisure and then you have 23 TIE and others as well. 24 It also allows the Council, through that entity, to 25 enter partnerships with other organisations as well, to 139 1 create consortia too. So it's a method of delivery and 2 allows to bring in expertise that's not within the 3 Council. 4 Q. In terms of bringing in the expertise, why can the 5 Council not just bring in expertise to the Council 6 itself? 7 A. It can do so, but with regard to TIE, as I understand 8 it, in 2002 we were told by the then Scottish executive 9 that they would like us to -- like to see us create an 10 entity to deliver this and other infrastructure 11 projects. 12 There were a number of projects that were coming 13 into the fore. The Stirling-Alloa railway, the 14 potential of ERL, Edinburgh railway link, and talk even 15 of the Borders link, and there was an opportunity to 16 create something that could deliver those. 17 It would be true to say that in operational terms it 18 is sometimes, as we've referred to earlier, cumbersome 19 to take all these things directly -- for operational 20 decisions, not for strategic decisions but for 21 operational decisions, through the political 22 decision-making process and therefore it can allow some 23 of the fleet of foot decisions that you require to make 24 when you're delivering these kinds of projects. 25 Q. But if you had either engaged consultants or even 140 1 employed people with a particular expertise in 2 transportation areas, would they not have been able to 3 get on with delivering these projects on an operational 4 day-to-day basis, subject to routine oversight or 5 strategic decisions by the Council? 6 A. That may be the case, but each of these things are 7 a choice given the information you have at the time and 8 the information we had was that the Scottish executive 9 wanted us to set this up. They saw this as a good 10 thing. 11 They also, it had to be said, were going to bring 12 their own expertise through Transport Scotland into 13 this, although not at that point, because I don't think 14 that wasn't created until a bit later on. 15 You will notice in the Audit Scotland report of 16 2007, it makes direct reference to the contribution that 17 Transport Scotland would have made. Frankly, if they 18 had continued to be involved, I think the kind of 19 expertise which would have been in-house to the public 20 sector, if not specifically to the Council, may well 21 have been -- I don't think we have been in the same 22 situation as we are today. 23 Q. We may come back to that a little bit later. 24 You have talked about the -- you mentioned a couple 25 of times the view of the Scottish executive as it then 141 1 was. There should be an arm's length company used. 2 Did the Council prefer that for their own reasons as 3 well or was it the executive view that was followed? 4 A. I think we saw it as an opportunity to really invest in 5 the infrastructure of Edinburgh. We knew at that 6 Edinburgh was a growing city, and a successful city, and 7 required significant infrastructure in a variety of 8 places, and that the model of arm's length companies was 9 seen, generally speaking, as good practice within public 10 sector generally and local government in particular, and 11 therefore that was the kind of narrative that led us to 12 that conclusion. 13 So I think it was a wider narrative than just: is 14 this the right thing for the trams? It was in the 15 context of there being others of a similar nature. 16 Q. Was one of the considerations that it was only by having 17 an arm's length company that it would be possible to pay 18 the people with the expertise enough to come in, who 19 were employed by the Council, would be on the Council 20 pay structures? 21 A. I think that's probably one of the issues that is raised 22 in that context, that when you buy particular expertise, 23 balancing that against the pay structures for the 24 Councils can be a challenge. 25 So that may well have been one of the things. 142 1 I don't actually remember it specifically, but one can 2 see how that would have contributed to the conversation. 3 Q. Do you consider there are disadvantages to using arm's 4 length companies? 5 A. I think they always create tensions about governance. 6 You need to have real clarity about which decisions are 7 the decisions devolved and which decisions are held by 8 the Council. 9 And I think it also creates challenges publicly 10 because when things don't go well, quite rightly, it is 11 the politicians who are held to account and so they, 12 and I suppose we, as I was then, should be, but it 13 becomes a more complex conversation when the decisions 14 which you are in a position of defending or explaining 15 are not decisions you've always been directly involved 16 in. 17 So I think there is a tension there. 18 Like I was referring to earlier, however, it's 19 always possible to think through how you are going to 20 manage that. One would suggest that perhaps that didn't 21 happen in this case, so it's not an inherently bad 22 thing. It's just how you manage those tensions. 23 Q. That's what I was going to say. In terms of the issue 24 about which decisions are taken, which side of the line, 25 Council or company, that is a matter that perhaps can be 143 1 thought out in advance and be clearly demarcated? 2 A. Yes. 3 Q. Do you think it was clearly demarcated here? 4 A. I think it became clear that it was regularly getting 5 muddied. 6 Q. For a long time it seemed that the Council stood back, 7 and then perhaps just before Mar Hall, there was a quick 8 flip over to almost total control by the Council? 9 A. I think that would be an accurate description. I think 10 that was a manifestation of the political administration 11 at the time. You know, I think that there was a reason 12 for them to be significantly more involved than they 13 were. I think frankly, if -- if the contract had been 14 signed in and a week later, or whenever it was, a month 15 later the contractor comes back and says: I want another 16 100 million; which is a rough resumé of what happened at 17 that point, the politicians should have got involved. 18 If I had still been leader at the time, I would have 19 been on the plane to Germany, because that's what you've 20 got to do. 21 Q. Following that through, and leaving aside the question 22 of the 100 million which I'll refer to, what you will be 23 saying there is that the Council leader, a week after 24 an arm's length company had signed a contract, you would 25 be have been on the plane to Germany. That seems to 144 1 just completely ignore the intention of having an arm's 2 length company and immediately take control back into 3 the Council? 4 A. That arm's length company is still wholly owned by the 5 Council, and if you think that it is not acting in the 6 way you want it to act, you need to act. 7 I'm hoping that, frankly, we wouldn't have been in 8 that situation at all if we'd been in charge, but that's 9 just whatever it is. Hypothetical. 10 The point I'm making is that you still have 11 a responsibility as a Council leadership, even though 12 you have delegated that responsibility in implementation 13 to others. 14 Q. Would the thing to do not be for either the Council, 15 either through its executive or through the Council body 16 itself, to give some directions or instructions or even 17 a policy direction to the company and say: we would like 18 you to do this, we would like you to approach the matter 19 in this way. 20 A. They could have done that, yes. 21 Q. That would respect the fact that the company is in fact 22 arm's length? 23 A. It would have done, yes. But they didn't. 24 Q. The way you described it, it sounds almost as if there's 25 a distrust of the arm's length company and a desire to 145 1 take control as soon as something looks not the way the 2 Council like it? 3 A. I think my reference earlier was there was clearly 4 a problem to be dealt with, and that the Council need to 5 be as responsible as the arm's length company to deal 6 with that issue, and that was, frankly, the particular 7 circumstance I referred to was a -- by that point 8 a crisis, in my view. 9 So you need to act on that. 10 But it's perfectly legitimate for the Council to 11 offer direction, to make direction to the company that 12 it owns, so that it doesn't end up in that situation in 13 the first place. 14 Q. Presumably, as the sole shareholder, if it wishes to 15 remove the board of directors and put in new ones, it 16 can do it at the drop of a hat? 17 A. It could choose to do so. 18 Q. In your experience, has the Council ever done that? 19 A. I don't think it's got rid of -- no, I can't recall 20 occasion when it's done that completely, no. Although 21 individuals have been removed, as happened with TIE. 22 Q. Yes. I'll ask you about that in a little while. 23 At the moment, does the fact that you have a company 24 involved, arm's length company, affect reporting to the 25 Council or briefing to the Council? 146 1 A. Well, it adds another layer. That is clearly the case 2 and I have indicated previously where that can -- where 3 it happens and where that can be challenging. 4 So yes. 5 You would expect, however, a company to be fully 6 transparent with its parent body. 7 Q. I think you came to the view in this situation that the 8 arm's length company wasn't beneficial. If I could ask 9 you to look in that regard at page 27 of your statement. 10 Paragraph 95. 11 You see, reading from about halfway through that 12 paragraph: 13 "The truth was that it was not wise to create an 14 arm's length company to deliver something that created 15 such an unclear decision-making process." 16 In what way do you think there was an unclear 17 decision-making process? 18 A. Well, that is a reference with hindsight. So in other 19 words, at the time it was created, it seemed the wise 20 thing to do. It became clear that the implementation of 21 arm's length company model, as this was, was not 22 working. And one of the key issues was the clarity over 23 who decides what and when. 24 Q. What was the lack of clarity? Who were the people 25 unclear as to who was doing what decision? 147 1 A. So the board of TIE and then also the officers of TIE at 2 times would be either making decisions or not informing 3 us of the decisions -- enough, as it became clear 4 afterwards, about the -- giving us the information to 5 make the decisions that we needed to make on their 6 behalf. 7 Q. So that is going back to a flow of information issue 8 more than anything else? 9 A. Yes. I do think, as I refer to here, also, that it 10 was -- there was a real issue of the relationship 11 between TIE and Lothian Buses because the success of one 12 would have an impact on the other and we should have 13 dealt with that earlier. There was clearly tensions 14 there that needed to be dealt with. 15 Q. I wanted to ask you some questions about councillors 16 sitting as directors on an arm's length company. Have 17 you ever been in that position? 18 A. Yes. 19 Q. Do you think it's a good idea? 20 A. I think it's an another example of where you are trying 21 to marry the requirement for democratic accountability 22 with the need to create a delivery model or a delivery 23 vehicle for a particular piece of work that sits in 24 all -- at least slightly, if not wholly, outside that 25 democratic process. 148 1 So the key element is clarity of the role of 2 councils. We regularly had conversations about both 3 councils and actually Council officers, and the conflict 4 that they might find themselves in between what was 5 regarded as necessary decision-making and what was -- 6 for that particular activity and the political process. 7 The most important thing is transparency in these 8 matters. So, for example, where a decision was being 9 made about an arm's length company's plan or strategy or 10 funding or whatever, there was a declaration of interest 11 by those councillors who were on that organisation as 12 directors. And that would be a regular happening. You 13 can see it in the minutes. So people would understand 14 that at that point, and they would then not take part in 15 the discussion as part of that, or at least that would 16 be my expectation. I don't really recall anybody doing 17 that. 18 Q. So that was decisions being taken by the Council which 19 might have an effect on the company? 20 A. Yes. 21 Q. The directors had an interest, perhaps the company's 22 interests, so they made it plain to the Council and 23 didn't participate in the Council decision? 24 A. Yes. 25 Q. What about the other way round though, where the company 149 1 are taking decisions which might have impacts on the 2 Council, but you've got a director of the company who is 3 in fact a councillor? 4 A. So that's the job of that Council, because they are part 5 of that communication link, and that relationship. So 6 their job is then to express -- to live in that tension 7 between understanding the task of the company and 8 recognising the role of the Council in being the point 9 of democratic accountability. 10 It's a difficult place, but it's a necessary place 11 and it requires transparency and declaration. 12 Q. In a board meeting of an arm's length company, the 13 councillor who is sitting as the director, whose 14 interests are they there to advance or protect? 15 A. So if the company is set up in the way that it is, in 16 other words to advance something that is in the 17 interests of the Council, and the Council's overall 18 strategy, then although there's one might say a legal 19 conflict, there shouldn't be. So they should be able to 20 act in the interests of the company and in doing so, act 21 in the interests of the Council. The problem comes when 22 there's a separation of those things and the councillor 23 therefore needs to make a decision at that point whether 24 they are willing to remain a director and say: I'm going 25 to go with this because I think it's the right thing to 150 1 do; or remove themselves. 2 Q. When you say go with this, go with what? 3 A. Go with the decision the company is going to make, 4 because clearly, legally, as the director of a company, 5 they have to act in the best decisions of the company. 6 My comment is that if the company has been directed 7 by its owner correctly, and the relationship and the 8 objectives are set up clearly, those interests between 9 the owner, in this case the Council, and the company, 10 will be at one and therefore there won't be a conflict. 11 Where there is a conflict, there is clearly a case for 12 the councillor to make a decision between those two 13 things. 14 Q. What about passing information from the company back up 15 to the Council? Is that a role that the 16 councillor/director has? 17 A. No, actually. That would be inappropriate. 