Thursday, 14 September 2017 16 (3.30 pm) 17 CHAIR OF THE INQUIRY: Mr McClelland? 18 MR MCCLELLAND: The next witness, my Lord, is Alan Coyle. 19 MR ALAN COYLE (sworn) 20 CHAIR OF THE INQUIRY: Have a seat, Mr Alan Coyle. Just 21 listen to the questions and answer them as clearly and 22 concisely as possible. If you lean into the microphone 23 so the shorthand writers can hear and speak at 24 a reasonable pace, so that they can keep up with you. 25 Examination by MR MCCLELLAND 168 1 MR MCCLELLAND: Can you please state your full name? 2 A. Mr Alan Coyle. 3 Q. And you have supplied written answers to the Inquiry, is 4 that correct? 5 A. That's correct. 6 Q. I think you should find sitting on the desk in front of 7 you those written answers. Can you just confirm that 8 those are the answers you have supplied? 9 A. Yes. 10 Q. Now that you are under oath, are you content for the 11 answers that you have given to stand as your evidence to 12 the Inquiry? 13 A. Yes. 14 Q. Is there anything in them that you no longer consider to 15 be accurate or would like to clarify? 16 A. No. 17 Q. Thank you. 18 We can take your answers as read to some extent, 19 Mr Coyle, but you will appreciate that there are some 20 matters we would like to clarify or expand upon. You 21 are an accountant, is that correct? 22 A. That's correct. 23 Q. What professional qualifications do you have? 24 A. Chartered Institute of Management Accountants. 25 Q. During the tram project you were employed by the City of 169 1 Edinburgh Council as a Finance Officer in the City 2 Development Department? 3 A. A Finance Manager in the City Development Department. 4 Q. I would like to focus this afternoon on the period from 5 late 2010 through 2011 starting from the point when it 6 had been decided that the disputes on the tram project 7 should go to mediation. 8 What was your role at that time? 9 A. From late 2010? Late 2010, I was on secondment at 10 tie Limited, and thereby I was asked to go on secondment 11 by my then Director, Mr Donald McGougan. 12 CHAIR OF THE INQUIRY: Could you speak a little bit more 13 closely and clearly -- 14 A. Sure. 15 I worked there on secondment for probably until 16 early 2011, at which point the new Council Chief 17 Executive, Sue Bruce, was starting to prepare for 18 mediation and I was asked to work as part of that team 19 for the City of Edinburgh Council in preparation for 20 mediation. 21 MR MCCLELLAND: Thank you. 22 Could you just give an indication. By late 2010 how 23 long had you worked on the tram project? 24 A. I worked on the tram project since late 2007. 25 Q. What level of understanding had that time spent on the 170 1 project given you about it? 2 A. Quite a lot of understanding, certainly in terms of the 3 make-up of the financials of the numbers. 4 Q. Can you give us some indication of your level of 5 seniority within the team of Council officers who were 6 working on the project? 7 A. Sure. In 2007, I was a pretty junior member of the 8 team, reported to Rebecca Andrew who was the Principal 9 Finance Manager for the City Development Department at 10 that time. And I continued on in that capacity until 11 Rebecca went on maternity leave some time, I think, in 12 2009. At which point I took on her role as a Principal 13 Finance Manager and reported directly into the Director 14 of Finance, Donald McGougan, at that point in time. 15 Then level of seniority pretty much stayed around 16 those lines until after mediation, and then after 17 mediation, I took on more of a prominent role in terms 18 of the financials for the project going forward. 19 Q. If we could please have document CVS00000056. 20 Mr Coyle, is that a copy of the CV you supplied to 21 the Inquiry? 22 A. That's correct. 23 Q. Could I ask you please, to look at the fourth bullet 24 point on that page? We see there that it says: 25 "As the Council's lead on the tram project and 171 1 a member of the Senior Executive Team for the Edinburgh 2 tram project, concluding a settlement agreement with 3 Bilfinger and Siemens that got the project back on track 4 and delivered the construction project under revised 5 budget and timescales. Alan led the work in relation to 6 finance, commercial, legal and business planning aspects 7 and was a key advisor on strategic decisions relating to 8 the project funding, construction and operation." 9 Do you see that? 10 A. Yes. 11 Q. Does that accurately describe your role at and after 12 mediation? 13 A. After mediation, it does. The only qualification 14 I would say is that with regard to legal matters, I was 15 more of a conduit between the project and the legal team 16 back in City of Edinburgh than actually leading on legal 17 matters. 18 Q. You referred earlier on to the fact that in late 2010, 19 you were seconded to tie? 20 A. Yes. 21 Q. Why was that? 22 A. At that point in time the project had clearly been 23 suffering from significant delay and had been for some 24 time. And the City of Edinburgh Council were very 25 concerned about the cost of the project at that point in 172 1 time, and my Director asked me if I would go on 2 secondment to get closer to the numbers and to get 3 closer to the team down in tie that were putting 4 together the numbers, so the commercial team and the 5 finance team there, so that we could get a better view 6 of what the potential outturn costs could be. 7 Q. Why was it thought necessary for Council to get closer 8 to the numbers? 