1 Thursday, 21 September 2017 17 (The short adjournment) 18 (1.57 pm) 19 CHAIR OF THE INQUIRY: Good afternoon, Mr Mackenzie. 20 MR MACKENZIE: Thank you, my Lord. The next witness is 21 Graeme Greenhill. 22 MR GRAEME GREENHILL (affirmed) 23 Examination by MR MACKENZIE 24 CHAIR OF THE INQUIRY: If you could speak into the 25 microphone and not too quickly for the benefit of the 120 1 shorthand writers. 2 Mr Mackenzie. 3 MR MACKENZIE: Good afternoon. Could you state your full 4 name, please. 5 A. My name is Graeme James Greenhill. 6 Q. And your current occupation? 7 A. I'm a Senior Manager with Audit Scotland. 8 Q. You provided a CV, Mr Greenhill. If we could go to 9 that, please, the reference number is CVS00000026. It 10 should come up on the screen in front of you. 11 Now, we can see under "Profile" you explain you're 12 a qualified accountant. You have over 30 years' 13 experience in public sector audit with the National 14 Audit Office and Audit Scotland. I think in short in 15 the National Audit Office was between 1985 and 2000, and 16 Audit Scotland is 2000 to date; is that correct? 17 A. That's correct. 18 Q. Then you say your current job title with Audit Scotland 19 is Senior Manager Investment: 20 "As such I am expected to be Audit Scotland's policy 21 expert in all matters pertaining to public sector 22 investment, including the management and funding of 23 major capital projects and all matters transport. A key 24 part of my role is to identify and oversee performance 25 audits relevant to the investment portfolio." 121 1 When we come to your statement, we'll see the 2 difference between financial audits and performance 3 audits. 4 Sticking with your CV, you explain your involvement 5 in Edinburgh trams performance audits in both 2007 and 6 2011 flows from being, at the time of the 2007 audit, 7 Senior Manager for Transport, Enterprise and Lifelong 8 Learning. 9 If we can go, please, over the page to page 2, we 10 can see in particular about a third of the way down, 11 between the years 2003 to 2009, you were Senior Manager 12 at Transport, Enterprise and Lifelong Learning; and it 13 states you were responsible for being Audit Scotland's 14 policy expert in the Transport, Enterprise and Lifelong 15 Learning portfolio, identifying and overseeing 16 performance audits relevant to the portfolio. 17 If we could then, please, one down in respect of 18 your time at the National Audit Office, between 1985 and 19 2000, you say that between 1993 to 2000 you were 20 a principal auditor, and it states you were responsible 21 for undertaking performance audits of the Scottish 22 Office and other central government bodies. 23 Pause there, Mr Greenhill. In that period were you 24 responsible for undertaking any performance audits of 25 transport projects? 122 1 A. No, I wasn't. 2 Q. Thank you. If I could then please carry on over the 3 page to page 3. Now, we can see this is headed as an 4 annex, "Audit Scotland performance audits I have been 5 involved in". 6 Between 2000 onwards, we see the involvement in 7 a variety of different types of audits. In terms of 8 transport, we see under the year 2001/2002, we see the 9 new trunk roads contracts, "An examination of the 10 competition for the maintenance and management of the 11 trunk road network". 12 Can you explain what that involved, please? 13 A. That was an audit which was requested that the Auditor 14 General consider to undertake by the Transport Minister 15 at the time who -- I can't recall who that might have 16 been. 17 Basically, that was looking at how 18 Transport Scotland had managed the tendering and award 19 of the first generation of contracts for managing the 20 trunk road network. 21 Q. Thank you. So just for the avoidance of doubt, before 22 your 2007 performance audit of the Edinburgh tram 23 project, is it correct that the only prior 24 transport-related performance audit you had been 25 involved in was the trunk roads audit you've just 123 1 mentioned? 2 A. I think there ought to be reference in around about 2005 3 to an audit we did on the NorthLink ferry service. 4 I was involved in that. Perhaps I have missed that one 5 off. 6 Q. Thank you. The NorthLink ferry service, how far north 7 is that? 8 A. That's the ferry service that provides lifeline services 9 to the Orkney and Shetland islands. 10 Q. Thank you. What did that involve? 11 A. Again, that was a slightly different kind of audit. We 12 have a kind of planned programme of performance audits, 13 round about 11 or 12 each year, but there is flexibility 14 within that planned programme to undertake kind of 15 reactive audits, audits in the public interest, and in 16 this particular case, the organisation which was awarded 17 to provide these lifeline ferry services had got itself 18 into financial difficulties, such that 19 Transport Scotland had to -- eventually had to re-tender 20 the contract. 21 So that was looking -- that was one of those kind of 22 reactive audits which the Auditor General decided to 23 conduct in the public interest, looking at the 24 circumstances behind the initial award and what had 25 happened to the service provider. 124 1 Q. Thank you. At the bottom of this page we are looking 2 at, we can see the year 2006/2007. 3 If we go over the page then to the next page, we can 4 see the second item there is the NorthLink ferry 5 services. So was it perhaps in 2006/2007 you were 6 involved in that? 7 A. I think it probably was ten years ago. It probably was 8 2006/2007. That probably would have been my mistake. 9 Q. I also, please, ask at the top of this page a reference 10 to Scottish Executive, and overview of the performance 11 of transport in Scotland. 12 Is that a reference to your involvement in the 2008 13 guidance produced by Audit Scotland? 14 A. No, it's not. That was a separate performance audit. 15 It's -- basically was an overview of how the Scottish 16 Executive was performing against its transport 17 objectives and targets. 18 Q. I see. So that was a performance audit? 19 A. It was a performance audit, yes. 20 Q. And it was a performance audit of the Executive? 21 A. The Scottish Executive, yes. 22 Q. As opposed to a performance audit of any of their 23 particular projects? 24 A. Quite. 25 Q. Thank you. 125 1 If we could put the CV to one side, please, you have 2 provided a statement to the Inquiry, I would like please 3 next to go to. The reference number is TRI00000041_C. 4 It should come up on the screen before you, and you may 5 also have a hard copy as well? 6 A. I have, yes. 7 Q. Thank you. If we start, please, by just going to the 8 last page, page 52, I'll ask you to confirm that is your 9 signature? 10 A. It is. 11 Q. Thank you. So that is the written statement you have 12 provided to the Inquiry? 13 A. Correct. 14 Q. Thank you. Mr Greenhill, your evidence to the Inquiry 15 will comprise both the whole of the written statement 16 and the evidence you give today. 17 Now, sticking with your statement, please, going 18 back to page 1, and in paragraph 1 you helpfully explain 19 the different roles of the Auditor General of Scotland, 20 who you say are responsible for the audit of central 21 government bodies. Then you go on to explain the 22 Accounts Commission is responsible for the audit of 23 local government. 24 You then go on to explain that audit basically forms 25 two streams. There is the annual audit of public bodies 126 1 accounts called the audit of financial statements, and 2 there are performance audits which include best value 3 audits, and I think we will come on to it soon, but 4 I think the 2007 audit you carried out into the tram 5 project was a performance audit; is that -- 6 A. That's correct, yes. 7 Q. Thank you. 8 If we then, please, go to page 41 of the statement, 9 to clarify something here, I should perhaps start on 10 page 40 to put it in context. 11 At page 40 we see the word "guidance", and about 12 a third of the way down on that paragraph, there's 13 a reference to various guidance helped form the 2008 AGS 14 report on the 'Review of Major Capital Projects in 15 Scotland, How Government Works', dated June 2008: 16 "The guidance also helped inform our thinking 17 regarding the 2007 report on the trams project ... The 18 main guidance we have produced on managing major capital 19 projects is set out in a supplement to the 2008 report, 20 called 'Review of Major Capital Projects in Scotland, 21 Report Supplement: Good Practice Checklist for Public 22 Bodies'." 23 And a reference number is given. 24 Then to carry on this, please, on to page 41, it's 25 explained at the beginning of paragraph 92 that: 127 1 "The main report, 'Review of Major Capital Projects 2 in Scotland, How Government Works' came about as part of 3 our normal process for developing our performance audit 4 programme." 5 Then finally, a few sentences down, towards the 6 bottom of this paragraph: 7 "The 2008 report came about as part of that 8 performance audit programme, although I was not involved 9 in this particular audit." 10 So we pause there. What do you mean by "this 11 particular audit"? 12 A. I was not involved in the performance audit review of 13 major capital projects in Scotland. 14 Q. Thank you. Your statement goes on: 15 "We had not done a huge amount of work on major 16 capital projects as a whole and there was an awful lot 17 of money being spent on major capital projects, so we 18 felt this was an area which should be subject to audit 19 attention." 20 I should also ask, Mr Greenhill, there's a reference 21 to various guidance documents produced by Audit Scotland 22 in 2008 in respect of major capital projects. Did you 23 have any involvement into those guidance documents? 24 A. I did not. 25 Q. Thank you. 128 1 We can put that to one side, that issue. I would 2 like, please, now to very shortly come to the question 3 of the 2007 tram audit. 4 First, please, can we look at the question of 5 retention of documents. This is dealt with at page 3 of 6 your statement. In paragraph 3 you explain you have 7 provided a copy of Audit Scotland's retention policy, 8 et cetera. It goes on to say: 9 "Those standards do not require us to retain 10 documents beyond a six year period and so very little 11 remains of the audit information we collected as part of 12 the 2007 performance audit we conducted on the 13 Edinburgh Trams Project. We have a little more in 14 relation to the 2011 report which I have made available 15 to the Inquiry." 16 But on the question of any documents which Audit 17 Scotland have in relation to the 2007 report, 18 I understand any such documents have been made available 19 to the Inquiry? 20 A. What little remains has been made available to the 21 Inquiry, yes. 22 Q. Now, on the question of what remains, it sounds as 23 though there were -- there was a fuller set, most of 24 which have been destroyed; is that correct? 25 A. Correct. 129 1 Q. Do you know when those records relating to the 2007 2 audit were destroyed? 3 A. They would have been destroyed in accordance with our 4 retention policy. 5 Q. Do you know on whose authority those records were 6 destroyed? 7 A. I would have gone through the records and destroyed them 8 at that point. 9 Q. So you would have destroyed those records? 10 A. As a matter of course, yes. 11 Q. Now, come 2011, Audit Scotland produce another report 12 into the tram project. You were aware at that time, 13 probably earlier, of the various difficulties which 14 arose in the project. 15 Did you not stop and think, "Hang on, maybe I should 16 make an exception to the general policy and retain the 17 2007 records"? 18 A. I didn't think that was necessary. We didn't have an 19 awful lot of documents from 2007 that we had retained. 20 I think a lot of documents had been returned to tie. 21 The 2011 report was lodged as an interim report. 22 So -- because it was always our intention to come back 23 to the transport -- to the tram project once it had been 24 completed. So there was a few more documents remaining 25 in respect of the 2011 audit that we had. 130 1 These documents were kept largely for reasons of 2 continuity, such that I was involved in the 2011 audit 3 because I had been involved in the 2007 audit, but there 4 was always the chance that when we came back to the 5 trams project, then I might not be involved in 6 a subsequent audit. 