18 Q. What about passing information from the Council down to 19 the company? 20 A. I think that's a different thing in the sense that most 21 of the things they would be talking about were in the 22 public domain anyway. So if you're talking about 23 Council decisions, Council strategy, Council objectives, 24 where they say, you know, there might be a conflict 25 here, or there might -- you need to pay attention to 151 1 that issue, that seems to be a legitimate thing to do. 2 Part of the expertise they bring to the board. 3 Q. So to what extent, bearing in mind these things we have 4 just discussed, does putting a councillor on the board 5 provide democratic accountability for the activities of 6 that company? 7 A. It means that the ultimate decision-making body of the 8 Council has a direct relationship, I suppose to protect 9 that relationship with an arm's length company that it 10 has set up. 11 Q. Can I just be clear about that. You said the fact 12 a director is -- start again. 13 The fact that a councillor is sitting as a director 14 on the board gives it a direct relationship? 15 A. Yes. There's -- it comes back to that business of -- 16 the question is not what does the Council think, but 17 what would the citizens who put the Council in place 18 think; and they see the Council saying: what we are 19 going to do is deliver this project and we are going to 20 do so through this vehicle. 21 And they would go: well, how are you going to make 22 sure that that vehicle, that legal entity, that company, 23 is doing what you want it to do? And you say: well, 24 your elected representatives are also going to be on it. 25 It does put people into a place of tension, as 152 1 I have described earlier, but tensions can always be 2 managed if you think about them. But it also means that 3 there is the perception, and I mean perception in 4 a positive way, of democratic accountability. So that 5 is a necessary part of the process. 6 Q. Notwithstanding the fact that the director has to vote 7 in the interests of the company and as you recognise, 8 can't pass company information back to the Council, 9 would it be fair to say that it is a matter of 10 perception, rather than reality? 11 A. What is a matter of perception and reality? 12 Q. That there is any democratic accountability? The 13 director will always have to vote in the company's 14 interests, and they won't be able to provide information 15 back to the Council? 16 A. Well, sorry, I want to come back to your question 17 earlier about passing information. 18 They themselves should not be passing information 19 back unless it's clear that they have been asked to do 20 so, but they can ensure, as directors, that information 21 can be passed back. And they can ensure that the right 22 information be passed back because they will understand 23 what the Council require. 24 So there is a difference between them being -- 25 themselves being the conduit of information and them 153 1 ensuring that the right information, or requesting, or 2 suggesting that the right information is passed back but 3 through appropriate channels. 4 Q. They can only ensure that the company does that if they 5 manage to sway the board with their opinion, or if they 6 resigned if they were unhappy with the decision? 7 A. Yes, that is true, but -- we are talking about the 8 question in principle here, rather than the specific 9 circumstances. 10 Q. Are all these things we are discussing, flow of 11 information and control of the company, not something 12 that would more efficiently be achieved by an agreement 13 between the Council and the company, and perhaps some 14 setting of standards for reporting and achievement and 15 monitoring? 16 A. Well, there are up sides and down sides to any scenario. 17 The up side might be that there would be apparently less 18 of a conflict of interest. But I think that the down 19 side might be a sense in which there is even more 20 distance than you are suggesting there already is. 21 Q. I want to move on now to the question of the procurement 22 strategy in relation to the tram. I'm going to ask you 23 again to look at your statement, this time at page 8, 24 paragraph 25. 25 Just the first sentence of that, you make the point: 154 1 "We had a lot of input into the procurement strategy 2 in the sense that we were indicating what we would want 3 to have happen." 4 Did that level of input as to what you want to 5 happen extend to things such as whether the contract was 6 to be fixed price or variable? 7 A. Yes, in the sense that we said we know we had this much 8 money, so we need to deal with that in -- we know what 9 we can spend. 10 That, of course, is also one of the challenges that 11 you have, because when you are trying to procure 12 something, you want to get the best possible price, and 13 if you are absolutely transparent about what that figure 14 is, then people are going to get up to the top end of 15 that, that is one of the challenges of public sector 16 procurement and the transparency involved. However, we 17 wanted it to be as fixed as possible. However, we did 18 understand that there was a difference between fixed 19 price and fixed cost. Fixed cost being the total that 20 we believed we were able to afford to spend and the 21 price that we -- that -- the prices that were fixed and 22 that element of variable which is the difference between 23 the two, because we always knew -- we always understood 24 that there needed to be different forms of contingency, 25 contingency for different circumstances. 155 1 That was why, for example, that we wanted to make 2 sure we had as much of the design as possible in place 3 before you got to the point, because that minimised the 4 risk. You know, you've got to manage an optimism bias, 5 you've got to manage a risk and what are your risks, and 6 what risks have you got more control over and less, and 7 so on. 8 So being part of all that frame was certainly part 9 of our conversation. 10 Q. That's one of the things I wanted to go to. The 11 councillors were involved to the extent of the level of 12 detail wanting the design to be done to a significant 13 extent? 14 A. Yes. 15 Q. Did the councillors give an indication of how much the 16 design they would expect to have completed? 17 A. I think we would have loved to have had it as close to 18 100 per cent. My recollection -- because that was never 19 going to happen, but you want to get as close to that as 20 possible. 21 My recollection is, and it is my recollection over 22 a number of years, was that the indication was that it 23 was somewhere over 90 per cent, which is why we thought 24 that sounds -- given, you know, the reduction in risk 25 over much less being designed, that's probably 156 1 acceptable in terms of risk. 2 It transpired that that was not the case, and had we 3 known that was not the case, we would have reached 4 a different conclusion, almost certainly. Of course by 5 then we were in opposition, so we were expressing 6 concerns as opposed to supporting it, if we had known, 7 for example, that change was in place. 8 Q. What about the position in relation to carrying out 9 works on the utilities? Was that something the Council 10 had an input in strategy there? 11 A. Yes. What we said was we knew it was going to cause 12 a great deal of difficulty. We knew we needed to 13 maximise that, before you moved into the laying of 14 tracks and we needed to turn it into an opportunity. 15 So we were clear that we should get as much of the 16 utilities all in one place, so that if we needed to go 17 back in again, we knew where they were and they were all 18 in one place. 19 We knew that it was going to be a huge challenge for 20 the businesses, and therefore there needed to be 21 a communication and support strategy in place for that, 22 and that was clearly part of the contribution that we 23 made to that process. How you were going to manage the 24 level of disruption that was involved. 25 Q. So what was it you expected -- how was it you expected 157 1 the utilities to be managed? 2 A. I expected the utilities to be in the end -- what 3 I expected was that all the utilities would be moved 4 into, I suppose, a single place, if at all possible, and 5 where that wasn't, there would be reasons for that, and 6 we -- the proper mapping to deal with that, and then any 7 place where it wasn't the case, it wouldn't hinder the 8 laying of the tracks and the delivery of the tram, so 9 that there was a connection between where that was all 10 the utilities were moved to and where the tracks were 11 going to come. 12 Q. When did you expect utilities work to be done in 13 relation to the carrying out of the -- what you term the 14 track work? 15 A. I would have expected it to be completed before track 16 came near that same section. The MUDFA contract didn't, 17 in my recollection, need to be completed before we 18 started the track works if everything had been in line. 19 I would need to look at the paper to get those 20 milestones, but you wouldn't be expected to (a) have 21 track works and utilities in the same place or (b) when 22 the track guys turned up, that the utilities were going 23 to get in the way. 24 Q. You said that was your expectation. As far as you were 25 aware, was that the expectation within the remainder of 158 1 your group? 2 A. Yes, absolutely. 3 Q. Could I ask you to look at page -- still on page 8 of 4 your statement, this time at paragraph 23. You said 5 there: 6 "I was not aware that poor performance by Parsons 7 Brinckerhoff was an issue." 8 They were the designers? 9 A. Yes. 10 Q. "What was portrayed to me was that there were challenges 11 with the design because we had to manage a huge number 12 of different demands. That meant TIE and the Council 13 were not getting things as quickly or in the way they 14 would have wanted. It is perhaps better to say that 15 Parsons Brinckerhoff were struggling to meet the many 16 views people had on what the design should look like." 17 Now, what you're talking about there seems to be 18 whether or not there were difficulties with Parsons 19 Brinckerhoff on the one hand, or difficulty with getting 20 things done on the part of TIE and the Council on the 21 other. 22 A. So I'm not sure that that paragraph now that I read it 23 is exactly worded as accurately as I would have -- 24 Q. Perhaps I could ask you to explain what it is you want 25 to say? 159 1 A. Yes. It's not far off. 2 What I'm indicating in the first instance is that 3 I understood by the time we got to the point of 2008 and 4 the Final Business Case being -- the Tramco contract 5 being given was that design had progressed much more 6 than it actually had. So my reference in the first 7 sentence is the fact that I only became aware later that 8 the design hadn't progressed as much as it had. 9 What I did know was that there were huge challenges, 10 because it wasn't simply an engineering project in the 11 sense that it was in a vacuum. It was an engineering 12 project in the middle of an historic city, with a huge 13 number of demands from a whole different number of 14 people as to what things should and could look like. 15 And also future-proofing it as well. So how you 16 managed it so that if and when you got to extensions, 17 you were not going to do something that required to be, 18 or as little as possible, dug up again or changed 19 dramatically. 20 So I'm being sympathetic to Parsons Brinckerhoff in 21 the sense that I think they were under a lot of demands. 22 What was portrayed to me was that things were not -- 23 that they were struggling to get to achieve everything 24 they could because of the nature of the demands 25 possible, which meant that TIE and the Council were not 160 1 getting -- reaching the milestones they wanted to. 2 However, as I indicated earlier, I had understood 3 that they'd made significant progress eventually with 4 the design when we came to sign off. 5 Q. So when you get to the sign-off, you thought it was back 6 at -- 7 A. 90, 95 per cent. 8 Q. Just ask you a little bit about the governance of the 9 implementation of the project. 10 We've had various references already made to TIE, 11 and you have said yourself they were set up in 2002, not 12 just for this project but for others. 13 Were you aware of how those other projects had gone? 14 A. The Stirling and Alloa one, I think it was completed and 15 delivered. ERL obviously fell foul of what happened in 16 2007. Borders railway eventually was delivered by the 17 Scottish Government. 18 So by the time we got to the point of delivery, it 19 became clear that one of the concepts of TIE which was 20 that you increased capacity by having a wide variety of 21 projects under one roof, was not being achieved, and 22 I think that was one of the weaknesses. 23 CHAIR OF THE INQUIRY: Can I just clarify something. You 24 said that you understood the Stirling-Alloa-Kincardine 25 rail line was delivered by TIE. 161 1 A. Yes. 2 CHAIR OF THE INQUIRY: Did you not appreciate that in fact 3 TIE were taken off that project by Transport Scotland? 4 A. If I knew that at the time, I have forgotten it now, 5 my Lord. 6 CHAIR OF THE INQUIRY: If you had known that, would that 7 have been something of significance? 8 A. It would have been, and my point was that it was 9 becoming clear that when they were reduced to only 10 having the trams, the capacity that would have been 11 created by having multiple operations -- projects wasn't 12 there, and that was one of the weaknesses that we were 13 facing. That was clear at that time. Which is why, you 14 know, for example, the ERL, the loss of ERL was 15 significant. 16 CHAIR OF THE INQUIRY: And also a project you didn't mention 17 was the Ingliston park and ride. Were you aware that 18 there had been issues about that as well? 19 A. I was aware that there were issues about the park and 20 ride and several parts of that strategy. 21 CHAIR OF THE INQUIRY: And that TIE prepared a document 22 of lessons learned from that project; were you aware of 23 that? 24 A. What I'm saying, I don't recollect it, but I may well 25 have been aware of it at the time. Again, I refer to 162 1 what I do recollect was the concern that this was the 2 only project that TIE had, and that we needed to 3 continue, but be aware of the challenges that would 4 bring because of the capacity issues. 5 CHAIR OF THE INQUIRY: And if there had been -- if you had 6 been aware of difficulties with these other two 7 projects, if there were such difficulties, would that 8 have just added to your concern? 9 A. Yes. Actually, I think, to be honest, the issue that 10 we -- I wonder whether we will refer to this in due 11 course -- that probably should have been a bigger 12 concern was the removal of Transport Scotland from the 13 project, because I think had they been in place, that 14 would have mitigated the issues that you just raised. 