9 A. I think just because the fact was that the -- you know, 10 the numbers were increasing, the delay on the project 11 had been significant, and chief officials thought that 12 it was, I guess, time to get closer to those numbers and 13 to get a better understanding of them. 14 Q. By numbers, can you just clarify what you mean by that? 15 A. The financials, so the potential outturn costs and the 16 cost of the -- of the project. 17 Q. Had there been any concern with the level of information 18 about those matters that had been supplied previously? 19 A. Yes. 20 Q. Can you just expand on what those concerns were? 21 A. I think because we didn't have a full view of the kind 22 of commercial aspects of the project or indeed the legal 23 exposures, that tie had at that point in time that the 24 Council were ultimately liable for, the information that 25 we were getting from tie was piecemeal at times -- at 173 1 times just not very informative at all. So that led the 2 Council to want to get closer to those financials and 3 get a better view of what the potential outcomes could 4 be. 5 Q. By time of your secondment in late 2010, the project had 6 been underway for how long? 7 A. The project -- well, the project had started in May 8 2008, so it had been 2.5 years. 9 Q. Can you explain why it had taken until late 2010 for 10 somebody to be seconded to get closer to the numbers? 11 A. I can't. 12 Q. Whose decision would that have been? 13 A. Certainly in terms of my secondment, it was my -- my -- 14 my line manager at the time, Donald McGougan, who made 15 that decision. 16 Q. When you were on secondment at tie, what was the nature 17 of your work? 18 A. Mostly the nature of the work was to work with the 19 finance team that was in tie, and the commercial team 20 that was in tie, to look at the potential outturn cost 21 of a range of scenarios. So various potential 22 contractual outcomes, whether that could have been 23 termination of the contract as an example or 24 continuation of the contract to a particular terminal 25 point, whether that be, you know, Haymarket, 174 1 St Andrew Square or the full length of the project to 2 Newhaven, so really just to be involved with those 3 members of the team to construct the potential outturn 4 costs. 5 Q. When you say the finance team at tie, which individuals 6 was that? 7 A. That would be Stewart McGarrity and Gregor Roberts. 8 Q. What was their position in tie? 9 A. Finance Director and Deputy Finance Director. 10 Q. The commercial team, who was in the commercial team? 11 A. Dennis Murray was the main contact in the commercial 12 team. 13 Q. What professional background did Dennis Murray have? 14 A. Quantity Surveyor. 15 Q. You said that your work was to involve looking at the 16 outturn costs for a range of scenarios. Can you just 17 expand a little bit more on what you mean by that? 18 A. The project at that point in time, tie had been looking 19 at a number of potential scenarios, whether it be 20 termination of the Infraco contract, continuing on with 21 the Infraco contract, looking at various terminal points 22 in terms of where the track would go to, whether it be 23 St Andrew Square, Haymarket or Newhaven. So they were 24 working through a range of assumptions that they had 25 made in terms of what their view was of the position, 175 1 and then how that informed the potential cost. 2 Q. Just give us an indication of your role. Were you, for 3 example, an observer to the production of these numbers, 4 or were you a participant in their production? 5 A. An observer to the production of the numbers but also 6 there to question. So to, you know, as a number -- or 7 certain numbers was produced, then actually ask 8 questions for the backup to those numbers, where did 9 they come from and so on and so forth. 10 Q. What level of understanding did this work give you about 11 the costs of the project? 12 A. Within the certain scenarios that were -- that were 13 being looked at it, it gave me a good view in terms of 14 what the numbers could be. So I had a -- a good view 15 of -- depending on what eventuality came to pass, what 16 the potential risk to the Council could be. 17 Q. Could we have document TIE00897064? Mr Coyle, this is 18 a set of the Tram Project Board papers for March 2011. 19 Could you please turn to page 5? 20 We see here that these are the minutes for the Tram 21 Project Board meeting on 9 February 2011. That is just 22 a month before the mediation, correct? 23 A. Yes. 24 Q. If you could go to page 6, please, there is a passage 25 that begins: 176 1 "RJ went on to confirm ..." 2 Could you just highlight that, please? Down to the 3 two paragraphs below it. 4 That is fine, thank you. 5 RJ, I think RJ is a reference to Richard Jeffrey, 6 the Chief Executive of tie: 7 "... went on to confirm that the mediation will be 8 undertaken during early March. A number of possible 9 outcomes were discussed. These were: 10 1. Agreement is reached with BSC to continue with 11 the works ... under revised contractual conditions; 12 2. Mutually agreed termination of the Infraco 13 contract; and 14 3. Continue on under the existing contractual 15 terms which may lead to either party adopting unilateral 16 action leading to termination of the contract." 17 You discussed looking at options when you were 18 working at tie. Were these the options that you were 19 considering? 