7 Q. Now, you mentioned in respect of the 2007 audit records. 8 Did you say most had been returned to tie? 9 A. I recall returning a lot of tie documents to -- that we 10 had kept in respect of the 2007 audit back to tie at the 11 conclusion of that audit. 12 Q. I understand. So what documents were retained in 13 relation to that audit and why? 14 A. They would have been mainly internal documents, 15 covering, for example, drafts of the report. 16 Q. Those were destroyed? 17 A. They were destroyed in accordance with our document 18 retention policy. 19 Q. Come 2011, did it cross your mind that: I provided 20 a positive report in relation to the project in 2007, 21 but it's gone on to develop all sorts of problems; it 22 would be interesting just to look back and see what 23 I was told at the time of 2007, to see the information 24 on which I based my report? 25 A. I'm sorry, could you repeat that? I didn't catch that. 131 1 Q. Yes. Put it this way. I'm just wondering why you 2 destroyed the records in relation to the 2007 report and 3 why you didn't stop and think: well, these records might 4 be of some assistance. 5 A. Well, I explained that most of the tie documents that we 6 had kept for the purposes of 2000 audit had been 7 returned to tie. So if we needed them, I assumed that 8 we could have got them again in any kind of subsequent 9 audit. 10 Most of the documents that we retained in 2007, from 11 the 2007, were the kind of internal working papers that 12 we had. So I didn't think they were relevant for any 13 subsequent audit that we needed to retain. 14 Q. You mentioned drafts of the 2007 report that were 15 destroyed. Do you remember whether those drafts 16 included any -- were different in any way to the final 17 published report? 18 A. Yes, we have a process whereby once the Auditor General 19 in this case has agreed to the report, then that draft 20 report is provided to the bodies that we're auditing, to 21 allow them to comment on the factual accuracy of that -- 22 the draft report. 23 So we would have received comments from the likes of 24 tie and the Council and Transport Scotland commenting to 25 the draft that the Auditor General had originally 132 1 issued. Likewise we would have had draft reports 2 leading up to the point at which the Auditor General 3 agreed the final draft report for issue. 4 So all that kind of draft report material was 5 deleted. 6 Q. Do you remember what comments were made on the draft 7 report by the different bodies? 8 A. Not to any great extent, no. All I can say was that the 9 comments that were received were not substantial. 10 Q. Thank you. Do you remember what changes were made to 11 the draft report as a result of those comments? 12 A. I do not. 13 Q. Do you know whether any changes were of significance in 14 any way? 15 A. I don't recall there being any comments of significance. 16 The purpose of issuing the draft report and asking for 17 comments is to confirm factual accuracy. So generally 18 there are kind of three classes of comments, I would 19 say, that we do tend to receive. 20 There are comments on factual accuracy. If we've -- 21 say, for example, we have got a number wrong and we have 22 mistaken something, in such cases we will check our 23 evidence and correct the report if it's warranted. 24 Secondly, we can get comments which are perhaps 25 adding context and they can be quite helpful because it 133 1 aids the readers of the report's understanding. So we 2 tend to look quite sympathetically towards these kind of 3 comments and incorporate them when they are relevant. 4 And thirdly, there are comments which I would maybe 5 class as interpretation of the facts, and again, these 6 are considered. We will go back to check our evidence. 7 We might ask for additional evidence and we will change 8 the report as we think fit. 9 The point being that any of these changes that are 10 made are made by -- with the agreement of the Auditor 11 General and/or the Accounts Commission. 12 In the circumstances of the 2007 report, I cannot 13 recall any comment which gave us particular difficulty 14 or concern. So we would have changed the report as we 15 saw fit, but I don't recall it being a particularly 16 difficult task to do that. 17 Q. Thank you. I can quite understand, Mr Greenhill, why 18 you would send the draft report to other bodies to 19 ensure the facts are correct as set out in the report. 20 On the question of the interpretation of the facts, 21 isn't that entirely a matter for Audit Scotland as an 22 independent body? 23 A. Generally speaking, yes, but there are occasions whereby 24 we might have a kind of fundamental disagreement between 25 the interpretation of the facts between ourselves and 134 1 the auditor body, and in those kind of cases we often 2 kind of allow the public body to express its own views. 3 So we will say: here is our opinion and here is the 4 position of the other people that we're auditing. And 5 basically let the reader read into that what they will. 6 Q. In relation to the 2007 draft report, do you recall 7 whether there was any disagreement on the interpretation 8 of the facts between Audit Scotland and the other 9 parties? 10 A. Not that I recall, no. 11 Q. Thank you. Now, you've also described the process that 12 once that has all happened, you then send the final 13 draft, if I can call it that, or your final draft, 14 rather. Is it to the Auditor General for Scotland that 15 you mentioned? 16 A. Yes. Once we get the comments back from the audited 17 bodies, we will sit down with the draft report. We 18 will -- we being the team, I'm talking about, we will 19 agree what changes we think are necessary to make and 20 then we will meet with the Auditor General to discuss 21 what we think should be changed and at that point he 22 will -- he or she will finalise the report. 23 Q. In this case, in relation to the 2007 report on the tram 24 project, did the Auditor General for Scotland suggest or 25 request any changes to the draft report? 135 1 A. Not that I recall. He -- to the best of my 2 recollection, he accepted our suggestions. 3 Q. Thank you. I would like to move on from this point now, 4 please, on to the question of the instruction or 5 discussions, I should say, in relation to what brought 6 about the 2007 report. 7 If I can go to your statement, please, at page 3 and 8 paragraph 5, I think you mention this in different parts 9 of your statement. So I'll take you to each. 10 Page 3, paragraph 5, you start by saying you 11 conducted both audits reported in the 2007 and 2011 12 performance audit reports, et cetera. You go on to say: 13 "The 2007 report was conducted in a very short space 14 of time and because of that, we changed the normal way 15 in which we conducted that audit. As a senior manager, 16 my role was normally to oversee audits and not to 17 actually manage them. As the 2007 report was required 18 to be conducted in such a short space of time, I was 19 asked to carry out the audit and draft the report." 20 If we then, please, go on to page 10. It's page 7, 21 I'm sorry. In fact it's a page earlier than that. It's 22 page 5, in paragraph 8. Then a few lines down, you say: 23 "As I said earlier, the Cabinet Secretary asked the 24 Auditor General to conduct an inquiry into the Edinburgh 25 Trams Project in 2007, which is a very rare occurrence 136 1 and which has only happened on another two occasions. 2 One was on the trunk roads maintenance contracts, which 3 we undertook in 2001/2002, and ..." 4 To pause here, is that the audit I asked you about 5 earlier? 6 A. Correct, yes. 7 Q. To carry on: 8 "... and the other was on the Scottish Prison 9 Service prisoner escort services, conducted by Reliance, 10 in 2004/2005. It is not by accident that I was involved 11 in both of these projects, and I was involved in the 12 Trams project because I had that forensic 13 audit experience of doing things on a quick basis." 14 Then, please, at page 7, you explain at the top of 15 the page that the Auditor General for Scotland, 16 Robert Black, determined the scope of the 2007 review. 17 You go on to say: 18 "Reflecting his independence from Ministers and 19 Parliament, he decides what he is going to audit and how 20 he is going to audit." 21 In paragraph 11 you state: 22 "I understand that the Auditor General received 23 a phone call in June 2007 from the then Cabinet 24 Secretary for Finance and Sustainable Growth, 25 John Swinney MSP, asking if we could undertake a high 137 1 level review of the arrangements in place for estimating 2 the costs and managing the Edinburgh Tram and EARL 3 projects. This was the genesis of the 2007 review. 4 I was obviously not party to the discussion, but as 5 I understand it, on the back of that phone call, 6 Bob Black decided he would undertake the review which 7 resulted in the 2007 report. I think Ministers were 8 feeling a bit of political pressure elsewhere and so 9 they were looking for independent assurance." 10 Then also on this point still at page 8, please, if 11 we see the last few lines of the top paragraph, it 12 states: 13 "Normally, performance audits typically take around 14 nine months, and we have various stages to go through, 15 but we had a very short space of time for the 2007 16 audit." 17 When you say normally performance audits typically 18 take around nine months, can they take longer, depending 19 on the size and complexity of the project? 20 A. They can do. When I was referring to nine months, I was 21 referring to a planned programme of performance audits. 22 So they might typically last between -- say, between 23 six and 12 months, but with a normal duration of round 24 about nine months. 25 The reactive type of reports I referred to earlier 138 1 would tend to be a little shorter, perhaps two or three 2 months normally. 3 Q. I understand. Page -- 4 CHAIR OF THE INQUIRY: How long were you given for this one? 5 A. The Auditor General received the phone call from the 6 Cabinet Secretary on 4 June and we published our report 7 on 20 June. That was an unprecedented short period of 8 time. 9 CHAIR OF THE INQUIRY: And do you know -- did the Auditor 10 General decide that timescale or had the Cabinet 11 Secretary decided it? 12 A. I'm not entirely sure of the complete turn of events. 13 As I understand it, the Cabinet Secretary phoned the 14 Auditor General on the 4th. I'm not sure to what extent 15 any discussion was had over the duration of that report. 16 A day or so after the phone call, the Auditor General 17 met with the audit team to be doing that work, and we 18 discussed what might be doable within the kind of time 19 frame. And on that basis the Auditor General decided 20 that we should aim for a publication date of 20 June, 21 and I'm assuming, but I don't know for sure, that the 22 Auditor General got back in touch with the Cabinet 23 Secretary and spelt out what he was planning to do as 24 part of that audit, and when he was expecting to publish 25 the report. 139 1 MR MACKENZIE: Thank you. Page 11, we will see in 2 paragraph 20 you say, as you just explained, 3 Mr Greenhill: 4 "The review was instructed on 4 June 2007 and the 5 report was finished on 20 June. The short timescale was 6 definitely a challenge. Three weeks for a performance 7 audit is very fast going for Audit Scotland and as 8 I said earlier, normally performance audits can take up 9 to nine months." 10 Now, to pause there, it's not even three weeks, is 11 it? 12 A. It's somewhat less than three weeks. 13 Q. 16 days? 14 A. 16 days. 15 Q. Within that 16 days, just to think about what you had to 16 do, so you have to interview witnesses; is that correct? 17 You have to read documents and then draft -- produce 18 your first draft of the report, get to a stage of the 19 draft that you're happy enough with it to send it to the 20 parties for comment? 21 A. That is essentially correct. What it meant was that 22 a review was by necessity high level. It was very 23 focused mainly on management arrangements within tie. 24 We only looked at particular parts of the Edinburgh tram 25 project. And while I think we followed the basic 140 1 process that we use for all performance audits, it was 2 by necessity quite a compressed process. 3 Q. Just for the avoidance of doubt, what do you mean by it 4 being a high level review? 