15 CHAIR OF THE INQUIRY: Thank you. 16 MR LAKE: We will come to look at Transport Scotland -- 17 A. Thank you. 18 Q. -- in a little while. 19 What I would like -- look at some of the other 20 companies that were involved. Transport Edinburgh 21 Limited. Are you familiar with that company? 22 A. Yes. 23 Q. What was its role in relation to the tram? 24 A. As I understood, it was going to oversee the operational 25 work, the operation of the trams once the trams were -- 163 1 once the infrastructure was in place. 2 Q. Once it was in place they would take over, right. 3 You also mentioned you know about the Council and 4 the tram sub-committee that wasn't really functioning; 5 the Tram Project Board, was that an entity you were 6 familiar with? 7 A. I was aware of it, yes. 8 Q. What was its role? 9 A. I'm not sure I could actually give you an accurate 10 answer to my recollection right now. I apologise for 11 that. 12 Q. I appreciate that. Perhaps we can go and look at 13 documents which spell it out a little more later in 14 a little while. 15 It seems to me a number of bodies involved. Was 16 that an advantage or a disadvantage? 17 A. Clearly a disadvantage. 18 Q. Why? 19 A. Well, as I have referred to earlier, key to this -- all 20 these processes is clarity of decision-making, who 21 decides what, when, why are they deciding and what 22 information are they using to decide it. 23 The difficulty appears -- regularly appears and this 24 was not unique, it has to be said, to this project, but 25 is a regular occurrence within the business of public 164 1 sector infrastructure and other areas; is that a number 2 of people require to be involved in different ways, and 3 you often get decisions -- the same decision having to 4 be taken by different bodies. So you're kind of lining 5 the ducks up, as it were, or one group take a decision 6 and then it gets changed or added to, and that can be 7 unhelpful. Well, it is unhelpful, frankly. 8 Q. I would like to look now at the stage of moving to give 9 the project approval and October 2007, where the first 10 version of the Final Business Case was made available. 11 I would like you to look at a production which is 12 a presentation to the Council. It's at CEC02083536. 13 You can see the front page here that it records it's 14 for a meeting of 25 October 2007 of the Council. It's 15 related to Edinburgh Tram. It was a presentation by 16 TIE, TEL and the City of Edinburgh Council. 17 Do you recall this presentation, by any chance? 18 A. Not specifically because it was ten years ago, but 19 I have no doubt that when you show it to me, I'll 20 remember. 21 Q. Can you remember who gave the presentations? 22 A. No. 23 Q. If you look at the second page of this, we will see it's 24 just a front page. An introduction to the presentation. 25 But if we go on to the page after that, you can see the 165 1 reference there to June 2007 to a review of the tram 2 project by Audit Scotland? 3 A. Mm-hm. 4 Q. There's quotations there in relation to sound financial 5 management and reporting and clear procurement strategy. 6 You have already indicated you placed some weight on 7 that report by Audit Scotland? 8 A. Yes. 9 Q. We also see at the foot of the page reference to an 10 external audit, OGC. Do you know who OGC are? 11 A. I can't remember what the acronym stands for, but I'm 12 aware of what they do. 13 Q. They are the Office of Government Commerce. 14 Did you -- it's noted here it confirms the project 15 status green. Was any weight attached to that, the 16 decision to proceed? 17 A. It would have done, because previously in the run-up to 18 the Draft Business Case, there was a status red. So 19 there was actions needed to be taken to mitigate those, 20 and the fact that we had got to a stage where we'd moved 21 by their analysis from red to green suggested that 22 progress had been made in the right direction. 23 Q. If I could ask you to look at the Final Business Case 24 itself. The document reference for that is CEC01395434. 25 Could I ask you to go firstly to section 6. I have just 166 1 misplaced the page number. 2 Go to page 84. You see this is section 6 of the 3 report relating to governance, and there's a heading 4 halfway down that page, Governance structure to the 5 Period mid-2007. 6 If you look at paragraph 6.4, there's a description 7 there: 8 "The structure ... in the period to mid-2007 is 9 described in the following sections and highlights the 10 following four key bodies, the roles of which are 11 represented in figures 6.1 and 6.2." 12 Then they have got the TEL Board, Tram Project 13 Board, and then two sub-committees of the Tram Project 14 Board. 15 Were you surprised at the time of the Final Business 16 Case that there was no mention of TIE as one of the key 17 bodies? 18 A. I don't recall being surprised, to be honest. 19 I certainly don't -- 20 Q. Did you understand that TIE was one of the key bodies? 21 A. I always understood that TIE was one of the key bodies. 22 Q. If we go through this rather than looking at the period 23 up to mid-2007, actually, firstly, staying with that 24 section, if we go on to page 88, we see the heading 25 "Transport Scotland", and underneath, paragraph 6.23 and 167 1 6.24. The second of those notes that Transport Scotland 2 withdrew from the governance process, the Tram Project 3 Board and its sub-committees, in favour of a monitoring 4 regime based on regular reporting and meetings with the 5 Council, supported by audit processes and issue of 6 regular compliance certificates in relation to grant 7 award letter terms. 8 Now, you have already indicated you think that was 9 a bad thing, that Transport Scotland withdrew. Bad for 10 the project? 11 A. Yes, but it wasn't a decision that we had any control 12 over. And there was -- it was one of the -- the 13 government's decision to give the money was predicated 14 on the withdrawal of Transport Scotland. There was an 15 attempt to mitigate that risk, as has been identified in 16 that paragraph, and I think the view was taken, whilst 17 we would have preferred that wasn't the case, there 18 wasn't anything we could do about it, and that we needed 19 to do what we could to mitigate it while continuing with 20 the project. 21 Q. You have noted earlier that the Audit Scotland report, 22 which we referred to, did refer to the fact that 23 Transport Scotland were involved in the government's 24 processes when approving it? 25 A. Yes. 168 1 Q. Was the involvement of Transport Scotland and the 2 government something that was material even at 2006, at 3 the time of approving the Draft Final Business Case? 4 A. Yes. 5 Q. What weight, if any, was attached to the fact that the 6 government were putting up GBP500 million for this 7 project? 8 A. In what sense? 9 Q. Well, as to whether or not it was wise to proceed, 10 whether or not it was a sound project? 11 A. The way that this and many other processes work was that 12 you convince a principal funder that the project has 13 rigour and is deliverable and has a proper benefit in 14 the long run to the public need and development -- the 15 city in this case, and good financial return. 16 If you've persuaded them, you work on the principle 17 that your argument is sound because somebody else has 18 said: your argument is sound, I'm going to give you the 19 money. 20 So in that sense it's like an external affirmation 21 rather than: they're giving the money, it must be okay. 22 Q. So you've already referred to the Audit Scotland and 23 Office of Government Commerce -- of affirmation. In 24 a sense we have got a third strand here, in that GBP500 25 million of government money is coming into it? 169 1 A. Well, I would say that that is the outcome of there 2 being the right kinds of conversation and the right 3 people being persuaded, rather than the money itself 4 being the thing that says it's good. You don't get the 5 money unless you've proven that what you've got is 6 robust and rigorous. 7 Q. Would you then look within this document -- if you go 8 forward to page 91. If we look -- we have got the 9 general heading there, "Governance structure - 10 Construction period" and then another sub-heading, 11 "Roles of TEL and TIE Boards". And in 6.32, the role of 12 TEL is described as: 13 "The TEL Board is focused on its overall 14 responsibility to deliver an integrated tram and bus 15 network for Edinburgh on behalf of the City of Edinburgh 16 Council. It will make formal recommendations to the 17 City of Edinburgh Council on key aspects of the 18 project." 19 That's perhaps what you referred to earlier. It's 20 looking to integrate the tram and bus as it's specified 21 there. 22 If we come down to paragraph 6.38, noted: 23 "It is also envisaged that certain of the elected 24 members of the TIE Board and its independent 25 non-executive directors will join (if not already 170 1 members) the TEL Board or the Tram Project Board 2 (including specific sub-committees) to ensure consistency 3 of approach and to utilise relevant experience 4 productively. The redeployment of elected members and 5 the independent non-executive directors will reflect the 6 emphasis of the TEL Board on oversight (on behalf of the 7 Council) of matters of significance to the elected 8 members in relation to the project delivery and 9 preparation for integrated operations ..." 10 Just pausing there, the preparation for integrated 11 operations seems to refer back to paragraph 6.32 and 12 looking at how matters were managed once the tram was 13 built? 14 A. Yes. 15 Q. But it also is referring to the oversight in relation to 16 project delivery, as if TEL has been given the oversight 17 role for that. Is that your understanding? 18 A. No. I think, looking back, what would I have read 19 there? I would have understood that of course. Part of 20 the operation is based on what is delivered, and 21 therefore they need to ensure that what is delivered 22 means that they can meet the business case based -- of 23 the operation. 24 And therefore that's the element that's being 25 referred to there, rather than suggesting that they have 171 1 oversight of the whole thing, would be my understanding 2 of that paragraph. 3 Q. If we look at the next indented paragraph in 6.38, it 4 notes: 5 "The emphasis of the Tram Project Board on delivery 6 of the tram system to programme and budget and the 7 preparation for integrated operations." 8 That seems to be giving the Tram Project Board -- 9 the emphasis is on them for the delivery of the tram 10 system to programme and budget? 11 A. I'm recalling, if I remember rightly, the Tram Project 12 Board was made of officers, if I remember rightly. It 13 would be helpful for me to -- 14 Q. If I ask you to look over the page, rather than making 15 it a memory test? 16 A. That would be very helpful. 17 Q. If we look at paragraph 6.47, it notes that the 18 suggested membership of the Tram Project Board is seven 19 people, Office of Government Commerce, constituency 20 definitions highlighted. We have essentially got David 21 Mackay, who I think was the Cchairman of TEL? 22 A. TEL, that's correct, yes. 23 Q. Donald McGougan and Andrew Holmes were both officers of 24 the Council? 25 A. I'm now recalling the role that this group played. 172 1 So one of the -- there were a number of reasons why 2 we believed that trams were a good plan. One of them 3 was that we would be able to deliver the only integrated 4 tram and bus system because we would be the whole owners 5 of both the trams and the buses. And one of Edinburgh's 6 great strengths is that even though it is another arm's 7 length company, it owns one of the most successful bus 8 companies in Britain. 9 Now, if you could integrate that with a tram system, 10 that means your interconnectivity within the city, and 11 beyond, frankly, is far, far greater, so that this 12 wasn't just about the delivery of a tram. It was about 13 delivery of an integrated tram system. 14 Now, the Tram Project Board was to ensure that that 15 was the ultimate focus of the activity and you can see 16 there the people who were involved represented the 17 constituent parts that would take us to that outcome. 18 So that would be the rationale for having a Tram 19 Project Board to hold things together, and perhaps to 20 deal with some of the tensions I referred to earlier. 21 Q. But if we look further up that same page at 22 paragraph 6.45, you see that it notes: 23 "The Tram Project Board maintains its role as the 24 pivotal oversight body in the governance structure. The 25 Tram Project Board is established as 173 1 a formal sub-committee of TEL with full delegated 2 authority through its operating agreement to execute the 3 project in line with the proposed remit set out in 4 paragraph 6.32. In summary, the Tram Project Board has 5 full delegated authority to take the actions needed to 6 deliver the project to the agreed standards of cost, 7 programme and quality." 8 That seems to be putting the Tram Project Board with 9 the responsibility for execution or delivery of the 10 project. 11 A. So it's clear that, when you have a number of legal 12 entities, all of whom who are tasked, but you have an 13 overall objective which is to draw those things 14 together, both the delivery of the thing and the tram 15 itself in this case, and the operation of it, you need 16 to make sure you co-ordinate that. 17 Now, in the long run, the operation of the tram and 18 buses, and the integration of that, is the ultimate 19 objective and therefore the organisation that is dealing 20 with that, will be dealing with that in the future, 21 needs to be -- it needs to influence the implementation 22 of the project that will get them to the point where 23 they can operate that. 24 However, as I think you are indicating, it is yet 25 another body to whom we need to hold to account, and for 174 1 which decisions can be taken, and I think it's an 2 example of what I referred to earlier in hindsight, that 3 we could have had fewer bodies in place to allow us to 4 make clearer decisions with the clarity that was -- and 5 authority that was required. 6 Q. Thank you very much. 7 Within this same document, if I could ask you to 8 look forward to, first of all, page 97, this is just to 9 provide context. We see we're now moving on to 10 section 7 and we are looking under the heading, 11 "Procurement". What I would like to do in that regard 12 is firstly look forward to page 105. 