20 A. These options were there, but there was then a subset of 21 options below that, because, you know, this doesn't look 22 at potentially what the terminal point of the route 23 could be. So there was further options around, you 24 know, what were the -- where the route would actually 25 go. 177 1 Q. Thank you. 2 What was your understanding about the options as 3 they were noted there, in the context of what were the 4 main options under discussion at the mediation? 5 A. I think these were the key options. 6 Q. If you look at option number 2, which is mutually agreed 7 termination of the Infraco contract, was there also 8 consideration of re-procuring the work from another 9 contractor? 10 A. That had been talked of. 11 Q. Was that a matter that was under consideration when you 12 were preparing the numbers? 13 A. I believe so. 14 Q. As you understood it, did the Council have a preferred 15 outcome from mediation? 16 A. As I understood it, I thought that the Council wanted to 17 make a successful go of the project with the contractor. 18 Q. When you say "with the contractor", do you mean with the 19 existing contractor? 20 A. With the existing contractor, yes. 21 Q. What about tie, did they have a preferred outcome? 22 A. I don't know for sure. But it seemed that, I think -- 23 well, I think that the preferred outcome tie had was to 24 terminate the contract. 25 Q. Was that an understanding that you gleaned from your 178 1 time at tie? 2 A. I think it was an understanding of the time there and 3 before and after. 4 Q. Now, in preparing for the mediation, did the Council 5 officers have any instructions from the councillors so 6 far as you were aware? 7 A. Not so far as I was aware. 8 Q. Were there any limits placed on the Council officers 9 about the outcome to be sought from the mediation? 10 A. I don't know. 11 Q. What about the price to pay? 12 A. I don't know. 13 Q. As far as you understand it, was that a matter that was 14 left to the discretion of Council officers at the 15 mediation? 16 A. I think it was. But I don't know what other 17 conversations were happening, you know, with councillors 18 or Transport Scotland or anyone else. 19 Q. If we just look a bit more closely about the work done 20 in relation to the estimated costs, for the different 21 options, who primarily was doing the work in producing 22 these estimates? 23 A. Can you be a bit more specific around what actual 24 estimates we are talking of? Because there was various 25 parties that contributed to that. 179 1 Q. Okay. How was the work broken down in terms of the 2 production of estimates? 3 A. In terms of the work that we did in preparation for 4 mediation, the commercial team at tie would produce 5 a number of estimates based on a particular terminal 6 point for the project. That was then fed in through the 7 finance team who looked after the overall spreadsheet 8 that totalled up what those various scenarios could look 9 like. But there was obviously contributions from 10 a number of the project managers at tie for each of the 11 various components of the cost estimates. 12 Q. In terms of the information which would inform the level 13 at which the estimates were set, who in tie was 14 responsible for ascertaining the substance of the 15 matter, if we put it that way? 16 A. Ultimately Richard Jeffrey as the Chief Executive. 17 Q. What information were the estimates based upon? 18 A. Various -- various documents. There was various reports 19 that tie had commissioned, by QS firms and the like, to 20 give them a view of what their potential exposures were. 21 There was estimates from the internal team at tie, that 22 all contributed towards those -- those numbers. 23 Q. You refer there to work commissioned from external 24 firms, I think, in relation to potential exposure. 25 First of all, can you identify the professional firms? 180 1 A. tie commissioned a report from Cyril Sweett, a QS firm, 2 that helped them to come up with various estimates. 3 There was also various advisers that tie had at that 4 time that were providing an alternative view, and so, 5 um, Gordon Harris Partnership, I think were involved and 6 a few others, just to provide them with varying views of 7 what the potential costs could be. 8 Q. Cyril Sweett and Gordon Harris, were they firms of 9 quantity surveyors? 10 A. Yes. 11 Q. Do you recall the scope of the work done by these firms? 12 A. I don't. 13 Q. How difficult or easy was it to come to a view about the 14 estimated cost of each of the different options? 15 A. It was -- it wasn't easy. It was difficult. 16 Q. What were the difficulties? 17 A. Very wide ranging. Potential outturns and obviously 18 a number of potential claims that were at play that -- 19 that were very difficult to estimate. 20 Q. When you refer to "claims", are you referring there to 21 claims made by the Infraco consortium under the Infraco 22 contract? 23 A. That's correct. 24 Q. Are you in a position to give some indication of the 25 nature of the issues that made it difficult to estimate 181 1 the value of those claims? 2 A. I am not. 3 Q. If I could ask you to think, first of all, about the 4 option of carrying on under the Infraco contract in its 5 original form, was it necessary, for that purpose, to 6 calculate tie's liabilities which had built up under 7 that contract to date? 8 A. Yes. 9 Q. Was it also necessary to consider the liabilities that 10 would continue to accrue under that contract in the 11 future? 