5 A. Well, where the project was at meant that if we were 6 going to be looking at, say, a capital project in its 7 entirety, we could clearly not do that in respect of the 8 Edinburgh Tram project, because, for example, one of the 9 things that we would look at if we were looking at 10 a major capital project in its entirety, was things like 11 tendering and tender evaluation, and the delivery of the 12 project itself. 13 Now, clearly in respect of Edinburgh Trams project, 14 the infrastructure contract had yet to be signed at that 15 stage, so that was an example of something we could not 16 have looked at for the Edinburgh Trams project at that 17 time. 18 Q. Thank you. 19 Now, I mentioned within those 16 days, you had to 20 interview witnesses, consider documents, and produce 21 a draft you were satisfied going to the other parties, 22 and then comments to come back, for you to consider the 23 comments, perhaps some revising of the draft, meeting 24 with the Auditor General, agreeing and finalising the 25 report, and presumably the editorial things like 141 1 a spellcheck, formatting -- 2 A. That's correct, yes. 3 Q. Is publication of these reports, is that done in-house 4 by Audit Scotland or do you send the report to 5 a printer? What happens? 6 A. We -- at that stage -- yes, we would have sent it to 7 a printer, I think. 8 No, hold on, sorry. That is essentially a Word 9 document. So we would not have -- we did not go through 10 the same procedures that we would normally do for 11 a performance audit. So we were able to cut back some 12 of the time associated with printing. 13 Q. I understand. 14 So within that 16-day period, Mr Greenhill, how many 15 days did you have on the substantive investigations? 16 A. We met with representatives from Transport Scotland -- 17 separate meetings with Transport Scotland, with the City 18 of Edinburgh Council and with tie on 7 June. 19 That principally was to get an update on where the 20 project was and to identify potential documents that we 21 might be interested in. 22 tie responded very promptly to our request for 23 documents. I would have thought five days actually, 24 looking at those documents. 25 Q. Now -- 142 1 A. Certainly no more than five. 2 Q. Yes. It may be suggested that seems a remarkably short 3 period of time to produce a performance audit for 4 a complex infrastructure project costing over half 5 a billion pounds of public money. 6 A. It reflected, as I said, we needed to keep the review 7 high level. And very focused. Looking at the 8 management arrangements within tie principally. 9 Q. Did you have any concerns at the time about conducting 10 an audit within such a short timescale? 11 A. I recognised that it was a challenge, but it was 12 something which I thought was achievable. 13 Q. Did you express any concerns within Audit Scotland about 14 that timescale? 15 A. No, I didn't. 16 Q. Are you aware whether anybody else within Audit Scotland 17 expressed any concerns about producing a performance 18 audit of this project within that timescale? 19 A. No. I mean, as I said earlier, we met with the Auditor 20 General to discuss what was possible within the time 21 frame, and there was common agreement that we should at 22 least endeavour to aim for 20 June as a publication 23 date. 24 Q. Was any consideration given to saying: okay, we will do 25 what we can within that short time period, but the size 143 1 and complexities of the project justified a longer, more 2 in-depth follow-up report. 3 A. Not specifically at that stage, no. Not that I recall 4 anyway. 5 Q. Can I then please come back to your statement. Go to 6 page 20. In paragraph 41, towards the bottom, you say: 7 "It is certainly unusual for us to be asked to 8 undertake a review by Ministers, bearing in mind the 9 Auditor General's independence. This kind of live 10 auditing can be awkward because we do not know what is 11 going to happen in the future." 12 To pause there, I understand from that usually Audit 13 Scotland would audit something that has happened and has 14 finished? 15 A. That's normally the situation, yes. 16 Q. I suppose in that situation you know the outcome? 17 A. Quite. 18 Q. Carrying on in that paragraph, towards the bottom, the 19 second line from the bottom, you say: 20 "I think that we would think seriously about the 21 timing of any similar audit in the future. We need 22 to ..." 23 Over the page: 24 "... be very careful about whether we can offer 25 assurances about something that is at such an early 144 1 stage." 2 Just to pause there, the question of needing to 3 think seriously about the timing of any similar audit in 4 the future, by that I take it to mean Audit Scotland 5 have to consider their future, whether it was 6 appropriate to undertake this sort of audit at all? 7 A. I think maybe my words didn't come out quite as much -- 8 quite as well as I intended them inasmuch that we would 9 always consider carefully any request to do an audit. 10 I think the general point I was trying to make is 11 that in any kind of audit of this nature, we would have 12 to be careful about what kind of assurances we could 13 offer about something which had yet to happen in the 14 future. 15 So we could not in this kind of -- in this kind of 16 case of the Edinburgh Trams project, we could not offer 17 any kind of assurances of guarantees that successful 18 delivery was likely, because there was still an awful 19 lot of things to happen in respect of the project before 20 any such assurances could be given. 21 Q. So rather than undertaking an audit of a live ongoing 22 project, it's better to wait until the project has been 23 completed and to undertake the audit at that stage? 24 A. If you're looking for a full audit of that project, then 25 yes. 145 1 Q. I just wonder whether what you have said in this 2 statement and explained in your evidence, whether these 3 considerations ought equally to have applied back in 4 June 2007 when Mr Black receives the phone call from 5 Mr Swinney. If it's obvious now that you would have to 6 think seriously about the timing of any similar audit in 7 the future, why was that not equally obvious back in 8 June 2007? 9 A. I think we did think carefully about just how much 10 assurance we could give, because it influenced how we 11 designed and undertook the audit and the objective set 12 for the audit. 13 Q. Just to sum up things at this point, if I may, so we 14 have, as at June 2007, we have firstly it is unusual for 15 Audit Scotland to undertake a live audit; is that 16 correct? 17 A. Correct. 18 Q. Secondly, I think we saw from your statement that Audit 19 Scotland didn't have a huge amount of experience in 20 large infrastructure projects; is that correct? 21 A. Not up until that point, I think that's fair, yes. 22 Q. I think we saw from your CV, Mr Greenhill, you yourself 23 had very little experience in large infrastructure 24 projects; is that correct? 25 A. That's correct. 146 1 Q. It appears at that time to have been restricted to 2 reviewing the contracts for the roads maintenance. 3 On top of that, the other factor, we have a 16-day 4 period within which to undertake this audit; is that 5 correct? 6 A. That's correct, yes. 7 Q. Listing the factors in that way, on the face of it, why 8 did Audit Scotland agree to do this? 9 A. I think we need to ask the Auditor General for his 10 opinion as to why he agreed to undertake that audit. 11 It certainly influenced the way in which we 12 conducted the audit and why we concentrated on 13 management arrangements within tie. Because management 14 arrangements is something that we are familiar with, and 15 in that context the nature of the project is of 16 secondary importance. 17 Q. Thank you. 18 CHAIR OF THE INQUIRY: Does the intervention of the Cabinet 19 Secretary maybe not explain why the Auditor General 20 decided that he should undertake this exercise -- 21 A. Well, the Auditor General -- 22 CHAIR OF THE INQUIRY: -- despite his independence from 23 Ministers? 24 A. Exactly. The Auditor General is independent. He would 25 have been within his powers to refuse the Cabinet 147 1 Secretary's request for him to consider undertaking the 2 audit. But for his reasons, he decided that we should 3 undertake an audit. 4 MR MACKENZIE: Would it be fair to say, Mr Greenhill, that 5 the circumstances surrounding this audit were highly 6 unusual? 7 A. I think it's fair to say that, yes. 8 Q. Thank you. Could we now, please, move on to what 9 happened in this audit. Starting with the documents, 10 please, you had available to you, page 7 of your 11 statement. In paragraph 13 you say: 12 "The material and evidence that the 2007 review was 13 based on comprised interviews and a review of key 14 papers, which is a normal part of the audit process. 15 These key papers included the Outline Business Case, 16 reports and minutes relating to meetings of the Tram 17 Project Board ..." 18 You also then mentioned: 19 "A standard audit process is triangulation." 20 Can you explain that, please, by reference to the 21 three points of the triangle? 22 A. It's a general point that when we're looking for -- 23 looking at one piece of evidence, we are effectively 24 seeking to corroborate that evidence through reference 25 to another source of evidence. 148 1 So while we might review papers and reports, we 2 would then corroborate the contents of those papers 3 through an interview with the relevant people. 4 Q. So are the three points of the triangle the auditor at 5 the top, and perhaps one bit of evidence, another point 6 of the triangle, another bit of evidence, the other bit 7 of the triangle? 8 A. Yes. 9 Q. So essentially it involves corroboration, as you put it? 10 A. Yes. 11 Q. So if perhaps a witness had spoken about something, you 12 may want to check if there's a document which confirms 13 that? 14 A. Yes. 15 Q. So if for example, a witness says we had a plan for 16 this, you might want to see a document setting out the 17 plans? 18 A. Exactly, yes. 19 Q. Thank you. I understand. 20 I should also ask: do you have a clear recollection 21 of the documents that were -- that you reviewed for the 22 2007 report? 23 A. I couldn't give you chapter and verse on every document 24 that we had access to. My written statement gives 25 a kind of flavour of the documents. So we had, as it 149 1 says there, access to Business Cases, access to reports 2 and minutes relating to the Tram Project Board, various 3 other documents like a project management plan, a risk 4 management plan and so forth. 5 Q. I think you also refer to having produced 6 an investigations matrix; is that correct? 7 A. Yes. The issues in an investigations matrix is 8 a standard document that we produce for every 9 performance audit. It basically sets out the aims and 10 objectives of the audit, the kind of key audit questions 11 we want to ask ourselves, and the sources of evidence 12 that we will look at to answer the questions that we've 13 asked ourselves. 14 Q. So it may be helpful to go to that matrix. The document 15 reference is ADS00066. 16 Does that look familiar, Mr Greenhill? 17 A. It does, yes. 18 Q. This is the investigation matrix you produced; is that 19 correct? 20 A. It is, yes. 21 Q. I think that we can see in the box on the right-hand 22 column, under "Methods", we can see interviews with 23 senior managers, but also then there's obviously 24 a review of records for each project. So these are the 25 sorts of records you would be looking for as part of 150 1 your review; is that correct? 2 A. That is in general, correct, yes. 3 Q. Then going back to the left-hand column, I'm not going 4 to read out each of the questions, but the first one, 5 for example, is: 6 "What are the current targets for delivery to time, 7 quality and cost?" 8 If we just go through the document fairly quickly, 9 we have an overview, on to the next page, we can see in 10 total there are seven questions or issues that you want 11 to look at. 12 On page 2, please, we can see on page 2 at issues 3 13 and 4. On to the next page, please. We see issues 5 14 and 6, and lastly, the last page, please, we'll see 15 issue 7. 