13 A. You don't want me to refer to 97 then? 14 Q. It's just to indicate that we are now referring to 15 a section entitled "Procurement", and within that, we go 16 to page 105 and look at paragraph 7.53, and the heading 17 above it. 18 The heading is just to indicate that we are now 19 talking about activities under the SDS contract, but 20 what was reported here was that: 21 "The original assumption was that the overall design 22 work to detailed design would be 100 per cent complete 23 when the Infraco contract is signed. Due to a number of 24 delays, largely outwith TIE's control, this is now not 25 achievable. However, by identifying key risk areas and 175 1 prioritising SDS activities, TIE is completing several 2 key elements of the detailed design in time to inform 3 the Infraco bids on price critical items. This has 4 enabled the Infraco bidders to firm up their bids, based 5 on the emerging detailed design, and thereby reduce the 6 provisional scope allowances and design risk allowances 7 that they would otherwise have included." 8 It's clear from that that design isn't 100 per cent? 9 A. Yes. 10 Q. What else did you take from that? 11 A. That we understood the risk, and that it had been -- 12 there were things in place to mitigate it, and that the 13 Infraco bidding process would be predicated on the 14 original assumption, which was identified in the Audit 15 Scotland Report and in previous reports, that the 16 maximum amount of design would be in place and agreed 17 and fixed, which would allow us to significantly reduce 18 the risk overall and achieve as fixed -- as much fixed 19 price as possible, because that would in some ways at 20 least transfer some of the risk to the contractor, 21 because if you'd fixed a price based on a design that 22 was agreed, it was up to them to deliver it for that 23 price. 24 One of the key elements in this, and it was repeated 25 again further down the line, was how much risk had to be 176 1 held by TIE and ultimately the Council, and how much 2 risk could be by the work that was done prior to the 3 contract transferred to the contractor. 4 A lot of the discussion at that time was around 5 that, and that this element was key to that because if 6 you get the design in place and agreed, then you're 7 going to reduce the -- the number of unexpected things 8 that are going to come along as a result. 9 Q. In this connection, if you could also look at -- perhaps 10 easier to start with page 180. 11 We see a heading here, just “Allocation during the 12 Construction Period”. If you can take it from me this is 13 in a section entitled "Risk". 14 We can then look at the next page, and under the 15 table we see a sort of indent heading, "Design", and it 16 notes that: 17 "Changes in design which are required by the public 18 sector after the signing of the Infraco contract will be 19 at the risk of the public sector. The progress of 20 detailed design has somewhat mitigated this risk." 21 Now, taking what was said in 7.53 together with 22 suggestion that the risk had been, as its put, somewhat 23 mitigated, what did you understand the position to be? 24 How much risk were the Council carrying? 25 A. Well, as I have indicated earlier, if you haven't agreed 177 1 the designs before you agree the contract, then -- so 2 you've got provisional designs and the price is based on 3 a provisional design, and then you say we're going to do 4 something else instead, or we want this here or that 5 there. If there's a change in price, you will have to 6 pay for that. But I go back to my previous comment. My 7 understanding was, my belief was, that we would have 8 maximised the amount that was actually agreed and the 9 price would be predicated on those designs being as they 10 needed to be, and that therefore they would not need to 11 be changed and therefore the fixed price element of this 12 was -- a risk to that was that the public sector was 13 minimised because the design was agreed. 14 There is a flagging up here, significant failure in 15 the agreed design will effectively be transferred -- 16 would pass risk to the public sector, is true. But what 17 we believe was that that had been and would be dealt 18 with, because the design would be as complete as was 19 ever possible in a contract such as this. At the point 20 of signing. 21 Q. Did you take -- 22 A. Can I just take, this is October 2007? 23 Q. This is December 2007. This is Version 2 of the Final 24 Business Case. 25 A. Yes. So in other words, we're at the point of being 178 1 told that we need to make sure we have got the designs 2 in place as much as possible before we sign, which 3 I think happened in May 2008. 4 Q. You've already explained that completion of the design 5 was one of the parts of the procurement strategy the 6 councillors had had input for? 7 A. Yes. Yes. 8 Q. So I take it this was important to you? 9 A. Yes. 10 Q. Could you also look, please, at page 109 of this 11 document, and paragraph 7.78. This is again under the 12 heading of "Procurement" that we looked at before, but 13 it's concerned with the activities under the 14 MUDFA contract. 15 Perhaps it's easier if you just look at the last 16 sentence of this: 17 "To date work has commenced on some of the most 18 congested sections such as Leith Walk and is expected to 19 be complete on cost and programme." 20 A. Yes. 21 Q. Again, what did councillors reading this report take 22 from that by way of comfort or otherwise? Did you 23 believe that the procurement strategy was being 24 achieved? 25 A. It suggested that we were pretty close to it, yes. That 179 1 seems to me what that says. 2 Q. In relation to the design risks, could I ask you please 3 to look back to your statement and page 15 of that. 4 Paragraph 49 towards the top of the page. 5 Perhaps it would be clearer if I go to the previous 6 page to provide the context for that. So if you go to 7 page 14. You are referring to a report, you see in 8 paragraph 46 at the top, Tom Aitchison had submitted to 9 the Policy and Strategy Committee and you had already 10 identified that as being something taking place on 11 13 May 2008, just before the contract was signed. 12 You note in 46 that he advised that the estimated 13 capital cost of phrase 1(a) had increased to 14 GBP512 million, and in return TIE had secured a range of 15 improvements to the contract terms and risk profiles. 16 This is an example of the difficulties you have when 17 doing commercial negotiations with an elected member of 18 the decision body. But you say over the page on 49: 19 "I cannot recall the details of the improvements 20 that were made to the contract but what seemed to be 21 a significant achievement by TIE was that the additional 22 payments bought them (TIE) transfer of risk. Therefore, 23 Bilfinger Berger would meet the consequences of further 24 design change or moving utilities. To me, that seemed 25 a helpful approach and we were getting more for our 180 1 money. Risk is fundamental to all these things and this 2 was a direct response to the management of risk." 3 What I'm interested in is where did your 4 understanding that Bilfinger would meet the consequences 5 of design change and moving utilities? 6 A. So I'm recalling the conversation I had in a briefing 7 with Willie Gallagher. 8 Q. Willie Gallagher? 9 A. So my memory is -- because that was quite significant, 10 although I don't remember the dot and comma changes, 11 I remember in broad terms -- that we transferred risk 12 and that's what the money, the additional money was, as 13 it were, purchasing. 14 Q. When and in what context did that discussion with 15 Willie Gallagher taking place? 16 A. That would be a briefing I had one to one with him, but 17 I'm as certain as I can be that it was not -- that 18 wasn't the only time it was referred to. So it was 19 referred in other briefings. 20 Q. If you could look at page 12 of your statement, please. 21 This is a paragraph which spans from that page to the 22 next, paragraph 41. It starts: 23 "The plan with the utility diversion works was to 24 get everything into one place on the side of the roads 25 so we always knew where it was. I cannot be sure 181 1 exactly when, but I did discover that had not happened. 2 However, I continued to be reassured by TIE, 3 particularly through Willie Gallagher, that the cost and 4 risk could be met with the money we had." 5 Is that another example of briefings direct by -- 6 A. That is -- that is correct. It may be that I have 7 conflated two things there. 8 So we knew that the utility diversions was 9 a challenge. But what Willie was saying was we will be 10 able to manage this over the piece. 11 It wasn't until actually significantly after then 12 that I discovered that we had not achieved -- I think 13 I'm referring there to the -- yes, the utilities all 14 being in -- what I'm referring to wasn't until after 15 I had discovered that we hadn't achieved having all the 16 utilities in one place. 17 Q. Was this something that Willie Gallagher said just to 18 you, or was it a -- 19 A. No, again, it was referred to in other places as well, 20 but I do recall the conversations I had with Willie. 21 Q. When you said in other places -- 22 A. Well, it would be in the Labour Group briefing, would be 23 at least one place where it would be, it would have been 24 in the briefings we had with officers and I don't know 25 whether it was actually referred to directly in the 182 1 Council meetings themselves, but certainly it was not -- 2 it was repeated in other contexts when we were being 3 briefed on the progress. 4 Q. Can you recall roughly when those briefings were taking 5 place in relation to conclusion of the contract? Was it 6 December, May? 7 A. I couldn't tell you when, no, but I could tell you it's 8 prior to the contract. Sorry, I can't tell you when. 9 Q. Prior to the contract. 10 Once the contracts started to run, what was your 11 degree of understanding of the cost overruns that were 12 starting to build up? How quickly were you aware that 13 costs were escalating? 14 A. We knew almost immediately that they'd come back asking 15 for more money. 16 Q. Who told you that? 17 A. I believe that was -- I think I heard it from several 18 places quite quickly, to be honest, both informally and 19 formally. 20 Q. Can you remember how you heard it formally? 21 A. Council officers. 22 Q. Did you hear anything from officers of the company? 23 A. We probably did, but I couldn't be certain exactly where 24 and when. 25 Q. If you were told that the contractors were asking for 183 1 more money, were you told what the response to that was 2 to be? 3 A. That they were going to say no. 4 Q. Did they say the basis on which they were going to say 5 no and the basis on which it was sought? 6 A. Initially, as I recall, they said it was because the 7 contract signed, but it became clear fairly soon 8 afterwards that there needed to be some negotiation. 9 Q. When did that become clear? 10 A. Within a few months. 11 Q. You're aware a dispute broke out in relation to the 12 works on Princes Street? 13 A. Yes. 14 Q. Was it before that or after that that you say you became 15 aware? 16 A. I think before that. 17 Q. Even before that? 18 A. Yes. 19 Q. What was -- when you say it became clear, was that to 20 you or to your group or to the Council as a whole, can 21 you say? 22 A. I think to the Council as a whole, but we would hear 23 about it in a different way, but it wasn't something 24 unique to my knowledge. 25 Q. What was the Council reaction to that as a whole? 184 1 A. I'm sorry, I can't recall what we formally said at the 2 time. There would have been some formal response 3 through the Council meeting. But you would have to 4 indicate it to me, a response to that. I apologise. 5 Q. You made reference in your statement in paragraph 58, 6 which on page 17 -- it's beyond halfway. The sentence 7 begins: 8 "Once Willie Gallagher was removed following 9 political pressure from one half of the coalition 10 administration, there was a complete lack of trust 11 between TIE and the contractor, and as much as 12 Richard Jeffrey tried to repair things, trust never 13 seemed to be rebuilt." 14 Can you recall what were the circumstances of 15 Willie Gallagher's removal? 16 A. Traffic management when they first started working on 17 Princes Street was a disaster. There was backlog all 18 the way up to the Royal Mile and all over the place. 19 I first became aware of it because I was on a bus that 20 got stuck in the jam, and there was then some public 21 attacking of Willie by some councillors in the media, 22 and it rapidly became apparent that he felt his position 23 was untenable. So he departed. But he clearly departed 24 on his own terms in the sense that he decided that he 25 was being pushed very hard. 185 1 Q. So when you say he was removed, this wasn't formal vote 2 by the Council or something? 3 A. No, he left on his own -- he left by resignation, as it 4 were, but it was clear from public comments and what we 5 were hearing privately that there was a view that he 6 needed to be removed, particularly, somewhat ironically, 7 from the leader of the -- the deputy leader of the 8 Council at the time. 9 Q. If you look then on page 18 of your statement, 10 paragraph 62, you refer in 62 to an email that 11 Councillor Whyte sent to Councillor Dawe, 12 Councillor Wheeler, Jackson and the officers 13 Tom Aitchison and Donald McGougan on 10 December 2008, 14 noting concerns on comments made by David Mackay in 15 relation to TIE never starting with a fixed budget: 16 "We knew that David Mackay often said things when 17 speaking about the project publicly that were open to 18 interpretation, which in part was one of the reasons for 19 a continued negative relationship between the Council, 20 TIE, and the BSC consortium." 21 Was it your understanding that it was fixed at that 22 time? 23 A. As I indicated elsewhere, there was a -- there was 24 a fixed price and a fixed cost. The cost was what we 25 could afford. The price was the price of the things we 186 1 knew about. We understood it to be close to -- 2 I understood it to be about 95 per cent fixed, and that 3 the rest was what would be managed by the fact there 4 would always be challenges. 5 So there is, as I indicate in the next paragraph, 6 sometimes a conflation between fixed price and fixed 7 cost because you have to manage the overall budget. 8 Q. I want to turn to the question of the mediation that 9 took place in 2011. 10 CHAIR OF THE INQUIRY: Mr Lake -- 11 MR LAKE: That would be a suitable point to break, my Lord. 12 CHAIR OF THE INQUIRY: We will have a break for the 13 shorthand writers for 15 minutes. 14 (3.13 pm) 15 (A short break) 16 (3.28 pm) 17 CHAIR OF THE INQUIRY: You are still under oath, Mr Aitken. 18 MR LAKE: Thank you, my Lord. 19 Just before we resume, I would like to take a step 20 back, if I may, to consider something arising out of the 21 Final Business Case. If you could have again on screen 22 the document CEC01395434. 