12 A. Yes. 13 Q. How were these calculated? 14 A. There were a number -- I can't recall how they were 15 calculated going on to mediation. 16 Q. Who was responsible for the calculation of these 17 elements? 18 A. tie. 19 Q. And who within tie? 20 A. It would be the commercial team that would be working, 21 you know, to ascertain what the potential exposures 22 were. Ultimately the figures were collated by the 23 finance team there. 24 Q. The commercial team, was that under the direction of 25 Dennis Murray? 182 1 A. That's correct. 2 Q. When you talked about the finance team collating 3 material from the commercial team, can you just explain 4 to us what that involved? 5 A. I don't know for sure, but there was a -- there had been 6 a number of meetings that the finance team would have 7 with the commercial team to get an assessment of what 8 the cost exposure would be, and then they would report 9 that in the various spreadsheets that were assessing 10 what the outturn costs would be. 11 Q. If I can put it this way, did the finance team have an 12 involvement in selecting what the numbers would be, or 13 was it more a matter of presentation of the numbers? 14 A. I don't know. I wasn't -- I wasn't party to the 15 discussions that the finance team were having with the 16 commercial team. 17 Q. That's not something that you were given an insight to 18 when you were on secondment at tie? 19 A. I was not involved in all those discussions, so I don't 20 know what the -- what the discussions led to. 21 Q. Did you have a view on how much certainty there was 22 about the liabilities tie had accrued under the Infraco 23 contract? 24 A. No. 25 Q. That was not a matter upon which you had a view? 183 1 A. I think that the numbers were very uncertain. 2 Q. The parties of course, tie on the one hand and the 3 Infraco consortium on the other, were in dispute over 4 a range of issues. Were you aware of what assumptions 5 were made about the likely outcome of those disputes 6 when coming up with the numbers? 7 A. When tie were assessing the numbers, they would have 8 a view on what the potential liability would be under 9 a certain heading, for example. So they would have 10 a view of what they thought it would cost for an 11 extension of time due to delayed utility works, and they 12 would then present that view within the financials. 13 Q. As you understood it, the tie commercial team had come 14 to a view about likely liability under each of the 15 different disputes individually? 16 A. Yes. 17 Q. Under the option of separation, that is tie agreeing 18 a termination of the Infraco contract, I presume that 19 also required a calculation of tie's liabilities under 20 the contract? 21 A. That's correct. 22 Q. Were the same assumptions made in coming to the 23 estimates under this scenario, as applied under the 24 previous scenario we were discussing? 25 A. I think that there would be -- there would be some 184 1 assumptions that would be the same, but there would be 2 some that would differ. 3 Q. Can you clarify for us which ones would be different? 4 A. For example, if you were looking at project management 5 costs, for example, clearly there would be a difference 6 in the numbers, because, you know, the project would 7 stop, would cease, so therefore the number -- we would 8 not require those project management costs going 9 forward. However, the assumptions around the 10 liabilities to date from, say, the Infraco contract 11 would be largely the same. 12 Q. You talk there about project management costs being 13 different if the project did not continue. What other 14 costs had to be estimated in relation to the separation 15 option, over and above the liabilities that tie had 16 accrued under the Infraco contract? 17 A. I can't recall. 18 Q. What about costs associated with terminating the 19 contract? 20 A. Yes, I would assume that those costs would have been 21 included within the Infraco numbers for separation. 22 There would have been a number that they would have to 23 have -- been arrived at in terms of the split of 24 liabilities at that point in time. 25 Q. What about the costs associated with procuring a new 185 1 contractor to do the works? 2 A. If the separation then led to a re-procurement rather 3 than just stopping the project all together, then, yes, 4 that would be -- that would be appropriate. 5 Q. What about risk? 6 A. Yes. If there was separation, and the project was to 7 continue, then there would clearly have to be 8 a reassessment of risk, and obviously that risk may be 9 different under a different contractor than it would be 10 under the Infraco. 11 Q. How much certainty was there over the estimates of risk? 12 A. I can't remember. 13 Q. If we look briefly at the option of a new agreement with 14 the Infraco consortium, as we will see in a moment, the 15 consortium on 24 February 2011 supplied a revised price 16 proposal under the name of project Phoenix. 17 Prior to that proposal arriving, how were estimates 18 calculated for the likely cost of a new deal with the 19 consortium? 20 A. The estimates would have been largely prepared by tie. 21 At that point in time, I -- I can't recall that the 22 Council had any particular view on numbers that were 23 coming from -- from BSC or in Project Phoenix. The 24 numbers that we were looking at would have been 25 primarily prepared by tie. 186 1 Q. So before 24 February, when the Phoenix price proposal 2 came out, it is your evidence that the Council had no 3 view about any new price that it would wish to pay under 4 a revised deal with the Infraco consortium? 