16 Now, that's the question of documents. I would like 17 to go on to the question of interviews you conducted, 18 please. If we can go back to your statement, if I may, 19 to page 9. In paragraph 17 you explain that: 20 "The audit team had a number of meetings with CEC, 21 TIE and/or Transport Scotland in relation to the 2007 22 report, although any documents that we had relating to 23 2007 have been discarded ..." 24 You say: 25 "After a review of my Outlook calendar and that of 151 1 my colleague ... I can confirm the following meetings 2 took place, although this may not be a complete list." 3 You set out there meetings with certain individuals 4 in Transport Scotland on 7 June, the same day with 5 Tom Aitchison and Donald McGougan from the Council, and 6 again the same day with Willie Gallagher, 7 Stewart McGarrity and Graeme Bissett from tie. On 8 14 June, you also met with Bill Reeve. 9 Can you remember why you didn't meet with Mr Reeve 10 on 7 June? 11 A. I cannot. I cannot, sorry. 12 Q. I understand. You go on to say that: 13 "Dick Gill was responsible for looking at the EARL 14 aspect of the 2007 review." 15 So I take it within the 16 days, at least you were 16 able to concentrate on the tram project, because Mr Gill 17 was dealing with the EARL aspect? 18 A. That's correct, yes. 19 Q. You say: 20 "These were high level introductory meetings ..." 21 Over the page, please, top of page 10, you say: 22 "There were other meetings subsequent to 7 June with 23 members of TIE." 24 I just pause there. You explained that on 7 June 25 that you had high level introductory meetings with the 152 1 individuals we see. Did you have any further meetings 2 with anyone from the Council after 7 June? 3 A. No, we didn't. 4 Q. Presumably -- is it correct to say only -- sorry. 5 Start again. 6 On the list on the previous page, we had seen you'd 7 met with Bill Reeve on 14 June. Was that also a high 8 level introductory meeting, or that being a later 9 meeting, was that a more substantive meeting? 10 A. I can recall very little of that meeting. To the best 11 of my knowledge, it was a kind of follow-up based on -- 12 we obviously had been looking at papers within tie, and 13 there was a kind of opportunity to speak in greater 14 detail with Mr Reeve about Transport Scotland's 15 involvement in both projects. 16 Q. We will come back to their involvement when we come to 17 your report shortly, but sticking with this paragraph on 18 the top of page 10, you say: 19 "There were other meetings subsequent to 7 June with 20 members of TIE, but I do not have a full record of who 21 they were with. It was part of the process of 22 triangulation I spoke about earlier that we interviewed 23 people such as TIE's Project Director, Graeme Bissett, 24 and Stewart McGarrity, TIE's Director of Finance ..." 25 Just to pause there, I think tie's Project Director 153 1 was Matthew Crosse; is that correct? 2 A. I cannot remember. The reference to Graeme Bissett and, 3 Stewart McGarrity is because within my Outlook calendar, 4 I could see that we were due to meet with Graeme and 5 Stewart and also the Executive Chair, Willie Gallagher. 6 To my knowledge, I think all of tie's senior 7 management team were present at that initial meeting of 8 the 7th. But who was who and who did what after 9 a period of time, I have kind of forgotten. 10 Q. Thank you. Again, for the avoidance of doubt, are any 11 records available of those meetings? 12 A. No, there aren't, no. 13 Q. Now, Mr Greenhill, I would like to move on to another 14 matter. It's the question of design, and in particular 15 the issue of the project having experienced design 16 difficulties, delay and slippage. 17 Do you remember whether at any of these meetings, 18 anybody told you that there were difficulties and delays 19 in design? 20 A. No. No. 21 Q. If you had been told that, is that likely to be 22 something you would have referred to in your report? 23 A. Correct, yes. 24 Q. Why? 25 A. Because it was a significant issue that should not 154 1 have -- was of significant importance, that we would 2 have commented upon that in the report. 3 Q. If we go, please, to your statement at page 8, in 4 paragraph 15, at the very bottom of the paragraph, the 5 sentence commencing three lines from the bottom: 6 "Obviously as it was the early stages of the Trams 7 project in 2007, we could not look at execution in any 8 detail." 9 Now, to pause there, the design contract had been 10 let in September 2005. So you could perhaps have looked 11 at the execution of the design works and how they were 12 progressing? 13 A. We could have done had we had more time, yes. 14 Q. Just before I go to this next document, are you quite 15 sure that you were not told at the time about any 16 difficulties or delays in relation to design? 17 A. I -- I cannot recall if -- I cannot recall being -- 18 issues of design coming up, no. 19 Q. Thank you. 20 Do you remember during the meetings with tie being 21 given any sort of presentation in relation to design? 22 A. No. 23 Q. Is it possible you were given a presentation on design? 24 A. Do you mean some kind of PowerPoint presentation? 25 Q. Yes. 155 1 A. Not that I can recall, no. 2 Q. Is it possible that happened? 3 A. It is possible, I guess. But I can't recall being -- 4 seeing that. 5 Q. I would like now, please, to go to document CEC01674236. 6 Now, we'll see these appear to be slides with tie's 7 logo. The title is "Edinburgh Tram Project Engineering, 8 Assurance and Approvals" and we can see "Briefing Note 9 for Audit Scotland". Do you see that? 10 A. Indeed, yes. 11 Q. I'm just going to go through them, Mr Greenhill, to see 12 whether either the slides appear familiar or whether the 13 content appears familiar. 14 So slide 2, please. It's headed "Key functions". 15 If we can blow up that slide, I'll just give you 16 a minute to read through it. 17 Again, same with the next slide, please, page 3. 18 Blow it up. We can see it states under the second 19 bullet point: 20 "Phases. Requirements Definition - complete. 21 Preliminary Design - awaiting formal closure. Detailed 22 Design - under way." 23 I'll let you read the rest to yourself. 24 The next slide again, page 4, please. I'll let you 25 read that. 156 1 A. Okay. 2 Q. Again, please, the same for page 5. In the second main 3 bullet point, it states: 4 "19 Design Assured packages for delivery covering 5 whole tram system. 1st package due July 2007, last 6 due November 2007." 7 The next bullet point states: 8 "Each package contains [circa] 100 drawings, 25 9 documents and documentary evidence as above." 10 The last bullet point states: 11 "Key contributor to creation of Infraco confidence 12 and low price." 13 In relation to the last bullet point, did that 14 reflect your understanding at the time of the importance 15 of design? 16 A. My understanding of the importance of design was that 17 the intention was to do the design work early, which 18 would provide certainty and confidence to the Infraco 19 constructor, which would enable them to be able to 20 provide a firm price bid, yes. 21 Q. By firm price, do you mean a fixed price? 22 A. Fixed price, sorry, yes. 23 Q. We have seen other documents, that was part of the 24 procurement strategy. Is that how you understand it? 25 A. Indeed, yes, fixed price. 157 1 Q. The next slide, please, the next page. I'll let you 2 read that yourself. 3 A. Okay. 4 Q. And the next slide again, please. You can see it's 5 headed "Current progress and challenges". It states, 6 first bullet point: 7 "Management and measurement processes." 8 Indent: 9 "Critical issues (potential blockers) identified and 10 managed on a weekly basis." 11 The next indent: 12 "Dashboard showing whole-project progress and 13 forecasts." 14 The next indent: 15 "Critical Issues (blockers) understood, regularly 16 updated and being tackled by all stakeholders." 17 And various other matters set out. 18 Do any of these slides or the content of the slides 19 look familiar, Mr -- 20 A. Sorry, no. No. 21 Q. If you had seen the content so far, would it have raised 22 any concerns on the issues of design? 23 A. Not necessarily so far. I think what they're saying to 24 me is that there is a clear plan that tie is managing 25 the process of bringing forward design work, and that 158 1 whilst there were some challenges recognised, there was 2 nothing at that stage which was suggesting significant 3 problems. 4 Q. I think in the seven slides we have looked at thus far, 5 we haven't seen any reference to design slippage or 6 delay, have we? 7 A. Correct, yes. 8 Q. Let's look then, please, at slide 8. Now, this is 9 headed "Current progress and challenges". We do now see 10 the word "slippage". It says: 11 "Some design slippage to date, typical period view 12 shown below." 13 If we can blow this up a little, it's not, I think, 14 an easy slide to understand. If one looks at the 15 different coloured lines and what they're said to 16 represent, I'm not sure it's clear what they refer to. 17 But I think if we look at the horizontal axis, we 18 can see at least that says "date". Do we see that? 19 A. Indeed. 20 Q. If we can blow up the dates a little, just at the word 21 "date" -- I think we can't blow this up, but if we try 22 and squint? 23 A. Yes, indeed. 24 Q. Above the word "date", can we see, is it 30 April 2007? 25 Do you see that? 159 1 A. Indeed, that's the vertical line, yes. 2 Q. If we carry on to the right a few more months, when the 3 various blue and red lines hit where it appears they are 4 supposed to be achieving, if we at that point look down 5 at the date, we can see perhaps December 2007 and 6 January 2008, around then? 7 A. Yes, indeed. 8 Q. If we then look at the vertical axis, please, we can see 9 this is headed "Number of Milestones", and where the red 10 and blue lines plateau and level out, we see that's 11 about 6,000; is that correct? 12 A. Mm-hm. 13 Q. So on the face of it, it may be that this graph is meant 14 to represent the design milestones required to be 15 achieved by perhaps December 2007 or January 2008? 16 A. Quite. 17 Q. Does that seem reasonable? 18 A. I think that's my interpretation of that, yes. 19 Q. Now, is the other thing we can see from this graph that 20 both the red and blue lines are at a certain angle up 21 until the black vertical line entitled "V15 Reference", 22 and after that vertical line, we can see both the red 23 and blue lines steepen in order to plateau at about 24 6,000 milestones at about December 2007 and 25 January 2008; is that correct? 160 1 A. Yes. 2 Q. So on the face of it -- I appreciate you have no 3 recollection of this graph, Mr Greenhill, but on the 4 face of it, if one were to look at this, this would 5 suggest that something needs to happen in order for the 6 6,000 target to be met by those dates; is that correct? 7 A. Correct, yes. Yes. 8 Q. In short, what it appears to require to happen is an 9 increase in the design output? 10 A. In -- increase in the volume of output, yes. I don't 11 know about the complexity of the individual items 12 necessary to deliver the output. 13 Q. If there's no increase in the production of the 14 milestones, the 6,000 milestones, and if the red and 15 blue lines continue at the same angle as they are to the 16 left of the V15 reference linear black line, if they 17 continue at that angle, it's going to take longer to get 18 up to the 6,000 target, isn't it? 19 A. If you draw a straight line from -- extending the period 20 after April 2007, yes. 21 Q. Then the next slide, please -- 22 CHAIR OF THE INQUIRY: Sorry, go back to that last one. 23 Does the difference between the blue line and the red 24 line indicate delay? 25 A. I don't understand what V15 or baseline V14 actually 161 1 refers to. 2 MR MACKENZIE: Yes. Mr Greenhill, I suspect V refers to 3 version, and I suspect it refers to a version of the SDS 4 design programme. But even with that information, I'm 5 not sure one can properly interpret that graph. 6 A. I would need to think about it, yes. 7 Q. Okay. Over the page, please, is the final slide. It's 8 headed "Current progress and challenges". Slippage, 9 again, we see slippage, due to three reasons. One, 10 a logged critical issue, two, a tie Change Notice having 11 the effect of changing the scope, three, slippage within 12 the Parsons Brinckerhoff SDS contract performance: 13 "These issues are now well understood and the 14 principal blockers (critical issues) are being removed 15 systematically. 16 "All stakeholders represented. 17 "Managed in detail on a weekly basis. 