23 If you go to page 181. You may recall this, 24 and I looked with you at paragraph 11.59 under the 25 design and I referred to the first two sentences of 187 1 that. But it purely arises in relation to what follows. 2 It's paragraph 11.59. 3 Now, I had read up to the second sentence: 4 "The progress of detailed design has somewhat 5 mitigated this risk." 6 It continues: 7 "However a significant failure in the agreed design 8 will effectively be transferred to the Infraco 9 contractor following novation. Provisions of consents 10 for prior approvals and temporary and permanent traffic 11 regulation orders by the statutory authorities remains 12 a public sector risk, but provision of the necessary 13 information in the required format and timescales will 14 be at the risk of SDS and/or Infraco." 15 Now, it's the bit, the first bit of the additional 16 part I read that is significant failure in the agreed 17 design will effectively be transferred to the Infraco 18 contractor following novation. 19 What did you understand that to mean? 20 A. That there would be additional risk in the contract 21 should we not get the designs in place. 22 Q. Why would there be a risk from that? 23 A. Well, there's a cost to designing as you go along. 24 I have to say, re-reading that now, my understanding was 25 if we didn't get the designs in place, it would cost 188 1 more because you would be designing as you go along, and 2 an iterative contract is always more expensive than one 3 you've got an agreed design on. 4 That appears to suggest, reading it just now, and 5 I want to emphasise I'm reading it now, not recalling 6 what I thought, if that's okay. 7 Q. Yes. 8 A. It suggests that somehow the risk would be transferred 9 to the contractor which I can't say would be accurate in 10 my understanding. So I'm slightly struggling here 11 because it doesn't appear to say what I assumed would be 12 the case, that if we didn't get our ducks in a row, it 13 would cost us when we signed the contract. 14 Q. When there was talk about design risk, is that talking 15 about the cost that would be involved in carrying out 16 further design work as in the cost of designers? Or the 17 cost that would be carried out in building to a new 18 design? 19 A. So the price would be predicated on what they knew. 20 Now, we knew where we wanted the tram to go to and we 21 pretty well what the design would be like and then you 22 need to get agreed design for all of parts of that. 23 So if you -- so the cost would be both. If you 24 signed it off without a fixed agreement on the whole 25 design, then those elements that you were continuing to 189 1 design would be costed against what they knew at that 2 point. So they would say, it looks like this much 3 because these are what you've got in place at the 4 moment. 5 However, if it changes at all, there will be 6 additional cost, and of course there is the cost of 7 paying the designers to do that part as well. 8 So there are two parts to it. There's the cost of 9 continuing to have it designed and the cost of the 10 difference between the price given when they knew the 11 design -- they priced the design at the point of 12 pricing, and the final design, because there will be 13 a difference between those two things. 14 Q. Okay. Thank you very much. 15 A. Sorry, I have to say, I'm confused by that. 16 Q. Thank you. 17 A. That sentence. 18 Q. I was turning to the question of now the mediation which 19 took place in 2011. 20 I think we understand that the mediation itself was 21 carried out by Council officers with the assistance of 22 people from TIE. Is that your understanding? 23 A. I'd understood that we'd had other facilitators involved 24 as well. 25 Q. To actually act as mediator? 190 1 A. Yes. 2 Q. And perhaps other consultants assisting you? 3 A. Yes. 4 Q. But no councillors were involved in the mediation? 5 A. Absolutely. 6 Q. Did the councillors provide any direction or suggestions 7 as to what they would expect to see achieved at that 8 mediation? 9 A. No, as I think I indicate in my statement, I don't think 10 we ever took a formal decision that that's what we -- 11 that that is what should happen. I understand that the 12 Chief Executive Sue Bruce believed that was the right 13 thing to do, and she got on and made it happen. 14 She may well have had conversations with group 15 leaders at that time, but by that time I was not a group 16 leader and therefore wasn't party to those discussions. 17 But certainly I don't recall there being a formal 18 decision of Council to move into mediation. 19 Q. When you say Sue Bruce believed it was the right thing 20 to do, you're talking about mediation? 21 A. Yes. 22 Q. But in terms of what was to be achieved at the 23 mediation, did the councillors set any parameters as to 24 what they wanted achieved, as in maximum price or 25 certain tram length? 191 1 A. No. As I said, because the councillors didn't take 2 a decision to go into mediation in the first place, they 3 didn't set objectives. Once we knew it was happening, 4 what we wanted was for the contract as signed to be 5 delivered at the minimum cost, and we knew that the best 6 way of that happening was for trust to be rebuilt, and 7 therefore that seemed like a good thing to do. 8 Q. What did you expect the Council officers and Sue Bruce 9 to bring back from the mediation to the Council? 10 A. I don't think we expected them to bring anything from 11 the mediation. Mediation is something that happens 12 between individuals in a manner that means that they 13 know that the content of that itself will remain 14 confidential, and rightly so. What we expected was 15 a better relationship between the contracting parties 16 and the Council, so that we could get the job done. 17 Q. Did you expect any agreement to come out of it, as in 18 legal agreement? 19 A. No, because I understood it to be about how they work 20 together, rather than -- because there already was 21 a legal agreement, and it was to make that agreement 22 work properly and professionally. 23 Q. So when you got to the fruits of the mediation, and 24 there were a number of options for new agreements, 25 whether the tram would run to Haymarket or York Place, 192 1 St Andrew Square or the possibility of termination, was 2 that a surprise to you? 3 A. I didn't perceive that as coming directly out of the 4 mediation itself. 5 Q. Right. 6 A. I perceived that to be -- mediation has happened. They 7 have therefore begun to have conversations in the way 8 they should, and one of the challenges was to manage 9 cost, and they were giving us options about how that 10 could be managed. 11 MR LAKE: Thank you very much, Mr Aitken. I have no further 12 questions. 13 CHAIR OF THE INQUIRY: Does anyone else have any questions? 14 Thank you very much, Mr Aitken. You're free to go. 15 A. Thank you. 16 CHAIR OF THE INQUIRY: You're still subject to citation. It 17 is hoped you won't need to be recalled, but if 18 necessary, Ms Fraser will get in touch with you. Thank 19 you very much for your help. 20 (The witness withdrew) 21 MR LAKE: My Lord, the next witness is Donald Anderson. 22 MR DONALD ANDERSON (affirmed) 23 Examination by MR LAKE 24 MR LAKE: Mr Anderson, could you state your full name, 25 please. 193 1 A. Donald Craig Anderson. 2 Q. We have your address in the Inquiry records. What is 3 your occupation? 4 A. I'm a communications director. 5 Q. I would like you to look at a document please. There 6 will be a paper copy in front of you and I'll put it up 7 on screen as well. The reference is TRI00000125_C. 8 A. I have not got anything in front of me yet. 9 Q. It will come. 10 A. Thank you. That's Iain Whyte's statement. 11 Q. I have the wrong reference there. 12 A. That's the one. 13 Q. That's the one we have. 14 Now, do you recognise that on screen in front of 15 you, the statement you gave to the Inquiry? 16 A. Yes. 17 Q. I think if you look on the last page of it, it's signed; 18 is that correct? 19 A. Yes. 20 Q. Do you adopt that as your evidence given to this 21 Inquiry? 22 A. I do. My apologies for not being able to correct all 23 the mistakes, but because I changed occupation in the 24 middle of the period, I didn't have the time to go 25 through it in detail. 194 1 Q. Just by way of summary, I think you were a councillor 2 from 1986 all the way to 2007? 3 A. Yes. 4 Q. And you were a Council Leader in that period from 1999 5 to 2006? 6 A. Yes. 7 Q. You ultimately, after leaving the Council in 2007, went 8 on to a communications consultancy, and eventually were 9 instructed by Bilfinger Berger and Siemens in relation 10 to the tram project with effect from 2010? 11 A. Yes. 12 Q. First I want to ask you some general questions about the 13 way the contract was delivered. 14 A. Okay. 15 Q. And the decision to use an arm's length company. How 16 did it come about that an arm's length company was used? 17 A. I'm not too sure I exactly remember all the details of 18 how we decided to set up an arm's length company. 19 I think from recollection we had advice from Scottish 20 Ministers that that was the best way to set up the new 21 transport initiative that we were pursuing in relation 22 to the congestion charge in Edinburgh. But we didn't 23 have the expertise within the Council to provide the 24 resource to staff up and run a transport initiative of 25 such a scale for so many projects within the Council. 195 1 So we had extensive experience of setting up special 2 purpose vehicles and arm's length companies to deliver 3 various aspects of Council activity. So we were 4 comfortable with that model and it seemed a sensible 5 approach at the time. 6 Q. Could the expertise have been procured in-house, brought 7 into the Council? 8 A. You could have done it in different ways. I think 9 that's a fair comment. But, you know, I do think we 10 were given advice and guidance, both internally from 11 officers of the Council, but also from Scottish 12 Ministers, that the best way to procure it would be to 13 create an arm's length organisation and we felt 14 comfortable about doing that. 15 Q. Can you remember why it was said to be the best way, 16 either by the ministers or officers? 17 A. I think we had a family of companies in Edinburgh 18 Council that were very, very successful, and we 19 obviously had the bus company. We had the Edinburgh 20 International Conference Centre -- 21 Q. Can I ask you to slow down a bit. 22 A. My apologies. 23 Q. If you take it too fast, it becomes too much. 24 A. Of course. We had a family of companies in Edinburgh; 25 and that included organisations such as the Edinburgh 196 1 International Conference Centre; organisations like 2 Edinburgh Park, where we were 50 per cent owners; the 3 bus company where we held a majority shareholding; and 4 other organisations that carried out specific functions; 5 and it was tremendously successful for Edinburgh. 6 So this was seen as a mechanism that we were used to 7 using, and one that could be used well to deliver 8 complicated and large scale projects. 9 Q. In some of those projects you refer to, like 10 Edinburgh Park, that was the one that stuck out in my 11 mind, conference centre, and others are ones that 12 generate money for the Council, whereas TIE was not 13 going to be something that was going to generate money 14 for the Council. It was going to be something that was 15 going to use money? 16 A. Well, initially, in association with the congestion 17 charge, there would have been a revenue stream that 18 would have come in and been administered through TIE as 19 well. So TIE would have been able to operate from the 20 context of having a revenue stream available to deliver 21 capital projects. 22 Q. I understand. Are there disadvantages to having an 23 arm's length company deliver? 24 A. I think there are pluses and minuses in having external 25 arm's length companies. You do get a degree more 197 1 flexibility than you sometimes get within a Council 2 bureaucracy. 3 Where there's a need for very specialist expertise 4 in delivering projects and project management, it can 5 have advantages and you have a more flexible approach in 6 terms of the levels of salaries that you can pay to the 7 senior officers. 8 So there are advantages and disadvantages. 9 Q. You give me the advantages. What are the disadvantages? 10 A. The disadvantages are sometimes they can take on a life 11 of their own. Sometimes they don't necessarily follow 12 the guidelines or the aspirations that the Council has 13 for them. There can be tensions in regard to that, and 14 action sometimes needs to be taken to pull organisations 15 back to their central and core functions. 16 We have had experience of that in terms of 17 organisation -- other organisations that we were 18 involved with in a similar fashion. 19 Q. Presumably if the Council is setting up an arm's length 20 company, it will also establish what it wants the 21 company to achieve and to some extent how it wants to go 22 about it? 23 A. Yes. 24 Q. To what extent would the Council expect to get involved 25 in the more operational day-to-day matters of the arm's 198 1 length companies? 2 A. I think it varies. I think you would want a very close 3 working relationship between the professional officers 4 of the Council who were supporting and giving guidance 5 to any arm's length company. Elected members would 6 probably have a more overseeing role in relation to 7 that, but that can change in relation to any issues that 8 come up in terms of the company. You can get involved 9 either at a strategic level in giving advice and 10 guidance, or at times where there are conflicts, where 11 there are complicated issues or problems, then sometimes 12 you would need to get involved in some of the intimate 13 detail of the operation of the company or organisation. 14 You had to be flexible because these are large and 15 complex organisations, and they are administering large 16 and complex projects. 17 Q. That being so, and perhaps the individuals within these 18 arm's length companies having been recruited for their 19 experience and expertise, is it helpful to have the 20 Council nonetheless intervening in operational matters 21 and dictating how matters are to be done? 22 A. Sorry, you said it's unhelpful? 23 Q. Is it helpful to have the Council interfering in 24 operational matters? 25 A. They might not see it as helpful. I think from 199 1 the Council's point of view, it is the organisation that 2 has established the arm's length company. It's the 3 organisation that has a strategic need to see that 4 deliver objectives on behalf of the Council. So the 5 Council has to have the right to intervene if it feels 6 it's necessary to achieve its objectives. 