5 A. Well, tie had looked at Project Carlisle before that, 6 and there had been a -- a potential deal on the table 7 then. And the City of Edinburgh Council were given 8 a view of what that looked like, but tie always had, you 9 know, tie always had their view which was different to 10 that that the consortium was coming up with. So, you 11 know, the estimates that we were looking at was 12 basically tie's view versus the view of -- the 13 consortium's view. 14 Q. Focusing for the moment on the question of what new 15 price should be paid for a deal with the Infraco 16 consortium. I just want to be clear, had the thinking 17 about what would be an appropriate price to pay been 18 done by tie rather than the Council? 19 A. tie were preparing the cost estimates of what it could 20 look like. I can't remember at any point then the 21 Council or tie coming up with what they thought was, you 22 know, the number at which a deal could be brokered. 23 Q. To be clear about that, neither tie nor the Council had 24 a figure in mind -- 25 A. Not in terms -- they had a set of numbers that were 187 1 based on certain scenarios which provided an estimated 2 outturn cost. I can't remember if there was 3 a particular figure in mind that the Council or tie had 4 that they would be prepared to do a deal at. 5 Q. Thank you. 6 CHAIR OF THE INQUIRY: When you say "the Council" in this 7 context, are you speaking about Council officials? 8 A. Yes. 9 MR MCCLELLAND: We discussed there the question of price for 10 a new deal with the consortium. At this stage prior to 11 the mediation, did the Council or Council officials take 12 any advice for themselves about cost estimates for the 13 project, or was it reliant wholly on tie to produce 14 them? 15 A. In the lead-up to mediation, I think it was wholly 16 reliant on tie. 17 Q. Were you satisfied with the estimates that tie were 18 producing? 19 A. They produced that set of scenarios based on their -- 20 their knowledge. I didn't have the knowledge to know 21 whether or not those were the correct numbers or, you 22 know, it was -- it was basically based on a set of 23 assumptions, there was still a number of contractual 24 matters that were outstanding and that were uncertain. 25 Q. I think you described your role earlier as an observer. 188 1 Was it any part of your function when at tie to 2 scrutinise the numbers that tie were producing? 3 A. Yes. 4 Q. So the question I have for you, in light of that, is 5 were you satisfied with the numbers that tie were 6 producing? 7 A. Based on the assumptions that they had made. 8 Q. Could we please have document BFB00053258. 9 We see here that this is a letter dated 24 February 10 2011 from the Infraco consortium to Steven Bell at tie. 11 You see that? 12 A. Yes. 13 Q. It is headed up: 14 "Edinburgh Tram Network Infraco Project Phoenix 15 Proposal". 16 The first paragraph: 17 "Please find attached our Project Phoenix Proposal 18 dated 24 February 2011, which is submitted in the ambit 19 of the forthcoming Mediation." 20 This document runs on for another 204 pages. Was 21 this a document that you were familiar with? 22 A. I can't remember at that time. If I -- if I -- 23 I received that, I have seen that document later. 24 I can't remember if I had seen that at this time. 25 Q. Were you aware at the time that a document had come in, 189 1 known as the Project Phoenix Price Proposal? 2 A. I believe so. 3 Q. If we just read on through the letter: 4 "The Proposal is for a reduced scope of the Infraco 5 contract works and comprises for the works between the 6 Edinburgh Airport and Haymarket Viaduct enabling works 7 in section 1A and work already executed in Sections 1B, 8 1C and 1D." 9 Now, Sections 1A to 1D, is that the on-street 10 sections of the project? Or is there -- do you not 11 know? 12 A. I can't remember. 13 Q. That paragraph there is talking about work between 14 Edinburgh Airport and Haymarket Viaduct. The following 15 paragraph refers to any works beyond the east end of 16 Haymarket Viaduct: 17 "They would be required to be carried out under a 18 separate mechanism, given that these on-street works, 19 currently undefined, consequently cannot be included in 20 the Phoenix Proposal." 21 What was your understanding of the reason for 22 different treatment of the off-street and the on-street 23 works? 24 A. Primarily the presence of the utility works. 25 Q. Is that in the on-street? 190 1 A. On the on-street section, yes. 2 Q. What was the significance of that to the price proposal 3 from the Infraco consortium? 4 A. I think that the on-street works were seen as more risky 5 than the off-street works. Therefore, that's why they 6 wanted to look at that under a separate proposal. 7 Q. It is your understanding -- and I think the letter 8 suggests -- the Phoenix Proposal was confined to the 9 off-street section between Edinburgh Airport and 10 Haymarket? 11 A. Yes. 12 Q. Is it correct that this price proposal formed the basis 13 for negotiations at the mediation? 14 A. I can't remember. 15 Q. If the Inquiry has evidence from other sources that that 16 was the case, would you disagree with that? 17 A. I wouldn't disagree. 