18 "Demonstrable progress in their removal." 19 Now, to pause here, if you had seen the two slides 20 we have just looked at, or at least been told of the 21 information shown on these slides, is that likely to 22 have caused any concerns on your part? 23 A. I think if I could -- having seen this presentation ten 24 years after the event, I certainly would have followed 25 that up in discussion with the relevant tie person 162 1 responsible for managing the design contract and trying 2 to understand further what was going on. 3 Q. If you had been shown these slides? 4 A. If -- well, I can't remember if I had been shown those 5 slides. I can't remember if I did follow up with the 6 individual concerned. 7 Q. One last document, if I may, my Lord, go to, or I could 8 wait until later. There's one accompanying email chain 9 it might be helpful to look at before we -- thank you. 10 This is a document, CEC01670035. You won't have 11 seen this before, Mr Greenhill. We start on page 2, 12 please. We follow from the chain from the bottom. It 13 starts at the bottom with an email from Matthew Crosse 14 who was the Tram Project Director at tie, sent on 8 June 15 to David Crawley, who was tie's Engineering Director, 16 saying: 17 "Subject: briefing note. Dave, as requested 18 a template with headings. Aim is to summarise what 19 happens in your area and convey confidence that we have 20 a plan and achieving the plan, albeit with some 21 challenges." 22 If we then please look at the email above that, 23 Mr Crawley replies the same day, saying: 24 "Try this." 25 We don't have the attachment before us, 163 1 Mr Greenhill, but I have checked and the first version 2 produced by Mr Crawley has a slide 8, issues and 3 challenges. It doesn't have the two we have just looked 4 at at the end. 5 We then go up the email chain, please. 6 This is an email from Matthew Crosse to Mr Crawley 7 and others dated 8 June, the same date. Mr Crosse says: 8 "David, just the job, thanks. Have made a few 9 changes and taken out the last slide merging some of 10 the challenges with the previous slide." 11 Again, to pause, the attachment to this email, 12 I have checked, in short contains slides 1 to 7 we have 13 just looked at. It doesn't contain the last two slides 14 we looked at. 15 A. Okay. 16 Q. The next email, please, this is an email from 17 Stewart McGarrity, the Finance Manager, saying: 18 "The really direct questions that you need to 19 prepare for are: one, has the design gone according to 20 programme so far -- if not why not?" 21 Secondly: 22 "What has changed which gives you confidence the 23 design process will deliver to the procurement programme 24 now on the table?" 25 Over to page 1, please, in the middle section we see 164 1 an email from David Crawley, dated 10 June, to 2 Stewart McGarrity and Matthew Crosse. Mr Crawley 3 states: 4 "Dear all, I have updated the presentation with two 5 additional slides at the end which attempt to answer 6 Stewart's questions." 7 Mr Crawley says: 8 "Matthew, you need to take a view on what I have 9 offered." 10 The last email at the top, please, it's from 11 Matthew Crosse, dated 11 June to Mr Crawley, saying: 12 "I think we should stick with current pack. The 13 last 2 new slides beg a lot of questions. If they 14 want to understand more about current and past progress, 15 we can respond when asked." 16 So what appears to have happened, Mr Greenhill, is 17 that a series of slides were prepared to be shown to 18 you, or at least to be used at a briefing to you, and it 19 appears to be the case that Project Director Mr Crosse 20 has decided that the last two slides which address the 21 question of design slippage were not to be shown to you, 22 or at least the content were not to be disclosed unless 23 you asked. 24 Do you have any views on that, assuming that is what 25 happened? 165 1 A. I think that potentially is one interpretation of the 2 email traffic that you have shown. It's difficult to 3 offer more than that. 4 CHAIR OF THE INQUIRY: I think you were being asked, if that 5 is what happened, do you have any view about that event? 6 A. There is a requirement to provide information. If we 7 are conducting an audit, there is a requirement for 8 people that we are auditing to provide information that 9 we asked for. 10 Are you suggesting that tie have deliberately held 11 information? Well, yes, I think that could be one 12 interpretation of that email traffic. 13 CHAIR OF THE INQUIRY: If somebody deliberately withholds 14 information, if that's what we're looking at -- as 15 I say, if -- what is the position of the Auditor General 16 or -- in the context of an audit? Is that -- 17 A. We would obviously take a very dim of view of that. In my 18 experience I have never seen that happen or certainly 19 never been aware of it happening. 20 MR MACKENZIE: Presumably, Mr Greenhill, you both expect and 21 rely on people to be open and transparent with you. 22 A. Quite. 23 Q. In order that you can produce an accurate audit report? 24 A. Quite. 25 Q. Just finally on this point, before I leave it, we can 166 1 obviously explore this further with Mr Crosse and 2 perhaps other individuals from tie, but if nothing else, 3 does this perhaps reinforce what you told us earlier, 4 that you don't recollect being told anything about 5 design slippage or difficulties? 6 A. Yes. 7 MR MACKENZIE: Thank you. 8 CHAIR OF THE INQUIRY: We will have a break for the sake of 9 the shorthand writers. We will just take ten minutes so 10 that we can try and finish this witness. 11 Thank you. We will resume again at 3.25. 12 (3.15 pm) 13 (A short break) 14 (3.25 pm) 15 CHAIR OF THE INQUIRY: You are still under oath, 16 Mr Greenhill. 17 MR MACKENZIE: Thank you, my Lord. 18 Mr Greenhill, I would like to move on to the 19 question of utility diversions and the MUDFA contract we 20 know was let in October 2006. 21 Did you look -- as part of your review of the 22 execution of the MUDFA contract and how the works under 23 that contract were progressing? 24 A. I think when we published our June 2007 report utility 25 diversion had really just begun. So no, we didn't look 167 1 at the execution of that piece of work. 2 Q. Yes. I think we will come -- we will look at your 3 report to see a reference to the construction works for 4 utilities commencing in July. So just after your 5 report. 6 Did you consider at all what had been done since the 7 MUDFA contract had been entered into in October 2006, 8 and generally how the works under that contract were 9 progressing? 10 A. No, we didn't, no. 11 Q. Again, is that an example of something you may have done 12 if you had a longer time period for the review? 13 A. Had we been conducting a full audit of the trams 14 project, then yes, that is something we could have 15 considered looking at, yes. 16 Q. What, if anything, were you told about whether there had 17 been a slippage in the programme for the utility works? 18 A. I think the risk register flagged up utility diversions 19 as being one of the costliest risks that tie had 20 identified. But I wasn't aware of any specific concerns 21 about there being a delay in the works taking place. 22 Q. Were you aware of any problems and delays in the 23 production of utilities design? 24 A. No. 25 Q. Were you aware of any difficulties or delays in 168 1 receiving responses from the statutory utility 2 companies? 3 A. No. 4 Q. Were you aware that around May 2007, certainly prior to 5 your report, the MUDFA programme had been revised to 6 show a five-month slippage of the end date, ie to show 7 the utility diversion works completing in November 2008 8 rather than May/June 2008? 9 A. I don't think I did, no. 10 Q. Were you aware that, despite that revised programme for 11 the MUDFA works, the Infraco works were still due to 12 start at the beginning of 2009? 13 A. I can't recollect that either, no. 14 Q. If you had been aware of any of these matters, are you 15 likely to have mentioned it in your report? 16 A. I think if we were aware of the specifics that you would 17 have -- that you referred to, then we would have flagged 18 it up in the report. 19 As you'll recall, the report talks about the tram 20 project reaching a critical phase whereby Infraco 21 contracts had to be signed and business cases had to be 22 finalised and signed off. I think that's the kind of 23 thing we would have flagged up as being a critical issue 24 which had to be considered. 25 Q. If we could now, please, go to your report, it's 169 1 reference CEC00785541. 2 At page 4, please, under "Aims and objectives of the 3 review", we see paragraph 2, the first bullet point 4 states: 5 "The high level objectives of this review were to 6 assess:" 7 Firstly: 8 "Whether the Edinburgh Trams and EARL projects are 9 progressing in relation to time and cost targets." 10 Secondly: 11 "Whether appropriate management systems are in place 12 to promote successful completion of the Edinburgh Trams 13 and EARL projects." 14 Then in paragraph 4, under "Our review", it is 15 stated: 16 "The review examined the process for estimating 17 project costs and project management arrangements for 18 the two projects. It does not provide assurances on the 19 accuracy of the estimated project costs." 20 I think we understand the distinction you make 21 there, Mr Greenhill. 22 Then please look at page 5. I won't read out 23 paragraph 5. We can see what that says. 24 Other than I should perhaps just for the avoidance 25 of doubt check this. 170 1 In paragraph 5, when it's stated: 2 "In undertaking this review, we took account of the 3 earlier work that we carried out for our performance 4 overview of transport in Scotland published in 5 September 2006 ..." 6 Pausing there, had you played any part in that? 7 A. The performance overview of transport in Scotland I had 8 overseen, yes, in 2006. 9 Q. The other part of that: 10 "... our regular monitoring of the progress of major 11 transport projects ..." 12 Is this a reference back, I think you have told us 13 before, audit of Scottish Executive, of their projects? 14 A. Yes. 15 Q. I understand. We can see what else is set out there. 16 Again, just a point of detail perhaps. In 17 paragraph 6 where you say: 18 "In preparing this report, we have shown our 19 findings to all of the key players ... and taken their 20 comments into account, but due to our timescale, we have 21 not followed our usual formal clearance process." 22 What is the usual formal clearance process? 23 A. We normally give three weeks to allow audited bodies to 24 come back to us with comments on draft reports. Clearly 25 that wasn't possible in the timescale that we were 171 1 working to with this exercise. So I think we only gave 2 them a couple of days. 3 Q. Thank you. Under "Key messages", we see in paragraph 8 4 it states: 5 "There are three key players common to both 6 projects - Transport Scotland, CEC and tie - all of 7 which have satisfactory high level governance 8 arrangements in place." 9 What do you mean by "high level governance 10 arrangements"? 11 A. We were looking at the overriding process by which 12 information was made available to these bodies about the 13 projects to enable them to scrutinise the progress of 14 the tram and the EARL projects. 15 Q. Can you give any examples of high level governance 16 arrangements as compared to low level governance 17 arrangements? 18 A. One example might be Transport Scotland's overriding 19 arrangements whereby they have an investment decision 20 board, whereby reports are brought to that about the 21 progress of projects as a whole. 22 That might be a kind of high level governance 23 arrangement, whereby at a lower level example, we might 24 be talking about governance arrangements for individual 25 projects, being managed by Transport Scotland. 172 1 Q. Do you remember what the City of Edinburgh Council's 2 governance arrangements were, or is that something you 3 come back to later in your report? 4 A. I think -- I think there's probably reference in the 5 report to the Council's arrangements. 6 Q. Yes, okay. We will come back to that then shortly. 7 So I think the key messages here is essentially 8 a summary of matters you go on to say a little more 9 about; is that correct? 