7 The organisation wouldn't exist except at the behest 8 of the Council. So ultimately it's the Council's 9 decision how much it wants to intervene in the 10 administration of the company, and how much it wants to 11 give guidance to what it actually does. 12 Q. You referred in your answers there both to conflicts and 13 tension. What do you have in mind? Can you explain 14 that? 15 A. Well, there are always -- I mean, local government is 16 about managing conflicts and conflicts of interest and 17 different pressures. So there are always going to be 18 issues around any organisation, whether it's inside the 19 Council as a Council department, whether it's an arm's 20 length company, whether it's a third party organisation 21 that the Council funds or whatever, there will always be 22 issues that need to be managed and resolved. That is 23 part and parcel of local government. 24 Councils are large and complex organisations, with 25 20,000 staff. It had a budget of about GBP1 billion 200 1 when I was involved in it. So these are big 2 organisations with lots of complicated issues, and that 3 doesn't come without conflict that needs to be resolved. 4 Q. The Council is a large organisation. Many issues for it 5 to consider. 6 The companies in question may be significant and 7 handling quite big budgets, but why does that generate 8 tension or conflict? 9 A. I think just in terms of administering large scale 10 operations, large scale capital budgets, complicated 11 projects, it does actually generate issues and 12 difficulties from time to time, and those can generate 13 the conflict. I'm not suggesting that there's conflict 14 all the time. In lots of the arm's length companies, 15 you know, you wouldn't have any particular difficulties 16 year on year and you would have lots of success. But 17 from time to time, there are difficulties and those need 18 to be managed. Those need to be resolved. Elected 19 members and officers of the Council need to take 20 decisions about how much they intervene. Are the 21 management of the organisation behaving appropriately 22 and properly in line with what the Council's aspirations 23 are, or do we need to give additional guidance to the 24 staff there to make sure that they are doing what the 25 Council set them up to do, and what they're -- actually 201 1 their purpose is in being there. 2 Q. In terms of what you mean by intervention, obviously you 3 have referred there to additional guidance being given, 4 and that would be perhaps one end of the spectrum of 5 what the intervention is. What other interventions 6 might the Council wish to take -- 7 A. Ultimately it could be the removal of a Chief Executive, 8 if the behaviour of the organisational Chief Executive 9 was deemed to be inappropriate. 10 It can be just giving advice or guidance, making 11 sure that behaviour is amended or actions are taken, or 12 ultimately it could be, you know, the removal of staff 13 or the winding-up of the organisation itself. 14 Q. If I could ask you in your statement, please, to look at 15 page 99. 16 I'm interested in paragraph -- sorry, it's the typed 17 page 99 which must be scanned page 98. 18 Paragraph 247. You record at the outset there that: 19 "An arm's length organisation is generally a useful 20 thing ..." 21 But you say: 22 "... the arms cannot be too long and in the case of 23 TIE, the arms were so long, they were almost infinite. 24 There was no coherent strategic direction or control 25 over TIE from within the Council that I could see." 202 1 Was that a problem that evolved as matters went 2 along with TIE, or was it structural in the sense there 3 was just no direction at all? 4 A. I think it's fair to say in the early stages of TIE, 5 there were lots of tensions. In particular I think 6 there was at times a strange relationship between senior 7 figures within the Council such as myself, 8 Michael Howell as Chief Executive and Ewan Brown as 9 Chair. And we did feel that there wasn't an adequate 10 understanding of the political environment and the 11 political realities of operating a project like that in 12 Edinburgh, with the complications of some of the 13 politics associated with the congestion charging and 14 issues around that. 15 So there were tensions and difficulties from the 16 very beginning. But they were managed in a way that 17 kept TIE in line with what the Council wanted to achieve 18 at that stage. I think what happened towards the end 19 of -- really towards the commissioning of the tram 20 project and the signing of the contract was that TIE 21 developed a life of its own, and actually went beyond 22 the control of the Council; and from my perspective 23 I couldn't see that there was proper administration and 24 management and direction given to TIE in a whole swathe 25 of issues in relation to the delivery of the tram 203 1 project; and in a lot of ways it kind of told the 2 Council what it was doing, rather than took guidance and 3 advice. 4 Q. Can you give me any illustrations of areas or decisions 5 where you felt TIE were doing their own thing and not 6 being guided by the Council? 7 A. I think one of the things that struck me about the 8 coverage of the Tram Inquiry so far is some of the 9 information that's emerging and the information that was 10 fed back to the Council in relation to things like the 11 progress of design work. The fact that design -- you 12 know, the case was misrepresented by TIE back to the 13 Council shows that it was dysfunctional from a fairly 14 early stage after the tram contract, and in the run-up 15 to the period in which the tram contract was signed. 16 So it was not discharging the functioning that the 17 Council set it up to discharge. The Council would 18 expect a Council company to behave in the same ethical 19 framework and with the same guidelines as exist in local 20 government, and in ways consistent with the aspirations 21 of the Council. I think in a number of key aspects, 22 it's emerged that TIE was not behaving in line with 23 these aspirations and that ethos. 24 Q. You are talking about things that have emerged in the 25 course of this Inquiry, both in the run-up to it and 204 1 perhaps the hearings themselves. Was this a concern 2 that the arms were too long? Was that a concern you had 3 at the time? 4 A. Not when we set up, no, because it's inconceivable to me 5 that TIE would, if you like, go off and do its own thing 6 without recourse to the Council in any kind of serious 7 way. If it tried to, frankly, we would haul it back. 8 Q. Not so much when it was set up, but in the period when 9 it was implementing the tram project, the final run-up 10 stage, 2006 onwards, were you happy with the performance 11 of TIE at that time? 12 A. Generally, I think I was happy with the performance of 13 TIE. TIE was going through a disruptive period. The 14 loss of a Chief Executive, Willie Gallagher taking over 15 wasn't an entirely satisfactory state of affairs, but 16 I wasn't in any sense worried that TIE was taking off 17 and developing a life of its own and I didn't have at 18 that time any concerns that it would do so in the 19 future. 20 Q. Before I move on to something else in paragraph 247, 21 I just want to pick up what you said there about the 22 loss of a Chief Executive, of Willie Gallagher taking 23 over. So the concern was the loss of the 24 Chief Executive prior to Willie Gallagher? 25 A. I think there were concerns, certainly I had concerns, 205 1 about the performance of the Chief Executive. So that 2 in itself was an issue. And the removal of -- the end 3 of period of employment of a Chief Executive and the 4 changeover between him and Willie Gallagher was 5 obviously an issue. 6 So that in itself would cause some uncertainty, but 7 not in a fundamental sense of worrying about the 8 direction of travel of TIE at that stage. 9 Q. Referring to the last sentence of the paragraph we see 10 on screen, it's gone. 11 The lack of coherent strategy -- the lack of 12 coherent strategic direction or control over TIE from 13 within the Council; the way that is phrased, it's not 14 a problem arising from TIE; that is a problem arising 15 from the Council, failure on their part? 16 A. I think there are issues there in terms of the way the 17 Council interacted with TIE and I don't think from what 18 I have seen that elected members or officers exercised 19 sufficient control over TIE. I think they were too 20 deferential in terms of allowing senior members of staff 21 in TIE to give direction to the Council, rather than 22 give advice and guidance to TIE about how best to 23 proceed in terms of development of the tram. 24 Q. That might be the control aspect, but -- or is that 25 intended also to be the lack of coherent strategic 206 1 direction as well? 2 A. I think it's both. 3 Q. What would you have expected the Council to have done or 4 Council officers -- 5 A. I think you would expect senior elected members and 6 senior officers of the Council to be clear what they 7 expected TIE to do in terms of meeting the performance 8 aspirations that they had for it, be clear and honest in 9 terms of the information that they presented to the 10 Council about the progress of the project, and I think 11 there were significant failures in that regard from, you 12 know, the period in which the tram project was signed 13 off by the Scottish Parliament and began to be 14 implemented. 15 Q. I think we're aware that councillors sat as directors 16 within these organisations. Did you regard that as 17 a good idea? 18 A. I think generally, yes. It's not to say that it doesn't 19 come without issues and complications. Elected members 20 vary in their qualities and their abilities. So that 21 can sometimes bring issues in itself. 22 But in general terms, across the family of Council 23 companies, elected members played a positive role in 24 Council companies, and it operated, I think, in a fairly 25 healthy and helpful way. 207 1 Q. What in your view are the advantages of putting elected 2 members on to boards? 3 A. I think it helps to -- it helps the organisation to 4 understand the political context in which it operates. 5 This is not like a private company that's, you know, 6 selling Coca-Cola or anything like that. These are 7 organisations that are set up to deliver a specific 8 purpose on behalf of the Council. 9 So they do need to understand the political context 10 in which they operate, and the Council's aspirations in 11 terms of the areas of activity in which they operate. 12 So it's important that elected members are there to give 13 advice, guidance and insight to the companies to ensure 14 that there's as little friction as possible in that 15 regard, and they can focus with getting on with the job 16 that they are actually discharged to do. 17 Q. That would be the provision of information, advice or 18 guidance from those councillors into the company? 19 A. Yes. 20 Q. What about passage of information the other way, from 21 the company back to the Council? Do you see it as a 22 conduit for that? 23 A. I think that helps as well, because you have a two-way 24 resource there, that can give insight back into the 25 Council about the issues that affect these companies. 208 1 In some cases that may not be significant because the 2 functions of the company are straightforward. 3 In other instances it can be really helpful to have 4 elected members who understand the intricacies of the 5 debates and discussions and the decision-making 6 processes, when a Council company is handling something 7 complex or comes across a challenge or an issue. So 8 that two-way feed of information can be very helpful all 9 around, I think. 10 Q. When an elected member is sitting as a director, sitting 11 at a board meeting, whose interests will they promote? 12 A. Primarily, in a legal sense, they are responsible for 13 the interests of the company. But there's a shared 14 interest between the Council and the company. So 15 generally speaking, those interests are aligned. So 16 there isn't necessarily a case in which the elected 17 member would be expected to do anything inappropriate or 18 different to the interests of the company, in terms of 19 the role as an elected member of the City Council. 20 So from that point of view, I think there is 21 a shared interest between the company and the Council, 22 and it's in the company's interests to deliver the 23 objectives that the Council established it for, and for 24 that reason, I don't really see there being too many 25 problems in terms of a huge conflict of interest in the 209 1 operation of the companies that I was involved in, but 2 obviously conflicts can occur. 3 Q. What happens then? 4 A. You've got to resolve them. 5 Q. How? 6 A. Well, there's a variety of different means. We had, 7 I remember, when I chaired the EICC, one of the partner 8 organisations wanted to register the company offshore 9 for tax reasons which I felt was inappropriate. We 10 thrashed that out. There was conflict over that issue. 11 I didn't think it was appropriate that a Council company 12 should be registered offshore for tax reasons. I felt 13 that was unacceptable from a political point of view, 14 and from a moral point of view actually. And we 15 thrashed that out. 16 So you can get issues like that that arise from time 17 to time. 18 What you've got to try and do in every case is look 19 at the circumstances that you are in, look at the 20 aspirations of the organisation, look at the suggestion 21 and the proposal, and try to take the best decisions you 22 can in light of the information that you have, and to my 23 knowledge, that's what we always sought to do when I was 24 in the Council. 25 Q. In terms of the advantages you have talked about of 210 1 having the elected members as directors, the provision 2 of information two-way, is that something that could not 3 be better dealt with by agreements and guidance from the 4 parties both ways? 5 A. I don't think it's an either/or. I think there's no 6 doubt that you can have agreements with an organisation 7 to deliver objectives. Indeed, the Council does deliver 8 many policy objectives through agreements with third 9 party organisations. It's just about picking the right 10 vehicle and structure for an individual project or an 11 individual initiative and making the best decision that 12 you can in terms of the circumstances. 13 So for different aspects of Council activity, there 14 will be different structures and different approaches to 15 resolving the issues. This just happened to be the way 16 that was felt to be the best for delivering a number of 17 transport projects associated with the potential of 18 congestion charging. 19 Q. Over time, TIE came to have just the one project, the 20 trams. It was decided nonetheless to keep TIE 21 implementing that project rather than bring that back 22 in. Was the matter reconsidered? 