18 Q. I would like to focus on certain matters relating to 19 cost and go through this document. But if they are 20 matters that you are not familiar with, please just say 21 that. 22 If we could go first of all to page 5, please. We 23 see there in the top paragraph: 24 "Further to tie's request, Infraco is able to offer 25 a project Phoenix Proposal Price of 449 million. 191 1 Infraco believes this is a fair and reasonable price 2 which Infraco hopes will be acceptable to tie." 3 If we could move on, please, to page 6, do we see 4 there the heading, "Pricing Exclusions"? 5 A. Yes. 6 Q. Without looking at the detail of the pricing exclusions, 7 was the existence of pricing exclusions a matter of 8 significance to tie and CEC? 9 A. Yes. 10 Q. Can you explain why? 11 A. From City of Edinburgh Council's perspective, the 12 existence of pricing exclusions would mean that there 13 was still uncertainty within the overall contract sum. 14 So, you know, there was still a large element of risk 15 that would need to be allowed over and above the 16 proposal. So there was still potential costs on top of 17 the 449. 18 Q. You refer there to extra cost arising from these pricing 19 exclusions. Was any work done to assess the likely cost 20 associated with these pricing exclusions? 21 A. I can't remember. 22 Q. Can we look briefly, please, at page 10. Do we see 23 there the breakdown of the 449 million -- 24 A. Yes. 25 Q. -- price. So the element for Bilfinger Berger, 192 1 231 million, Siemens, 136 million. And so on. 2 Just because it may be relevant later on, if we take 3 out the CAF element for the tram vehicles, the price 4 then for the other remaining elements would be 5 GBP384 million. 6 A. Yes. 7 Q. You agree with that? 8 A. Yes. 9 Q. If we could look briefly at page 11, we see at the 10 heading there: 11 "Bilfinger Berger Price Breakdown." 12 If we look briefly at the following page, we see 13 there a breakdown of Bilfinger's price. If we look 14 briefly at the next page, the breakdown carries on along 15 those lines, and there are similar breakdowns for the 16 work at Siemens, Parsons Brinkerhoff and so on. 17 I don't want to go into them in detail, but are you 18 aware of those schedules having been considered by the 19 tie and CEC teams in preparation for mediation? 20 A. Yes. 21 Q. What work was done? 22 A. I don't know. 23 Q. Who was responsible for that work? 24 A. I don't know. 25 CHAIR OF THE INQUIRY: What was your role in this exercise? 193 1 A. I did not see these documents in the lead up to 2 mediation. 3 CHAIR OF THE INQUIRY: Who was representing the interests of 4 the City of Edinburgh in this matter? 5 A. I can't remember at what point these documents were made 6 available to the City of Edinburgh Council. 7 MR MCCLELLAND: Mr Coyle, were you the only representative 8 from the Finance Department of the Council seconded to 9 tie for the purpose of looking at the figures in the 10 run-up to mediation? 11 A. Yes, I think I was, yes. 12 Q. Your evidence is you don't recall having seen this 13 document? 14 A. I can't remember seeing this document in the lead-up to 15 mediation. 16 Q. Is it simply a matter that you can't recall or can you 17 positively say that you didn't? 18 A. I can't recall. 19 Q. Do you think it is likely that in the run-up to the 20 mediation you would have been looking at these 21 documents? 22 A. It is possible. 23 Q. Is the price proposal which formed the basis for 24 negotiations at the mediation the sort of document that 25 you would have been likely to ask for? 194 1 A. I would have. But it's not -- the documents were not 2 always forthcoming from tie when you asked for them. 3 Q. Do you have any recollection of asking for this 4 document? 5 A. I don't. 6 Q. We don't need to look through it all, but the document 7 is 205 pages long. Being dated 24 February, it comes 8 about two weeks -- or just under two weeks -- before the 9 mediation started, is that correct? 10 A. Yes. 11 Q. Was there sufficient time for tie -- and separately the 12 Council -- to consider this proposal properly? 13 A. I don't -- I don't know how long tie had been 14 considering this proposal for, if there had been 15 anything that was a precursor to this document, but it 16 feels like from 24 February to mediation, that it's 17 a very big document to consider, but, you know, it may 18 have been enough time, depending on how many people were 19 looking at it. 20 Q. Were you at tie in the period between 24 February and 21 the start of the mediation on 8 March? 22 A. I think I had been taken back to Edinburgh Council by 23 then. I actually had some time off at the start of 24 January of that year, due to my son being born, so I was 25 off for three weeks in the lead-up to that. Then from 195 1 recollection, I can remember the Director of Finance at 2 that point in time bringing me back to the City of 3 Edinburgh. 4 Q. Are you aware whether anybody, another Council officer, 5 was sent in to replace you when you were absent? 6 A. I don't recall there being anyone sent in to replace me 7 when I was absent, no. 8 Q. Can we infer from that in that period, in the run-up to 9 the mediation, there was nobody from a finance function 10 of the Council working with tie in preparation for the 11 mediation? 12 A. My Director would have been. 13 Q. That is Donald McGougan? 