10 A. Yes. 11 Q. Yes. So in paragraph 10 it states: 12 "The current anticipated final cost of Phase 1 in 13 its entirety is GBP593.8 million and estimated project 14 costs have been subjected to robust testing." 15 You go on later in the report to explain that. 16 Paragraph 13: 17 "Some slippage in the project has occurred, but tie 18 is taking action to ensure that phase 1a can be 19 operational by early 2011." 20 We will come back to see what you mean by 21 "slippage". 22 Then page 6, please. Paragraph 14 states: 23 "Arrangements in place to manage the project appear 24 sound with: a clear corporate governance structure for 25 the project ... clearly defined project management and 173 1 organisation; sound financial management and reporting; 2 procedures in place to actively manage risks associated 3 with the project; a clear procurement strategy aimed at 4 minimising risk and delivering successful project 5 outcomes." 6 Paragraph 15 goes on to say: 7 "The project is approaching a critical phase leading 8 up to early 2008 when Cabinet Secretaries and CEC are 9 expected to be asked to approve tie's final business 10 case. This will allow infrastructure construction to 11 commence. A range of key tasks needs to be completed 12 before the final business case can be signed off, and 13 unless work progresses to plan, the cost and time 14 targets may not be met." 15 Go down, please, to page 15. I'm sorry, to page 9. 16 It's, I think -- this is in part 1 an introduction which 17 refers to both the tram and EARL projects, and then in 18 part 2 you go on to look at trams by itself, and then 19 part 3 is EARL. 20 So this is in part 1 in relation to both projects, 21 and we see the heading, "High level governance 22 arrangements are satisfactory". 23 Presumably, that must have been that conclusion 24 based on the governance arrangements in place at that 25 time. 174 1 A. Quite. 2 Q. If the governance procedures were to change, then it's 3 possible your conclusion may have changed? 4 A. Quite. 5 Q. Look then, please, at paragraph 27 in this page in 6 relation to Transport Scotland, where I think you set 7 out in these next paragraphs your understanding of 8 Transport Scotland's governance arrangements then in 9 place; is that correct? 10 A. Yes, it is, yes. 11 Q. In paragraph 28, it states: 12 "Transport Scotland's board meets on a monthly basis 13 and reviews, amongst other things: progress against its 14 business plan; major infrastructure projects; and 15 significant corporate risks." 16 In paragraph 29: 17 "The Chief Executive of Transport Scotland, as 18 Accountable Officer, has overall responsibility for 19 decisions affecting its capital investment programme. 20 A Major Investment Decision Making Board supports the 21 Chief Executive and meets monthly to consider major 22 project proposals and financial changes exceeding the 23 project owner's ... delegated authority." 24 Over the page, please, in paragraph 30, at the top 25 of the page: 175 1 "Separate to the MIDMB, Transport Scotland's Rail 2 Delivery Directorate operates a four-weekly review of 3 its own programme of major projects. All major rail 4 projects are subject to Gateway reviews where an 5 independent team reviews projects at key decision points 6 throughout the project cycle." 7 So you set out there your understanding of the 8 Transport Scotland governance arrangements. Go on to 9 the Council, paragraph 32, please. It states: 10 "CEC approves tie's annual business plan and 11 monitors its arrangements." 12 And a reference to draft business case and approve 13 the final business case. Do you know what is meant by 14 CEC "monitors its arrangements"? 15 A. tie was an arm's length organisation, and as such, there 16 should have been arrangements in place whereby the 17 relationship between the Council and tie are set out. 18 So there should have been an operating -- some kind of 19 operating statement which basically sets out things like 20 the aims and objectives of tie, how it was expected to 21 contribute to the Council's strategic objectives, 22 arrangements for covering things like finance, delegated 23 limits, accounting and auditing arrangements. 24 Also arrangements for how the Council should monitor 25 tie's performance and how tie should be reporting its 176 1 performance to the Council. 2 Q. Thank you. Is the reference to CEC monitors tie's 3 arrangements, is that a reference to CEC monitoring tie 4 and/or monitoring the tram project more generally? 5 A. I think it's referring to overall monitoring of tie. 6 Q. So focused on tie rather than more wider monitoring of 7 the project? 8 A. Yes, yes. 9 Q. Then the next paragraph it states, paragraph 33, in the 10 second sentence or perhaps third sentence: 11 "CEC conducts a quarterly reconciliation of 12 expenditure against the funds drawn down, and its 13 internal auditor certifies that spend has been properly 14 incurred in respect of the project." 15 Now, to pause there, Mr Greenhill, what is set out 16 in paragraphs 32 and 33 doesn't appear to amount to much 17 by way of monitoring on the part of the Council of the 18 tram project, in that you list CEC's monitoring of tie, 19 and it states that the Council were required to approve 20 the Final Business Case, and then there's the issue of 21 the quarterly reconciliation of expenditure. But in 22 terms of the Council monitoring the project more 23 generally, these steps don't appear to amount to very 24 much. Is that fair or unfair? 25 A. These are high level -- these are high level 177 1 arrangements, yes. 2 Q. Yes. 3 In short, what is set out in paragraphs 32 and 33, 4 is what is set out there, does that represent the 5 Council's governance arrangements for the tram project, 6 as you understood them at that time? 7 A. No, it doesn't, no. 8 Q. So what else is there? 9 A. In terms of ...? 10 Q. I'm sorry. So in your answer, by saying it doesn't, are 11 you really saying these relate to the Council's 12 monitoring of tie? 13 A. These are -- these relate to the Council's monitoring of 14 tie. Paragraph 32 really relates to the Council's 15 monitoring of tie. 33 is relating to the administration 16 of funding. That -- neither of these paragraphs relate 17 to how the Council monitors the trams project. 18 Q. I understand. Do we find that anywhere else in your 19 report? 20 A. The only reference to it would be the Council 21 representatives on the Tram Project Board, which comes 22 later on in the report. 23 Q. I understand. 24 In relation then to tie, we see in paragraph 34 -- 25 we can see: 178 1 "tie is overseen by a board which currently 2 comprises an Executive Chairman ..." 3 To pause there, do you consider that a company 4 having an Executive Chairman is good corporate 5 governance? 6 A. Normally you would have split the role between a Chair 7 and a Chief Executive. But it's not -- it's not unknown 8 to combine both roles, I don't think. 9 Q. This is a company responsible for spending over half 10 a billion pounds of public money. Does that not suggest 11 that it requires to be subject to the very highest 12 standards of corporate governance? 13 A. Yes. 14 Q. Now, you don't note in your report that Mr Gallagher 15 being an Executive Chair was a departure from the 16 standard of good corporate governance; why not? 17 A. I don't know. 18 Q. Is that something, with the benefit of hindsight, that 19 you perhaps should have noted? 20 A. With the benefit of hindsight, perhaps it is, yes. 21 Q. Because presumably Audit Scotland as an organisation, it 22 must be a central part to its role to ensure that good 23 standards of corporate governance are met by public 24 bodies? 25 A. Yes. 179 1 Q. You're nodding your head? 2 A. Yes, yes. 3 Q. Thank you. Again, sticking with tie, the second 4 sentence states: 5 "The board meets regularly to review the corporate 6 strategy, and governance arrangements within tie, and 7 oversees project delivery and financial performance." 8 Now, we have heard some evidence that it was the 9 Tram Project Board and not the tie Board that oversaw 10 project delivery. Would that have been inconsistent 11 with your understanding at the time? 12 A. The Tram Project Board had chief responsibility for 13 overseeing the delivery of the Tram Project Board -- the 14 trams project, but tie -- the tie Board had 15 a responsibility for overseeing the management and 16 performance of tie, which to some extent would have 17 included the delivery of the Tram Project Board. 18 So to some extent, I would say there was an element 19 of overlap between both bodies, but I think they would 20 have been coming out with tasks in slightly different 21 ways. 22 Q. Is having an overlap in responsibilities for 23 delivering -- sorry, for overseeing delivery of the tram 24 project, was that consistent with good governance? 25 A. I don't think it's impossible to have an overlap and be 180 1 consistent with good governance. 2 Q. What did you understand the Tram Project Board's 3 responsibilities to be for overseeing delivery of the 4 project, and what did you understand the tie Board's 5 responsibilities to be for overseeing delivery of the 6 project? 7 A. The Tram Project Board had a specific responsibility for 8 overseeing the delivery of the project. The tie Board's 9 responsibilities were wider than just reviewing and 10 overseeing the tram project, because at that time, tie 11 had more than just the tram project on its books, as it 12 were, that it was managing. 13 Q. But both bodies have responsibility for overseeing 14 delivery of the project? 15 A. From a slightly different perspective, I think. 16 Q. Can you explain clearly what the two different 17 perspectives are? 18 A. Well, the Tram Project Board had a specific 19 responsibility for overseeing delivery of the project. 20 Its membership included representatives from each of the 21 parties interested in the trams project. So each of the 22 representatives from the Council and TEL and 23 Transport Scotland could bring their own specific angle 24 to that oversight role. 25 I think the tie role was a more general role around 181 1 the overall management and performance of tie. 2 Q. I think we saw in the Final Business Case the governance 3 section, section 6, it seems to try to limit or narrow 4 the role of the board of tie to largely overseeing tie 5 as an organisation, with the Tram Project Board 6 responsible for overseeing delivery of the project. 7 One can understand that up to a point. What I find 8 a little harder to understand is in paragraph 34, the 9 reference to tie Board overseeing project delivery. It 10 doesn't say overseeing tie as an organisation. It says 11 overseeing project delivery. 12 A. Project delivery is not just tram project. It was 13 overall projects that tie was overseeing as part of 14 their overall responsibilities for overseeing the 15 management and performance of tie. 16 Q. So the reference in this part of the report to project 17 delivery, that means both the tie and the EARL projects? 18 A. Quite. 19 Q. Again, paragraph 35, we can see in the second line, tie 20 has made changes to its board membership, et cetera, in 21 providing a strong focus on project delivery. 22 So is that again both a reference to the tie Board 23 providing a strong focus to project delivery of both the 24 tram and EARL projects? 25 A. Yes. 182 1 Q. But again, it's not a reference to the tie Board 2 focusing on tie as an organisation. The wording is 3 "project delivery". 4 Over the page, please, page 11, in paragraph 37, it 5 states: 6 "There is evidence of regular and effective reviews 7 of progress within tie with the Executive Chairman, 8 non-executive directors and senior staff playing a very 9 active role in overseeing projects." 10 What was the evidence that reviews of progress were 11 effective? 12 A. From recollection, it would have been referring to the 13 fact that there was regular reporting of the progress of 14 the project to the tie Board, and with the tie Board 15 seeking additional information, and basically, you know, 16 asking -- holding the respective project directors to 17 account for what was going on within these projects. 18 Q. Then over the page, please, we get to part 2, which is 19 just to do with tram project at page 12. 20 Then we go on to page 14, please. We see the 21 headline: 22 "The cost and time targets for the Edinburgh Trams 23 project have been developed using robust systems." 