23 A. I think there was a real difficulty in there for TIE. 24 And I think that does cut to the very centre of some of 25 the issues in relation to the way that TIE chose to 211 1 operate, because initially it was set up to deliver 2 a wide range of transport initiatives, and it was set up 3 in view of the potential of congestion charging in 4 Edinburgh, which would have provided a huge revenue 5 stream and an ongoing workload of transport projects. 6 By the time that it got to being made responsible 7 for just the tram project, that was all that the officer 8 cohort of TIE were working on. So you had the entire 9 infrastructure of a company on one project. You didn't 10 have the critical mass or the ability to spread costs 11 across different projects. 12 I think that should have raised some questions about 13 whether it was right to continue with the structure that 14 TIE had at that time. However, you also had a situation 15 in which Transport Scotland wasn't involved with the 16 tram project. I think the obvious thing would have been 17 to do, as happened with many other transport projects in 18 Scotland, was that the activity to support those 19 projects should have been subsumed within Transport 20 Scotland. 21 It took over a number of different transport 22 projects. It took over the responsibility for 23 delivering the Borders railway from Borders Council, and 24 that could have happened in terms of trams. It didn't 25 happen because obviously the Scottish Government took 212 1 a different view about the tram project than it took 2 about the Scottish Borders railway. 3 On reflection, I think it probably would have been 4 better, had TIE been absorbed into Transport Scotland 5 and the project delivered that way. However, Transport 6 Scotland wasn't set up when we initially set up TIE. It 7 was still evolving in the period when I was still on the 8 Council. So there wasn't an obvious mechanism for 9 carrying that out then, and of course by the time the 10 tram project got the go-ahead, the Scottish Government 11 didn't want to proceed with the project and took the 12 view that it wanted to step back from it. So that 13 option wasn't really available to the Council. 14 Q. You do say in your statement, had Transport Scotland 15 existed, it would have been the delivery vehicle? 16 A. Sorry? 17 Q. You do say in your statement, had Transport Scotland 18 existed at the time, early days, it would have been -- 19 A. It would be the obvious. You wouldn't set up a separate 20 transport company in a Council now because you have the 21 facility of Transport Scotland. It's got a proven track 22 record of delivering a number of very, very difficult 23 and complicated projects to a high standard, and that 24 would be the obvious mechanism. If you had funding for 25 a transport project in Scotland, you would use Transport 213 1 Scotland. 2 Q. Is it something that's always likely to be of benefit in 3 a country the size of Scotland, to centralise the 4 experience rather than split it up among the Councils? 5 A. I don't know if I would say always. I think Scotland is 6 a pretty small country and we have the Scottish Futures 7 Trust and we have Transport Scotland, which I do think 8 are both very good organisations of providing an 9 experience, an expertise and a critical mass for 10 handling some of these big and complicated projects. 11 It's not easy to deliver these big complex capital 12 projects. The skills required are extensive and the 13 number of people who have the necessary skills can be in 14 relatively short supply. 15 If you're a small organisation, the Council isn't 16 a small organisation, but if you're a small 17 organisation, to actually have that resource available 18 to you can be very, very expensive and time-consuming to 19 deliver. 20 In terms of the period in which we were making these 21 decisions in the Council, there wasn't the option of 22 Transport Scotland at that time. So we took the best 23 decisions that we could at the time, but that's not to 24 say that that structure could not have evolved over 25 time, and it's not to say that it wouldn't have been 214 1 advantageous, had TIE been absorbed into Transport 2 Scotland, where there was already a significant 3 expertise developing. 4 CHAIR OF THE INQUIRY: Could I just ask Mr Anderson what you 5 have in mind? Are you saying that with the nature of 6 transport project in Scotland, even though it was 7 perceived by many to be a local project such as the 8 Edinburgh tram project, or for that matter, a proposal 9 to have a Glasgow airport rail link, say, are you saying 10 that that sort of project should always be done by the 11 national body of Transport Scotland, and the local 12 authorities be cut out of that? 13 A. I think the question needs to be asked in terms -- 14 I think it probably depends on the scale of the project. 15 I mean, I think in Edinburgh we're quite fortunate in 16 that we do have a large local authority. In Glasgow 17 there's a large local authority with significant 18 experience within the Council. But even then for 19 delivering something on the scale of the tram or the 20 airport rail link, we didn't have the expertise in-house 21 to deliver that. 22 So I think you've got to look at the project on an 23 individual basis and come to a view, is this something 24 that you can easily deal with within the local 25 authority, and if it's beyond the range and experience 215 1 of the local authority, and it's -- there's an obvious 2 link there with an organisation like Transport Scotland, 3 or it's a project that might benefit from the input from 4 the Scottish Futures Trust and advice from them, then I 5 think it would be foolish not to take that on board. 6 CHAIR OF THE INQUIRY: Would that then, take the example of 7 the proposed extension of the tram, would that also be 8 appropriate to take away from the city and put into -- 9 A. I think that's a possibility. If the Council was of 10 a view that Transport Scotland input into the project 11 would be very helpful, and it might be, then that would 12 be something that could be explored. I think that would 13 be very difficult at the moment, because the Scottish 14 Government actually takes quite a negative view about 15 the tram project. 16 So to get them to overcome their political 17 objections would be a challenge, I think, to say the 18 least. But I think there would be a lot of benefit from 19 having Transport Scotland at the table in implementing 20 the next phase of the tram project. 21 MR LAKE: You are aware that in the period up to when you 22 left the Council, Transport Scotland did continue to 23 have an involvement with the project? 24 A. Yes. 25 Q. That ended in 2007 following the Scottish General 216 1 Election and the decisions taken after that. 2 Did you have a view on the effect of Transport 3 Scotland withdrawing from the project? 4 A. I think at the time I was -- I had come off the Council 5 in 2007. So I wasn't taking an active interest in the 6 sense of looking at the intricacies of the delivery of 7 the tram project at that time. I was still a passionate 8 supporter of the tram project. 9 I would have seen it as regrettable that Transport 10 Scotland weren't as involved in the project. I'm not 11 sure I would have foreseen that that could have caused 12 the scale of difficulties that I think it contributed 13 to. 14 Q. And do you think it did contribute to the difficulties? 15 A. I think it was a contributory factor. I think the 16 situation that you got into, as I have said in my 17 statement, was that TIE became the resource for all the 18 information on the tram project for the Council, and 19 I think it's clear from what -- the documentation I have 20 now seen and the interview process and some of the 21 information that's come out from here is that there was 22 a deliberate, if not campaign, then a deliberate, 23 co-ordinated series of actions to prevent key figures in 24 the Council from having accurate and important 25 information in order to take the decisions that they 217 1 needed to take in relation to the tram project. 2 I think it's inconceivable that if Transport 3 Scotland had been at the table, TIE would have been able 4 to behave in that way. 5 Q. When you say concealment of information, is that from 6 councillors or Council officials or both? 7 A. Sorry? 8 Q. Was the information not made available to councillors or 9 Council officials or both? 10 A. I think it's clear from the information we have, it 11 wasn't made available to councillors. Whether it was 12 made available to Council officials, I can't comment on. 13 I haven't seen relevant information. I suspect it's 14 probably a bit of both. But I can't put a finger on who 15 exactly organised it and who co-ordinated what was 16 clearly a very -- how should I word this? There was an 17 organised attempt to prevent elected members in 18 Edinburgh from having important information on which to 19 base their decisions about how the tram project was 20 delivered, and a lot of the very, very significant 21 problems associated with the delivery of the tram 22 project were hidden from elected members for a prolonged 23 period of time, which lengthened the dispute between the 24 contractor and TIE and increased significantly the cost 25 of the tram project. 218 1 Q. You stated that in quite high terms, and you are saying 2 it was organised, and that the information was hidden. 3 Do we take from that that you are saying that this was 4 a deliberate course of action on the part of people 5 within TIE? 6 A. I think it was deliberate. I'm not sure I could be 7 specific about what exactly the motives were of each of 8 the people who were involved in it, but if you haven't 9 progressed the design work and you say you have, that is 10 a deliberate statement of -- and that's misinformation 11 that is being conveyed from TIE to the Council. 12 If you lose adjudications and you present them as 13 being successes, that's deliberate misinformation that 14 you are presenting to the Council that gives the elected 15 members the wrong impression of how the project is 16 proceeding, and makes it almost impossible for them to 17 take legitimate decisions in terms of the ongoing 18 management of the project. 19 Q. I think you were still -- you left the Council in 2007. 20 So when it came to taking the final decision in 21 December 2007, and the state of the design then, that 22 wasn't something you were privy to? 23 A. No. 24 Q. And again, when we come to the adjudication decisions 25 they were obviously still later than that. 219 1 From where is it that you've got your understanding 2 about these? Is this from your role later on with 3 Bilfinger and Siemens? 4 A. Yes. I mean, we were advising Bilfinger during that 5 period when the adjudication process was ongoing, and it 6 was clear from the information that we were getting that 7 although Bilfinger and Siemens had lost the first 8 adjudication, in terms of the rest of the adjudications, 9 they were by and large being won by Bilfinger and 10 Siemens. 11 But they were being presented to the Council as if 12 TIE had won them, and that was an inaccurate assessment 13 of where they were. I think that's now emerged 14 unequivocally from the information we now have and is 15 accepted. But in terms of the way that was presented to 16 the Council, it gave the impression that the contractor 17 was being difficult and was trying to extrude money from 18 the Council and from TIE in the way that they were 19 behaving, whereas actually what they were trying to do 20 was to stand up for legitimate interests in terms of the 21 contract, and that was presented to the Council in a way 22 that was completely false. 23 Q. We will come back to that a little later in my questions 24 for you. Going back a little bit to the things you said 25 earlier, you referred to Transport Scotland as having an 220 1 established track record in relation to delivery of 2 projects. 3 By about 2006/2007, when you were still there, were 4 you aware of what the track record of TIE was on 5 delivering the projects that had been committed to it? 6 A. Yes. 7 Q. Was it good or bad? 8 A. I think there were bad elements within it. I think -- 9 I can't remember which park and ride it was, but there 10 were problems associated with that. I'm not sure at 11 what stage I was aware of the issues on the 12 Stirling-Alloa project, but there were issues there. So 13 there were mixed, I think, and some difficult issues in 14 terms of TIE's track record. 15 Q. When you say you weren't aware of the issues on that, 16 but the issue arises, would it have been useful to know 17 about these things when you came to take the decisions 18 in 2006 and 2007? I appreciate you were away at the end 19 of that time? 20 A. Sorry, I'm not exactly sure how you -- 21 Q. Would knowledge of TIE's track record be relevant to 22 taking decisions and trusting it with the tram project? 23 A. I think -- I think at the time it was more that I had 24 serious reservations about the performance of the 25 Chief Executive of TIE, that coloured my impression of 221 1 the organisation at that time, and I felt there needed 2 to be a change in there. His contract wasn't renewed 3 because of concerns I had and other senior figures in 4 the Council had about his performance and we felt that 5 that would improve over a period of time. 6 Certainly we associated his involvement and some of 7 the other staff's involvement in some of those failures 8 as something that we could move beyond with new figures 9 appointed to administer TIE. 10 Q. Another thing you said when discussing matters 11 earlier -- I'll start the question differently. 12 You talked about the need for expertise and 13 experience, and how that might be brought into the 14 Council. You will be aware perhaps from just your 15 knowledge from dealing with the contractors that 16 ultimately the Council did resume direct control of the 17 contract? 18 A. Ultimately it did. 19 Q. So they did implement matters on an alternative model, 20 that instead of using an arm's length company, it was 21 done directly by the Council? 22 A. It was done directly by the Council but it was overseen 23 by an independent consultant. 24 Q. They engaged the services, I think several consultants, 25 Turner & Townsend and HG Consulting? 222 1 A. And my understanding is HG Consulting were the 2 overseeing organisation in terms of running the 3 remainder of the contract at the time. So you can do it 4 that way, and you can have large scale projects 5 delivered in that way. 6 That doesn't necessarily guarantee that there won't 7 be issues, and I think if you look through the history 8 of the tram project, from time to time there were 9 companies who were involved who made significant errors 10 and had problems along the way. So you've got to try 11 and again go back and make the best decisions you can 12 with the information that you have at the time, and 13 that's what we felt we were doing. 