14 A. Donald McGougan, yes. 15 Q. By the time of the mediation, the Infraco consortium had 16 asserted that they were entitled under the contract to 17 significant amounts of extra time and money. Were you 18 aware of that? 19 A. Yes. 20 Q. In addition to that, was it expected that if the 21 contract ran on, the consortium would make more claims? 22 A. Yes. 23 Q. You may not be able to answer this if you were not 24 familiar with the Phoenix Proposal, but did you 25 understand the consortium, in making that price 196 1 proposal, to have attributed any particular part of the 2 price to the settlement of those claims? 3 A. Yes. 4 Q. Can you explain what your understanding was of that? 5 A. It would be an assumption rather than an understanding. 6 Q. By an assumption, do you mean it was your assumption? 7 A. Yes. A settlement of historic claims. 8 Q. Could you just expand a little bit more on what 9 assumptions you made? 10 A. That within the price, there would have been a number 11 for historic claims being settled. 12 Q. Did it go any further than that? Rather than simply 13 that the matter that there would be an element of the 14 price which related to settlement claims, did you form 15 any view about the extent to which the new price was 16 designed to reflect the value of claims? 17 A. Not within the document, but obviously there had been 18 an assessment by tie of what they thought their exposure 19 would be under historic claims. 20 Q. So tie had a view of exposure to claims under the 21 Infraco contract? 22 A. Yes, yes. 23 Q. Did you understand the Infraco consortium, when 24 proposing this new price of GBP449 million, themselves 25 to have had in mind a figure for the settlement of 197 1 claims? 2 A. I guess they would have had a figure in mind for 3 settlement of historic claims. 4 Q. That's your assumption? 5 A. Yes. 6 Q. Do you know whether the consortium in fact had a number 7 in mind for the settlement of claims? 8 A. No, no. 9 Q. So far as you are aware, did they provide a breakdown of 10 their GBP449 million price which disclosed the value 11 they were attaching to claims? 12 A. I don't know. 13 Q. Can we please have document BFB00053260? 14 We see here, Mr Coyle, this is a Mediation Statement 15 submitted by the BSC consortium. Is that a document 16 that you have seen before? 17 A. Yes. 18 Q. Can we please turn to page 4 and paragraph 2.7. We are 19 going to go over the page to paragraph 2.8. 20 This is of course Infraco's statement of the 21 position: 22 "Progress on construction of the Edinburgh tram 23 network has virtually ground to a halt because the 24 parties are unable to agree a significant number of 25 issues arising out of the interpretation and 198 1 administration of the Infraco Contract and changes in 2 scope and delays outside the control of BSC. This has 3 led to numerous disputes between the parties which have 4 resulted in further delays and additional costs to the 5 project. As the project currently stands without 6 a mediated solution, BSC believes that the only way the 7 works can progress is for each and every disputed matter 8 to be referred to adjudication. 9 2.8. In contrast, this mediation does not relate to 10 individual disputes that exist, but focuses on finding 11 a sustainable solution for project scope, price, 12 programme and risk allocation, mindful of the budget 13 which may be available to tie." 14 In light of that statement there, was it one 15 objective of the mediation to avoid discussion of each 16 and every dispute under the Infraco contract. 17 A. I don't believe so. 18 Q. You don't believe so? 19 A. I think each and every one -- 20 Q. Yes? 21 A. I would have thought that mediation would not have 22 addressed each and every one of them. There may have 23 been discussion around some of them, but not each and 24 every one of them. 25 Q. As we see in the mediation statement there, 199 1 paragraph 2.8, mediation does not relate to individual 2 disputes that exist, but focuses on finding 3 a sustainable solution for the project scope, and so on. 4 That would be consistent with the view that you had 5 no intention to look at all of the disputes -- 6 A. Yes. 7 Q. -- in the context of the mediation. 8 Were you present at the mediation? 9 A. Yes. 10 Q. To what extent was there discussion at the mediation of 11 the value of individual claims? 12 A. I don't know. I can't recall. 13 Q. Were you aware of any discussion? 14 A. I can't recall. There was various meetings at various 15 times, and I certainly was not involved in all those 16 meetings. 17 Q. What about the global value of the claims that had 18 accrued? Was there any discussion about that? 19 A. I can't remember. 20 Q. You referred earlier to your assumption that the revised 21 price would include an element for the settlement of 22 claims. Did that remain your assumption throughout the 23 mediation? 24 A. Yes. 25 Q. In various documents in the run-up to mediation, there 200 1 is reference to something called the deckchair 2 spreadsheet; was that something you were familiar with? 3 A. Yes. 4 Q. Can you just explain in overview what it was? 5 A. The deckchair spreadsheet was the output of the 6 discussions that I had referred to earlier, where there 7 was a range of scenarios to a range of terminal points 8 and a range of outturns, and that spreadsheet captured 9 all those -- all those numbers. 