24 Then go, please, to page 15. At paragraph 50 -- I'm 25 not going to read all of this out, but it sets out the 183 1 robust testing the Edinburgh tram project cost estimates 2 have gone through, and we can understand that, I think. 3 Simply one point of detail, perhaps. There's 4 a reference to, for example, in November 2006, it 5 compared estimates for infrastructure construction, 6 a significant element of the total project cost, with 7 those of a recently completed tram system, et cetera. 8 What was that system? 9 A. I don't recollect, and I think that was something which 10 came up in my written statement, where it was suggested 11 that it might have been the Merseyside tram system, 12 which I understand was not completed. 13 So I do not recall which specific completed tram 14 system we were talking to, if it wasn't Merseyside. 15 Q. Yes. I think Audit Scotland have provided the Inquiry 16 with a benchmarking document which tie had produced 17 to Audit Scotland at the time on 14 June 2007. I don't 18 think we have to go to it, but for the record, it's 19 CEC01567302. I think that benchmarking document refers 20 to the Mersey trams; is that correct? 21 A. It does, yes. 22 Q. If it's correct, that was the benchmarking system and it 23 hadn't actually been completed. Does that then suggest 24 that the reference in your report to a recently 25 completed tram system is inaccurate? 184 1 A. If we're talking about Merseyside, then this is 2 inaccurate, if we're talking about a recently completed 3 tram system. 4 I think what -- the first part of the sentence says 5 "in November 2006". 6 Now, in November 2006, that was the date that tie 7 received the report from the consultants who were 8 commissioned to look at costs. So I cannot recall, but 9 it's possible that the reference to November 2006 might 10 have also included the consultants doing some kind of 11 benchmarking work on tie's behalf as well. 12 Q. But it seems in short, Mr Greenhill, your position seems 13 to be that you're not -- you can't recall what this 14 other tram system was, nor can you recall whether it had 15 in fact been completed? 16 A. Correct, yes. 17 Q. Now, moving on, please, to page 16. Top of the page, 18 the question of slippage. The headline states: 19 "Some slippage in the project has occurred but 20 action is being taken to ensure that phase 1a can be 21 operational by early 2011." 22 I'll let you, if I may, just read paragraph 53 23 yourself. I won't read that out. 24 A. Okay. 25 Q. Then paragraph 54, I will read out. It states: 185 1 "These timescales have been amended as the project 2 has progressed. tie's draft final business case in 3 November 2006 indicated an operational start date for 4 phase 1a of December 2010 and for phase 1b of 5 December 2011. Since then, the estimated dates to sign 6 contracts for infrastructure construction and vehicle 7 delivery have slipped by four months to January 2008, to 8 allow sufficient time for negotiations. tie has 9 responded to this delay by bringing forward advance 10 works, including critical path works such as the 11 construction of the tram depot at Gogar, and now expects 12 phase 1a to be operational on 21 January 2011." 13 Paragraph 55: 14 "tie's strategy to deliver the programme on target 15 is to maintain sufficient time between utilities 16 diversion work and infrastructure work. Infrastructure 17 construction bidders provided their own draft work 18 programmes to tie in May 2007 and tie is currently 19 analysing these. The full extent of contingency within 20 the programme will be confirmed once the bidder 21 programme is negotiated and agreed." 22 Now, to pause there, Mr Greenhill, in this 23 discussion of slippage, there is mention of slippage in 24 the Infraco procurement timetable, but there's no 25 mention here of any slippage in relation to the design 186 1 programme or works, is there? 2 A. Correct. 3 Q. In fact, there's no mention anywhere in your report of 4 slippage in the design programme of works? 5 A. Correct. 6 Q. Can you explain that? 7 A. Because I was not aware that there was slippage. 8 Q. Thank you. 9 Now, again, in this section of the report, there is 10 no mention of any slippage in the utility diversion 11 programme of works; is that correct? 12 A. Indeed, yes. 13 Q. Again, I don't think there's mention anywhere in your 14 report to slippage in the utility diversion programme of 15 works; is that correct? 16 A. Indeed, yes. 17 Q. Again, are you able to explain that? 18 A. Because I wasn't aware that there was slippage. 19 Q. Thank you. 20 Then on to page 16, please. Coming back to the 21 question of governance. 22 We see the headline: 23 "Arrangements in place to manage the project appear 24 sound." 25 Beneath that, another headline: 187 1 "There is a clear corporate governance structure for 2 the project which involves all key stakeholders." 3 Paragraph 56 states: 4 "The Tram Project Board exercises overall governance 5 of the project." 6 It then goes on to say that it includes senior 7 representatives from tie, Transport Scotland, CEC and 8 TEL, and has full delegated authority from CEC, through 9 TEL and Transport Scotland, to take the actions needed 10 to deliver the project to agreed cost, timescale and 11 quality standards. 12 The reference to "full delegated authority", would 13 you expect such delegation to have been done in a formal 14 way? 15 A. I would have expected it to be in writing, yes. 16 Q. Would you expect powers to have been formally delegated 17 to the Tram Project Board to enable it to fulfil its 18 function? 19 A. Yes. 20 Q. Would it have caused you any concern or have been 21 a matter for comment in your report if you had been told 22 that in fact there had at this time been no formal 23 delegation of authority to the Tram Project Board? 24 A. Yes, I think it would have been, yes. 25 Q. There's also then -- the paragraph goes on to say: 188 1 "The Tram Project Board has a clear written 2 remit ..." 3 I'm sorry. The sentence before that, I'm sorry, 4 which states that the Tram Project Board having full 5 delegated authority to take the actions needed to 6 deliver the project to agreed cost, timescale and 7 quality standards; was your understanding that the role 8 and responsibility of the Tram Project Board was to 9 deliver and execute the project or rather was it to 10 monitor the delivery and execution of the project by 11 others? 12 A. It was the latter, yes. 13 Q. Over the page, please, to the diagram at page 17. If we 14 could blow up that diagram, please, and take a minute to 15 look at it. 16 Do you consider this shows a clear corporate 17 governance structure? 18 A. As it stood at the time, yes. 19 Q. Who does the Tram Project Board report to? 20 A. The Tram Project Board was a freestanding board. Its 21 role was really to bring together the different 22 representatives of the organisations with an interest in 23 delivery of the project, and really to support the -- 24 the Chief Executive of TEL as the senior responsible 25 owner to fulfil his functions for -- his 189 1 responsibilities for integrating the tram project with 2 the bus network. 3 Q. So who does the Tram Project Board report to? 4 A. In that context it doesn't have direct reporting lines. 5 Q. For there to be a clear corporate governance structure, 6 surely the Tram Project Board requires to have a clear 7 reporting line to somebody. 8 A. What I thought was happening was the bodies involved 9 were trying to take into account various guidance which 10 existed on roles and responsibilities for major project 11 delivery, whilst reflecting the specific circumstances 12 of the tram project. 13 Hence the involvement of all the different parties 14 within the Tram Project Board. 15 Q. So are you able to say who the Tram Project Board 16 reported to? 17 A. I don't think it reported to anyone in this context. 18 Q. You also mentioned the question of the Chief Executive 19 of TEL as -- forgive me -- either senior responsible 20 owner or senior responsible officer. Which was it you 21 mentioned? 22 A. Owner. 23 Q. Owner. Now, this is June 2007 during the procurement 24 stage of the tram project. Do you agree that's a very 25 important stage of the project? 190 1 A. Yes. Yes. 2 Q. And breaking things down into stages, there's perhaps 3 the procurement stage, construction and operational 4 phases? 5 A. Yes, indeed. 6 Q. Now, who did you understand to be the senior responsible 7 owner for the tram project during the procurement phase? 8 A. In this phase? The Chief Executive of TEL. 9 Q. Who was ... do you remember his name, I'm sorry? 10 A. Mr Renilson. 11 Q. Yes, I think it's Neil Renilson. Now, the Inquiry may 12 hear evidence in due course from Mr Renilson himself 13 that his position was that he was only the senior 14 responsible owner for the project for the operational 15 phase. 16 Now, if that is the evidence the Inquiry hears from 17 Mr Renilson, would that cause you any concern? 18 A. I think it would do, yes. 19 Q. Why? 20 A. Because it would suggest there wasn't any senior 21 responsible owner for the procurement phase. 22 Q. Presumably it must be self-evident that a project like 23 this needs a senior responsible owner during the 24 important procurement phase? 25 A. Yes. 191 1 Q. Thank you. 2 CHAIR OF THE INQUIRY: If he was only responsible for the 3 operational phase, would that mean that there was no 4 senior responsible owner of either the procurement stage 5 or the construction? 6 A. Unless the governance arrangements changed as the 7 project moved from procurement into construction, yes. 8 MR MACKENZIE: Now, Mr Greenhill, pausing to look at this 9 terminology of senior responsible owner, could you go 10 back, please, to your investigations matrix, which is 11 ADS00066. 12 Can we please go to page 2. In issue 4, you ask the 13 question: 14 "Is project organisation consistent with good 15 practice?" 16 The next column states: 17 "Are the following in place with demonstrated 18 qualifications, experience and competence?" 19 You then list: 20 "Investment decision-maker ...; Senior Responsible 21 Owner; Project Sponsor; and Project Manager." 22 I think is this familiar terminology from -- 23 A. It is, yes. 24 Q. From OGC? 25 A. Indeed, yes. 192 1 Q. If we could then go back, please, to your June report, 2 page 17. It was the June 2007 report which is 3 CEC00785541. 4 Now, we saw in your investigations matrix, you had 5 noted the need to confirm that there were these four 6 positions in place: investment decision-maker, senior 7 responsible owner, project sponsor and project manager. 8 Now, those terms don't appear anywhere in your 9 report. Why not? 10 A. The -- just to explain, the issues in the investigations 11 matrix that we produced there is normally the product of 12 several weeks' work. 13 For this particular project it was produced very 14 quickly, before we had a full understanding of the 15 project. To some extent it was a draft document and we 16 wouldn't necessarily have followed it in its entirety 17 from start to finish. 18 But again, it would -- I would accept that it might 19 have been better, had there been a paragraph which 20 spelled out who was who within that Tram Project Board 21 structure. 22 Q. I just wondered whether it may be the reason you didn't 23 refer to those roles was because it wasn't actually 24 clear at the time who did fulfil each of these roles. 25 A. Clear to me or clear to the bodies concerned? 193 1 Q. Well, you. 2 A. Perhaps, yes. Perhaps. After ten years it's kind of 3 difficult. 4 Q. Well, if we go back to the governance diagram we are 5 looking at, at page 17 of this document, if we could 6 blow up the top half of the page again, please. 7 Looking at that diagram, are you easily able to 8 identify each of the investment decision-maker, the 9 senior responsible owner, the project sponsor and 10 project manager? 11 A. The investment decision-maker would have been the Full 12 Council. So it wouldn't appear in that diagram. 13 Senior users would have been the Council. As 14 I understood it, the TEL Chief Exec was senior 15 responsible owner. The tie Executive Chair was 16 a position called the Senior Supplier. I don't think 17 there necessarily was a senior sponsor, a project 18 sponsor, as such. But my interpretation of the guidance 19 was that such role was not obligatory. 