14 Q. When you said you looked through the tram project, there 15 were significant -- companies making significant errors. 16 Are you talking about the Edinburgh tram project? 17 A. Yes, I think there were issues in terms of deliveries of 18 things like the on-street utility diversions that were 19 procured. Even if you'd taken these companies on to 20 carry out the work directly for the Council, it doesn't 21 necessarily mean to say there wouldn't be problems. 22 If you look at the work that the Council has done on 23 things like road renewals and road repairs, there are 24 difficulties with some of the aspects of the capital 25 budget that's delivered directly by the Council, and 223 1 through employing contractors. 2 So there's no magic bullet, I don't think, in terms 3 of, you know, this is the model that works for 4 everything. I think you've got to try and look at it in 5 terms of what you think is the best approach for that 6 individual project. But you also have to manage it 7 properly, both between the elected members and the 8 officers of the Council, to make sure the problems are 9 picked up and addressed as early in the process as 10 possible and before they become major issues, 11 particularly when you've got a project on the scale of 12 the Edinburgh Tram Project which involves over half a 13 billion pounds of expenditure. 14 Q. And did you consider that was done after the mediation, 15 picking up problems and dealing with them? 16 A. I think largely it was done successfully, yes. 17 Q. And was it done before the mediation? 18 A. I don't think you could say that the tram project was 19 managed as well as it could have been before the 20 mediation. 21 Q. Going back to your time in the Council, at the time you 22 were there in 2006/2007, and I stress at the time, did 23 you feel you were getting the information that you 24 required to take decisions? 25 A. Yes. 224 1 Q. I take it with hindsight you no longer consider that to 2 be the case from what you say? 3 A. No, I think at the time -- I don't think I had any 4 concerns that TIE were seeking to misinform or misdirect 5 either myself or the senior officers of the Council at 6 that time. 7 Q. So when did that start? 8 A. I think because TIE found itself in the position where 9 it had a project that it was wholly reliant on, that the 10 Scottish Government didn't want to proceed, but the 11 Council and many in the Scottish Parliament wanted to 12 proceed, and they felt that the project was fragile and 13 might not actually take place, which would put at risk 14 all of their personal aspirations, at that stage I think 15 there began to creep into the mentality of TIE a degree 16 to which it was about securing the future of the 17 project, rather than necessarily carrying out good 18 governance or good project management. 19 I think that the priority was given to making sure 20 that the tram project was secured, rather than 21 necessarily it was successfully delivered. 22 Q. Was that a view you formed at the time or you formed 23 since? 24 A. I think I formed that view over a period of time. 25 I think in particular at some of the feedback I got 225 1 around about the time that the Princes Street works 2 began, because, you know, we had enormous frustration at 3 the delays in terms of the tram project going forward. 4 It was politically contentious, and then the works began 5 on Princes Street, and my response to that was 6 "Fantastic, at last, we are beginning to see the project 7 delivered". Feedback I got from some contacts that 8 I had in the Council and TIE was that the mentality in 9 TIE was not "Great, yes, it's going ahead", it was 10 "Great, now it can't be cancelled". 11 Q. When you sought information while you were a councillor, 12 was it ever refused to you on the basis that matters 13 were confidential? 14 A. No. 15 Q. Not at any time? 16 A. Well, if there was information that was inappropriate 17 for me to have, then, generally speaking, I wouldn't ask 18 for it. 19 If I felt I needed information on which to take 20 a decision, then I got that information. There are very 21 few examples where I can think where information was 22 withheld from me. 23 I know that one that springs to mind was the price 24 of the sale of a significant site in the west of the 25 Edinburgh city centre at Haymarket, where there was 226 1 a significant gap between the leading bid and the bids 2 underneath that, and officers felt they didn't want to 3 share that with anyone just in case it got back to the 4 bidder how significant that gap was, and I was 5 comfortable not to get that information, frankly. 6 But I can't think of any instance where I thought it 7 was appropriate for me to have information and officers 8 of the Council withheld it. 9 Q. When it came to taking the big strategic decisions on 10 the part of the Council while you were there, do you 11 consider that these were taken on a properly informed 12 basis? 13 A. Generally, yes. 14 Q. Was there sufficient time for discussion and evaluation 15 of the proposals that were put forward? 16 A. In my experience, yes. Quite often, to be honest, 17 because the Council is a bureaucracy, quite often there 18 was too much time spent on decision-making. Trying to 19 get things done can sometimes be a challenge in local 20 government. It will be like treading through treacle to 21 get projects delivered. So at times one of the 22 handicaps of the democratic process is that it can be 23 cumbersome and bureaucratic. 24 So my frustration was more often with trying to get 25 ahead and do things than necessarily trying to spend 227 1 enough time on discussing them and talking about them. 2 But part of the democratic process is you have to 3 robustly discuss these issues and you have to thrash out 4 any problems that you have. That's just one of the 5 complications of being in local government and in the 6 public sector. 7 Q. Taking account of what you said there, was there an 8 effective evaluation of the material being submitted by 9 Council officers and others to you? 10 A. I think it would be brave to say, you know, it was 11 perfect all the time. I don't think it was, and I think 12 if you look back at that period, we were engaged in an 13 enormous amount of investment in Edinburgh that actually 14 made a significant difference in terms of moving the 15 city forward, both in terms of our educational 16 facilities, but also in terms of transport as well, and 17 that put a huge pressure on the Council as an 18 organisation to deliver that, and elements of it were 19 done well. Elements of that were not done as well as 20 they should have been. There were mistakes made. There 21 were errors in terms of that. There were errors that 22 were down to failures on the part of the way the Council 23 administered some of the capital projects, but there 24 were also errors on the way that contractors delivered 25 some of these projects. If you look at the Edinburgh 228 1 Schools Partnership, there were significant issues 2 there. 3 But this was a Council that had some of the most 4 experienced practitioners in Scottish local government 5 and people who were at least as good as anywhere else in 6 Scotland. 7 So we had, generally speaking, a good level of 8 officer support for these and, generally speaking, we 9 made huge progress in the ambitions that we had for the 10 city and delivering an improvement to its infrastructure 11 and its capabilities. 12 Q. Could I ask you please to look at your statement on 13 page 37. In paragraph 77 you note that: 14 "On any of these projects that run over a long 15 period of time you need a high degree of political 16 confidence because they run across different 17 administrations. The person that is the leader of the 18 Council at the start of the project is unlikely to be 19 the leader of the Council at the end of the project. 20 Therefore, you need a robust political base to take it 21 through and we had that in Edinburgh." 22 Can we just pause there. There were quite 23 significant changes in the composition of the Council 24 obviously in 2007. 25 A. Yes. 229 1 Q. So while there had been a fairly consistent base up to 2 then, there was really quite a dramatic change in the 3 creation of the coalition in 2007. Does that not rather 4 give you the opposite to what you say there, that the 5 political base changed markedly and became more fragile? 6 A. Well, we had -- we had virtually unanimous and for 7 a long time we had unanimous support for the trams in 8 the Council. 9 Q. During your period? 10 A. Yes. 11 Q. It wasn't unanimous after that? 12 A. No, but you can't guarantee -- we live in a democracy. 13 You can't guarantee from one Council administration to 14 the next that things aren't going to change 15 dramatically, and you can't necessarily plan for that 16 because you wouldn't necessarily do anything if you felt 17 that you needed a guarantee for, I don't know, five, 18 ten, 15 years beyond the period you were immediately in. 19 So you have to take the decisions you can on the 20 basis of the knowledge you have at the time, and at the 21 time we had overwhelming support for Edinburgh trams, 22 and I didn't anticipate that changing dramatically. 23 Indeed, although the administration changed quite 24 dramatically in 2007, in terms of the majority in the 25 Council, there was still a very significant majority in 230 1 favour of trams amongst the major political parties. 2 Q. So allowing for that, within the coalition post 2007 of 3 the division, would you say that there was still 4 a robust political base after that, allowing for the 5 totality of votes within the Council? 6 A. Within the coalition? 7 Q. Within the Council. The coalition, I think, was divided 8 in relation to the trams. But making up the totality of 9 political parties within the town, would you call that 10 a robust political base? 11 A. Yes. 12 Q. Later in that paragraph you refer to the need for 13 a strong leadership and continuity at officer level, but 14 you do not think we necessarily had that. 15 Where do you consider the leadership issues arose? 16 A. I have to say it's something that I've pored over in my 17 mind many, many times. I worked closely with 18 Andrew Holmes and Tom Aitchison over a long period of 19 time. I worked with Dave Mackay for a period of time as 20 well. 21 I just don't think there was the strength of 22 leadership and direction given to TIE from the officers 23 within the Council that it should have had. I didn't 24 see it. There may be things going on behind the scenes 25 that I didn't know about, but from what I saw, looking 231 1 in from the outside, I couldn't see what Tom Aitchison 2 and Andrew Holmes were doing to control TIE and make it 3 comply with the Council's aspirations and wishes. 4 Q. You're talking about officers there taking action? 5 A. Yes. 6 Q. If you go back to page 2 of your statement, looking at 7 paragraph 2. It's perhaps easiest to read it from the 8 start: 9 "The tram project was one of the major projects the 10 Council was involved in over a prolonged period of time 11 and I was involved in overseeing it alongside my other 12 duties leading the operation of the Council as a whole. 13 It was therefore a very important and significant part 14 of what I did as leader and I would provide oversight 15 strategic guidance where I believed it was necessary." 16 Was that in relation to TIE? The tram project? 17 A. In relation to the tram project and in relation to TIE. 18 Q. And you say you would get involved in the detail if you 19 felt it was necessary: 20 "... and give advice and guidance to colleagues and 21 officers in the Council if I was either concerned or 22 keen to see a particular aspect of the project 23 developed, emphasised and taken forward." 24 So was that as Council Leader you took that degree 25 of control? 232 1 A. Yes. 2 Q. Can you remember any particular aspects in which you 3 intervened in that way? 4 A. In relation to trams or -- 5 Q. Yes, trams. 6 A. I think one of the things that concerned me in relation 7 to trams was that I did, and I think -- I think this is 8 true of other senior elected members and officers in the 9 Council. We lost confidence in the Chief Executive of 10 TIE and that we had to take action to try and address 11 that issue. Ultimately what that meant was his contract 12 wasn't renewed. 13 So that was an issue that I certainly took 14 a personal interest because I really didn't think that 15 he had the potential and the capabilities to deliver 16 a complicated project like that in a satisfactory 17 manner. 18 Q. If you were to get involved in matters of strategic 19 guidance or direction, was that a matter on which you 20 had in turn to take guidance from the Council as 21 a whole? 22 A. Well, initially, I mean, you would take advice and 23 guidance from the senior professional advisers in the 24 Council, the Director of City Development and the 25 Chief Executive. 233 1 If there was advice and information coming from 2 other sources within the Council, from the other 3 political groupings or colleagues, Andrew Burns who was 4 the executive member at the time, then you would take 5 advice and guidance there. 6 Ultimately you made up your own mind and you 7 thrashed out these issues with your colleagues to try 8 and get the best decision that you could, but you didn't 9 necessarily just make up your mind on a whim. You did 10 take advice and try it as robustly as possible to test 11 your opinions before you took a decision. 12 CHAIR OF THE INQUIRY: Is this a convenient point? 13 MR LAKE: Yes, my Lord. 14 CHAIR OF THE INQUIRY: Mr Anderson, we'll rise for the day 15 and resume again tomorrow. 16 A. Sorry, you couldn't speak up a little bit, could you? 17 CHAIR OF THE INQUIRY: We will rise for the day and resume 18 tomorrow. Let's start giving your evidence again at 19 9.30. Ms Fraser will keep you advised about the 20 details. 21 I'm sorry we haven't managed to finish your 22 evidence, but I think we indicated that it was likely 23 anyway that it would spill into tomorrow. 24 A. No problem. Thank you. 25 (4.33 pm) 234 1 (The hearing adjourned until Thursday, 7 September 2017 at 2 9.30 am) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 235 1 INDEX 2 PAGE 3 MS LESLEY HINDS (continued) ..........................1 4 5 Examination by MR LAKE (continued) ............1 6 7 MR EWAN AITKEN (affirmed) ..........................113 8 9 Examination by MR LAKE ......................113 10 11 MR DONALD ANDERSON (affirmed) ......................193 12 13 Examination by MR LAKE ......................193 14 15 16 17 18 19 20 21 22 23 24 25 236