10 Q. Do you understand from that that this is a single 11 spreadsheet which captures all of the cost estimate work 12 that was being done by tie? 13 A. A single spreadsheet. There may have been some backup 14 tabs within that, but it was a single spreadsheet that 15 captured each of the various scenarios that were being 16 examined. 17 Q. Who prepared the spreadsheet? 18 A. The spreadsheet was originally prepared by, I think it 19 was Stewart McGarrity or Gregor Roberts. 20 Q. I think you said earlier that they were the Finance 21 Director and Deputy Finance Director of tie? 22 A. Correct, yes. 23 Q. Did you have a role in relation to it? 24 A. In terms of preparation? Not in terms of preparation, 25 no. 201 1 Q. Any role? 2 A. Examination of the figures. 3 Q. What information was the spreadsheet based upon? By 4 that, I mean, what was the source of the underlying 5 information? 6 A. As per the earlier question, it was around discussions 7 with the commercial team, with the various project 8 managers for each element of the project, and then any 9 backup reports that they may have had from, you know, 10 potentially external advisers. So the information was 11 collated by the team down at tie to produce those cost 12 estimates. 13 Q. The deckchair spreadsheet itself, was it used in 14 preparing for and at the mediation? 15 A. Yes. 16 Q. Can you just explain in what way it was used? 17 A. In the lead-up to it, it was to give the team a view of 18 the potential outturn costs, based on the assumptions 19 that were made within that spreadsheet. And then at 20 mediation it was used as a presentation of, you know, 21 the potential outturn costs of each of those scenarios, 22 at the early part of mediation. 23 Q. When you refer to the team, who formed part of the team 24 that you were referring to? 25 A. It would be the mediation team, so the team that was 202 1 representing ultimately the City of Edinburgh Council 2 and tie. 3 Q. So in terms of officers at the Council, who was that? 4 A. Donald McGougan, myself, Bob McCafferty. I can't 5 recall. Colin Smith, who was then working with the 6 Council. 7 Q. What about the Council Chief Executive? 8 A. Yes. 9 Q. At the time that was -- 10 A. That was Sue Bruce at the time, yes. 11 Q. What about the directors of the Council departments? 12 A. Dave Anderson, Director of City Development. I think 13 that would have been it. 14 Q. Did you mention Donald McGougan, the Director of the 15 Finance Department? 16 A. Yes, yes. 17 Q. So they were all familiar with the deckchair 18 spreadsheet? 19 A. Yes. 20 Q. Was this a tool available to help them form their 21 thinking about the mediation? 22 A. Yes. 23 Q. Was it an important document in preparation for 24 mediation? 25 A. I think it was an important document because it set 203 1 a range of potential outturn costs for the project. 2 MR MCCLELLAND: My Lord, I'm planning to go next to the 3 spreadsheet, but I may take some time with it. 4 CHAIR OF THE INQUIRY: I think we may stop here. 5 Questions by CHAIR OF THE INQUIRY 6 CHAIR OF THE INQUIRY: Could I just ask you, before we rise, 7 about this deckchair spreadsheet and your role. You say 8 that it was prepared by the tie team as well and that 9 you had a role in what, in looking at it or -- 10 A. Yes. 11 CHAIR OF THE INQUIRY: -- approving it? 12 A. The spreadsheet, I can recall as the spreadsheet 13 developed, a number of meetings that we would have with 14 tie where we would examine what the spreadsheet was 15 telling us, and we would then be able to question it to 16 probe the assumptions that were behind those 17 spreadsheets and behind those numbers, where the numbers 18 came from. And so we had an opportunity to do that. 19 CHAIR OF THE INQUIRY: Did you get all that information, as 20 you said, where this assumption had come from, or how 21 were these figures calculated, were they then produced 22 with documents or an explanation? 23 A. Not all the time, no. 24 CHAIR OF THE INQUIRY: So at the end of the day, before 25 mediation, were you, as the representative of Edinburgh 204 1 City Council in this part of the exercise, were you able 2 to reassure the Council that the deckchair spreadsheets, 3 the figures for each option, were reliable? 4 A. I think that they were -- they were the most reliable 5 set of figures that we had seen. And I think the most 6 realistic set of figures that we had seen to date out of 7 tie at that point in time. So I think, based on the 8 information we had, it was the best -- the best range of 9 figures that we had. 10 CHAIR OF THE INQUIRY: Thank you. 11 We will adjourn now. Mr Coyle, obviously you have 12 not finished your evidence. I understand you have other 13 commitments next week, but would be available on the 14 Friday, and that doesn't interfere with our other 15 witnesses. So if you could come back a week tomorrow in 16 advance of 9.30, so we can start at 9.30? 17 A. Okay, my Lord, thank you. 18 (4.30 pm) 19 (The hearing adjourned until Tuesday, 19 September 20 2017 at 9.30 am) 21 MR NICK SMITH (continued) ............................1 22 Examination by MR MACKENZIE ..................1 23 Questions by CHAIR OF THE INQUIRY ...........141 24 Examination by MR MARTIN ....................144 25 Examination by MR DUNLOP QC .................145 205 1 Examination by MR FAIRLEY ...................165 2 MR ALAN COYLE (sworn) ..............................168 3 Examination by MR MCCLELLAND ................168 4 Questions by CHAIR OF THE INQUIRY ...........204 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 206