20 Q. And the project manager? 21 A. Project manager would have been the Director of -- the 22 Project Director within tie. 23 Q. Thank you. 24 Just sticking in this report, can we see the Tram 25 Project Director and his team in the bottom right-hand 194 1 corner. The Tram Project Director was a tie employee. 2 That's correct, isn't it? 3 A. Yes. 4 Q. Now, we can see for the Tram Project Director to report 5 to the tie Executive Chair, it appears to be he or she 6 has to do that through one of the Tram Project Board 7 sub-committees, and then through the Tram Project Board, 8 and then to the tie Executive Chair. Is that a fair 9 interpretation of this structure? 10 A. I think that's what that suggested, yes. 11 Q. Does that seem maybe a clear and simple reporting line? 12 A. It could have been simpler, certainly. I think it 13 depends how the relationship between the Tram Project 14 Board and the sub-committee worked in practice. But, 15 yes, it might have been better if the Tram Project 16 Director was reporting direct to the Tram Project Board. 17 CHAIR OF THE INQUIRY: How did you get to the tie Executive 18 Chair? It goes up to the sub-committee and the 19 sub-committee goes to the Tram Project Board. Then 20 there's no ... 21 MR MACKENZIE: There seems to be a line from the Tram 22 Project Board up to the left to tie Executive Chair. 23 CHAIR OF THE INQUIRY: Or to anyone. 24 MR MACKENZIE: Yes. 25 CHAIR OF THE INQUIRY: So it can't -- the Tram Project 195 1 Director on this diagram cannot report to the Executive 2 Chair of tie; is that right? Am I misreading it? 3 A. I would have expected the Tram Project Director to be 4 reporting to the tie Executive Chair within the overall 5 kind of management and governance of tie itself. Was 6 that what you were asking, sorry? The Tram Project 7 Board Director was a tie employee who I would have 8 imagined have been a direct report to the tie Executive 9 Chair. The tie Executive Chair would have sat on the 10 tie Board, and through that mechanism, the Tram Project 11 Director would have been reporting to the tie Board, and 12 as such, the tie Executive Chair. 13 MR MACKENZIE: Just two final questions, Mr Greenhill. 14 MR DUNLOP QC: I wonder, my Lord, just before we move from 15 that, can I ask a question that arises from 16 your Lordship's question before we pass from this. 17 I imagine your Lordship's question arises from the 18 direction of the arrow. 19 CHAIR OF THE INQUIRY: Yes. 20 MR DUNLOP QC: I'm not clear from my learned friend Counsel 21 to the Inquiry's approach as to what significance that 22 has, and I wonder before we pass on, could that be 23 clarified. 24 The direction of the arrow, does that mean that the 25 Executive Chair reports to the Tram Project Board, or is 196 1 it the other way round? 2 MR MACKENZIE: Yes, I'm happy to clarify that, my Lord. 3 Mr Greenhill, looking at the diagram, and asking the 4 question: does this help us in working out how the Tram 5 Project Director reported to the tie Executive Chair? 6 On the face of it, there is a line with an arrow going 7 up to sub-committee. There's another line, an arrow 8 going up to the Tram Project Board. There's then a line 9 going up to the tie Executive Chair, but with the arrow 10 pointing in the wrong direction. 11 Now, if one takes away the question of the direction 12 the arrows are pointing, and one just looks at the 13 lines, then on that interpretation, one can see on the 14 face of it a way in which the Tram Project Director can 15 report up to the tie Executive Chair. 16 Another interpretation, however, if one looks at the 17 direction in which the arrows are pointing, it seems to 18 be that any reporting by the Tram Project Director to 19 get to the tie Executive Chair stops at the Tram Project 20 Board. 21 Do you have any views on which interpretation is the 22 correct one? 23 A. The downward pointing arrows was intended to represent 24 who was on the Tram Project Board. The reporting lines 25 between the tram project director direct to the tie 197 1 Executive Chair are not exhibited on this diagram, 2 because it was talking about the Tram Project Board. 3 Q. I see. 4 A. The Tram Project Board Director reporting to the tie 5 Executive Chair would have taken place within tie's 6 arrangements. 7 Q. So if the diagram were to show that, we would see more 8 lines on the diagram? 9 A. Yes. 10 Q. By looking at this diagram, is it obvious who is in 11 charge of the project? 12 A. It sets out that the Tram Project Board could -- 13 comprised a number of different people from different 14 organisations, and collectively they had responsibility 15 for overseeing the project. 16 Q. So in short, the Tram Project Board were in charge of 17 the projects? 18 A. Well, they were responsible for overseeing the project 19 and supporting the TEL Chief Executive in his capacity 20 as senior responsible owner, as I understood it. 21 Q. Looking at matters now, Mr Greenhill, are you still of 22 the view that there was a clear corporate governance 23 structure for the project? 24 A. It could have been simpler. I think what we were -- 25 what I was looking at was whether there was appropriate 198 1 representation on the Tram Project Board, and whether or 2 not there was a regular line of reporting and a process 3 in place which allowed information to flow from the Tram 4 Project Director to the Tram Project Board to allow 5 the -- to exercise their role of scrutinising the 6 project and overseeing the project. 7 Q. Thank you. Mr Greenhill, that's the question of 8 governance. 9 I would like just to touch upon some other parts of 10 the report in that when it comes to your 2011 report, 11 I really only have one or two questions, but I think we 12 can finish this. 13 At page 18 in paragraph 62, this is under the 14 heading, "Procedures are in place to actively manage 15 risk associated with the project". 16 At the end of paragraph 62, there's reference to the 17 highest cost risks are currently utilities diversion 18 work, where the volume of work is uncertain until 19 digging starts and general delay with the programme, 20 et cetera. 21 The question of the volume of utility work being 22 uncertain until digging starts, is that something you 23 were aware of from your own general knowledge, or is 24 that something you were likely to have been told by tie 25 or one of the other people you spoke with? 199 1 A. The reference to the highest cost risks or the volume of 2 work on certain ... 3 I think I would have picked that up from discussion 4 with tie staff. 5 Q. I understand. Then beneath that, the headline of: 6 "A procurement strategy has been designed to 7 minimise risk and lead to successful delivery of the 8 project". 9 Over the page, on page 19, paragraph 64, the 10 procurement strategy is set out. Without going through 11 this in detail, one can see there are a number of 12 references to designs. For example, first bullet point, 13 in the last sentence states: 14 "Developing the design as far in advance of 15 procurement as possible helps reduce uncertainty and 16 improves cost estimating of the construction phase." 17 Then similarly the reference in bullet point 3, 18 a reference to the SDS contract being awarded in 19 September 2005 to facilitate the early identification of 20 utility diversion works, et cetera. 21 Then the next bullet point and the question of 22 utilities. It refers to, to paraphrase, the question of 23 trying to undertake these works in advance of the 24 infrastructure works. And essentially what you're 25 setting out here is your understanding of the 200 1 procurement strategy and the important parts of it; is 2 that correct? 3 A. Correct. 4 Q. Then again, paragraph 65, we can see the reference to 5 most of the large contracts are intended to be fixed 6 price. So again, we can see that reflects your 7 understanding at the time; is that correct? 8 A. Correct. 9 Q. I really refer to this, Mr Greenhill, in short, to 10 suggest that this perhaps reinforces the point that if 11 you had been aware of design and utility slippage, you 12 would have recognised that that was of importance to the 13 procurement strategy, including obtaining a fixed price? 14 A. If there had been slippage to design and utilities, it 15 could influence the signing of the contract and the 16 willingness of the infrastructure contractor to agree 17 a fixed price until he had greater certainty around 18 utilities diversion and design work, yes. 19 Q. Yes. Then in page 19, paragraph 66, again, reference to 20 the project entering a critical phase, and the key tasks 21 over the coming months including the commencement of 22 utilities diversion works. So I think you were aware at 23 this time that the works were still to commence, the 24 construction and utility works; et cetera. 25 Now, I already discussed with you the question of 201 1 the draft report and how that was sent to the parties, 2 and their response, and how that was factored in. 3 So that's all I wish to ask in relation to the 2007 4 report. Really finally, a very short question in 5 relation to the 2011 report. 6 If we could please go to that. I'm happy, 7 Mr Greenhill, to take your evidence on this as read as 8 based on what's in your written statement. But if 9 I could please go to document ADS00046, we can see this 10 is an interim report published in February 2011. We can 11 see just under the words "Audit Scotland" there, the 12 date. 13 If we could go, please, to page 4, in paragraph 1 it 14 is simply to see the background to this report. I'm not 15 going to read that out, but that explains why this 16 report was produced and why it is an interim report. 17 If we go over to page 7, please, under "Governance 18 arrangements", at bullet point 2, please, it is stated: 19 "CEC's governance arrangements for the project are 20 complex ..." 21 Go to a diagram, please, at page 36. If we blow 22 that diagram up, please, I'll give you a second look at 23 that, Mr Greenhill, but my question in short is whether 24 it's basically this. 25 Is this diagram any more complex or worse than the 202 1 one we looked at in the 2007 report, and really what had 2 changed in your mind so that you went from the 3 conclusion that the tram project had clear governance 4 structures to it now being complex? 5 A. The 2000 (sic) report and the reference to clarity was 6 aimed at the Tram Project Board. The 2011 report 7 reference to complexity was intended to consider all the 8 elements of the corporate governance structure. 9 So including the City Council's arrangements, via 10 the Tram Sub-Committee and the Tram Internal Planning 11 Group and whatnot. 12 Q. Are you saying, Mr Greenhill, that the reference to 13 clarity in the 2007 report was simply in relation to the 14 Tram Project Board? 15 A. Yes. 16 Q. I don't wish to go back to it, but the headline in your 17 report was: 18 "There is a clear corporate governance structure for 19 the project which involves all key stakeholders." 20 It didn't appear to be restricted to the Tram 21 Project Board governance structure. 22 A. That -- it was intended to refer just to the Tram 23 Project Board because that was the only element of the 24 governance structure that I looked at in 2007. 25 Q. I see. So I shouldn't ask you what were your views on 203 1 the whole governance structure of the tram project in 2 2007, because you only looked at the governance 3 structure in relation to the Tram Project Board? 4 A. Correct. 5 MR MACKENZIE: Thank you. I'm content to take the other 6 matters in your statement as read. So I have no further 7 questions. 8 CHAIR OF THE INQUIRY: I don't think anyone has indicated 9 any questions. So thank you very much, Mr Greenhill. 10 You're still subject to your citation, and you may be 11 recalled. Hopefully that won't be necessary. 12 A. Thank you. 13 (The witness withdrew) 14 CHAIR OF THE INQUIRY: We will adjourn until tomorrow at 15 9.30. 16 (4.30 pm) 17 (The hearing adjourned until Friday, 22 September 2017 at 18 9.30 am) 19 204 1 INDEX 2 PAGE 3 MR MICHAEL HEATH (sworn) .............................1 4 5 Examination by MR MACKENZIE ...................1 6 7 Questions by CHAIR OF THE INQUIRY ...........119 8 9 MR GRAEME GREENHILL (affirmed) .....................120 10 11 Examination by MR MACKENZIE .................120 12 13 205